Chapter 11

1. The aggregate demand curve is the relationship between the
A.price level and the real domestic output purchased
B.price level and the real domestic output produced
C.price level and what producers will supply
D.real domestic output purchased and the real domestic output produced


2. When the price level rises,
A.holders of financial assets with fixed money values increase their spending
B.the demand for money and interest rates rise
C.spending which is sensitive to interest-rate changes increases
D.holders of financial assets with fixed money values have more purchasing power


3. The slope of the aggregate demand curve is the result of
A.the wealth effect
B.the interest-rate effect
C.the foreign purchases effect
D.all of the above effects


4. If the price level in the aggregate expenditures model were lower, the consumption and aggregate expenditures curves would be
A.lower, and the equilibrium real GDP would be smaller
B.lower, and the equilibrium real GDP would be larger
C.higher, and the equilibrium real GDP would be larger
D.higher, and the equilibrium real GDP would be smaller


5. A decrease in the price level will shift the
A.consumption, investment, and net exports curves downward
B.consumption, investment, and net exports curves upward
C.consumption and investment curves upward, but the net exports curve downward
D.consumption and net export curves upward, but the investment curve downward


6. The aggregate demand curve will tend to be increased by
A.a decrease in the price level
B.an increase in the price level
C.an increase in the excess capacity of factories
D.a depreciation in the value of the U.S. dollar


7. A sharp decline in the real value of stock prices, which is independent of a change in the price level, would best be an example of
A.the wealth effect
B.the real balance effect
C.a change in real wealth
D.a change in household indebtedness


8. An increase in aggregate expenditures shifts the aggregate demand curve to the
A.right by the amount of the increase in aggregate expenditures
B.right by the amount of the increase in aggregate expenditures times the multiplier
C.left by the amount of the increase in aggregate expenditures
D.left by the amount of the increase in aggregate
expenditures times the multiplier


9. The aggregate supply curve is the relationship between the
A.price level and the real domestic output purchased
B.price level and the real domestic output produced
C.price level which producers are willing to accept and the price level purchasers are willing to pay
D.real domestic output purchased and the real domestic output produced


10. In the intermediate range, the aggregate supply curve is
A.upsloping
B.downsloping
C.vertical
D.horizontal


11.
Suppose that real domestic output in an economy is 50 units, the quantity of inputs is 10, and the price of each input is $2.
R-1 11a

The level of productivity in this economy is
A.5
B.4
C.3
D.2



12.
Suppose that real domestic output in an economy is 50 units, the quantity of inputs is 10, and the price of each input is $2.
R-1 11a

The per unit cost of production is
A.$0.40
B.$0.50
C.$2.50
D.$3.50



13.
Suppose that real domestic output in an economy is 50 units, the quantity of inputs is 10, and the price of each input is $2.
R-1 11a

If real domestic output in the economy rose to 60 units, then per-unit production costs would
A.remain unchanged and aggregate supply would remain unchanged
B.increase and aggregate supply would decrease
C.decrease and aggregate supply would increase
D.decrease and aggregate supply would decrease



14.
Suppose that real domestic output in an economy is 50 units, the quantity of inputs is 10, and the price of each input is $2.
R-1 11a

All else equal, if the price of each input increases from $2 to $4, productivity would
A.decrease from $4 to $2 and aggregate supply would decrease
B.decrease from $5 to $3 and aggregate supply would decrease
C.decrease from $4 to $2 and aggregate supply would increase
D.remain unchanged and aggregate supply would decrease



15. If the prices of imported resources increase, then this event would most likely
A.decrease aggregate supply
B.increase aggregate supply
C.increase aggregate demand
D.decrease aggregate demand


16. If Congress passed much stricter laws to control the air pollution from business, this action would tend to
A.increase per-unit production costs and shift the aggregate supply curve to the right
B.increase per-unit production costs and shift the ggregate supply curve to the left
C.increase per-unit production costs and shift the aggregate demand curve to the left
D.decrease per-unit production costs and shift the aggregate supply curve to the left


17. An increase in business taxes will tend to
A.decrease aggregate demand but not change aggregate supply
B.decrease aggregate supply but not change aggregate demand
C.decrease aggregate demand and decrease aggregate supply
D.decrease aggregate supply and increase aggregate demand


18. If the real domestic output is less than the equilibrium real domestic output, producers find
A.their inventories decreasing and expand their production
B.their inventories increasing and expand their production
C.their inventories decreasing and contract their production
D.their inventories increasing and contract their production


19.
Aggregate demand aggregate supply schedule for a hypothetical economy.
R-2 11b

The equilibrium price level and quantity of real domestic output will be
A.100 and $2,500
B.100 and $3,000
C.125 and $3,500
D.150 and $4,000



20.
Aggregate demand aggregate supply schedule for a hypothetical economy.
R-2 11b

The horizontal range of the aggregate supply curve is associated with the quantity supplied of
A.$4,000
B.$4,000 and $3,500
C.$3,500 and $3,000
D.$2,500 and $2,000



21.
Aggregate demand aggregate supply schedule for a hypothetical economy.
R-2 11b

If the quantity of real domestic output demanded increased by $2,000 at each price level, the new equilibrium price level and quantity of real domestic output would be
A.175 and $4,000
B.150 and $4,000
C.125 and $3,500
D.100 and $3,000



22.
Aggregate demand aggregate supply schedule for a hypothetical economy.
R-2 11b

Using the original data from the table, if the quantity of real domestic output demanded increased by $500 and the quantity of real domestic output supplied decreased by $500 at each price level, the new equilibrium price level and quantity of real domestic output would be
A.175 and $4,000
B.150 and $4,000
C.125 and $3,000
D.100 and $3,500



23. When the economy is in the horizontal range, an increase in aggregate demand will
A.increase the price level and have no effect on real domestic output
B.increase the real domestic output and have no effect on the price level
C.increase both real output and the price level
D.increase the price level and decrease the real domestic output


24. An increase in aggregate demand will increase the equilibrium real GDP if the economy is operating in the
A.horizontal range only
B.intermediate range only
C.horizontal or intermediate ranges
D.vertical range only


25. An increase in aggregate demand will increase both the equilibrium real GDP and the price level if the economy is operating in the
A.horizontal range
B.intermediate range
C.intermediate or vertical ranges
D.vertical range


26. In the aggregate demandaggregate supply model, an increase in the price level will
A.increase the marginal propensity to consume
B.increase the strength of the multiplier
C.decrease the strength of the multiplier
D.have no effect on the strength of the multiplier


27. If aggregate demand decreases but the price level does not fall as much as would be expected if price were flexible, then this situation could be the result of
A.an increase in aggregate supply
B.the foreign purchases effect
C.lower interest rates
D.a ratchet effect


28. The ratchet effect is the result of
A.a price level that is inflexible upward
B.a price level that is inflexible downward
C.a domestic output that cannot be increased
D.a domestic output that cannot be decreased


29. An increase in aggregate supply will
A.reduce the price level and real domestic output
B.reduce the price level and increase the real domestic output
C.increase the price level and real domestic output
D.reduce the price level and have no effect on real domestic output


30. If there were cost-push inflation in the economy that decreased aggregate supply,
A.both the real domestic output and the price level would decrease
B.the real domestic output would increase and rises in the price level would become smaller
C.the real domestic output would decrease and the price level would rise
D.both the real domestic output and rises in the price level would become greater



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