Question 1

2 and AS2.Which curve would have shifted,and in what direction would it have shifted,if a new equilibrium were to occur at an output level of $300 billion and a price level of P3 in Figure 8.3? A) Aggregate supply would have shifted to the left. B) Aggregate supply would have shifted to the right. C) Aggregate demand would have shifted to the left. D) Aggregate demand would have shifted to the right." class="answers-bank-image d-inline" rel="preload" > Assume the economy is initially in equilibrium on AD2 and AS2.Which curve would have shifted,and in what direction would it have shifted,if a new equilibrium were to occur at an output level of $300 billion and a price level of P3 in Figure 8.3?

Accepted Answer

A)  Aggregate supply would have shifted to the left.
B)  Aggregate supply would have shifted to the right.
C)  Aggregate demand would have shifted to the left.
D)  Aggregate demand would have shifted to the right.E) A) and B)
F) None of the above

Question 2

Ceteris paribus,if average prices in the U.S.economy fall,then the

Accepted Answer

A)  Real balances effect will lead to a lower quantity of U.S.output demanded.
B)  Foreign trade effect will lead to a higher quantity of U.S.output demanded.
C)  Interest rate effect will lead to a lower quantity of U.S.output demanded.
D)  Profit effect will lead to a higher quantity of U.S.output demandeD.As the domestic price level falls,consumers (domestic and international) will buy more U.S.-made products and exports will rise.In essence,exports will rise,and imports will fall.E) A) and C)
F) A) and B)

Question 3

A positively sloped aggregate supply curve reflects

Accepted Answer

A)  The idea that greater production lowers profit margins,which raises quantity demanded.
B)  The decrease in the real value of money as the price level rises.
C)  The rising costs associated with increased capacity utilization.
D)  None or the other choices.E) A) and C)
F) None of the above

Question 4

A recession can be represented by a point

Accepted Answer

A)  Inside the production possibilities curve.
B)  Outside the production possibilities curve.
C)  On the production possibilities curve.
D)  At either end of the production possibilities curve.E) A) and B)
F) A) and C)

Question 5

The study of aggregate economic activity for the economy as a whole is

Accepted Answer

A)  Opportunity cost.
B)  Scarcity.
C)  Macroeconomics.
D)  Microeconomics.E) B) and C)
F) A) and C)

Question 6

Which of the following is true if equilibrium exceeds full employment?

Accepted Answer

A)  The economy is inside the production possibilities curve.
B)  The economy is experiencing low inflation.
C)  Growth rates are unacceptably low.
D)  The economy is working beyond normal capacity.E) A) and B)
F) A) and C)

Question 7

International trade and money flows can increase aggregate supply and aggregate demand if

Accepted Answer

A)  Trade barriers are increased.
B)  Trade barriers are reduced.
C)  Tariffs are increased.
D)  Quotas are increaseD.For example,if trade barriers are reduced,the increased imports allow aggregate supply to increase.Another example would be if money flows caused the value of the dollar to fall,then U.S.goods would be less expensive relative to foreign goods,which would increase aggregate demand.E) A) and B)
F) B) and C)

Question 8

According to Keynes,when the economy falters,the government should do any of the following except

Accepted Answer

A)  Practice a laissez faire policy approach.
B)  Provide more dollars for unemployment benefits.
C)  Make more money available.
D)  Buy more output.E) None of the above
F) A) and D)

Question 9

According to Keynesian theory,the correct fiscal policy to stimulate the economy would be to

Accepted Answer

A)  Raise taxes to increase aggregate demand.
B)  Increase the money supply to increase aggregate supply.
C)  Increase government expenditures to increase aggregate demand.
D)  Lower taxes to increase aggregate supply.E) A) and D)
F) A) and C)

Question 10

The growth path of the US economy is considered to be

Accepted Answer

A)  Smooth and predictable.
B)  Consistent and reliable.
C)  Old and steady.
D)  Stumbles and setbacks.E) None of the above
F) A) and D)

Question 11

If wages and prices are flexible,then a recession is best eliminated when prices

Accepted Answer

A)  And wages both rise.
B)  And wages both fall.
C)  Rise and wages drop.
D)  Drop and wages rise.E) None of the above
F) A) and B)

Question 12

If aggregate demand decreases and aggregate supply decreases,the level of real output will

Accepted Answer

A)  Decrease,and the price level will definitely decrease.
B)  Decrease,and the price level will definitely increase.
C)  Either increase or decrease,but the price level will stay the same.
D)  Decrease,but the price level is indeterminate.E) B) and C)
F) A) and D)

Question 13

Assume you have $5,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 125 at the end of the year,the real value of your savings is closest to

Accepted Answer

A)  $4,000.
B)  $4,875.
C)  $5,125.
D)  $6,250.E) A) and D)
F) None of the above

Question 14

Which combination of shifts of aggregate demand and supply would definitely cause an increase in real GDP?

Accepted Answer

A)  Demand shifts to the left and supply shifts to the right.
B)  Demand shifts to the left and supply shifts to the left.
C)  Demand shifts to the right and supply shifts to the right.
D)  Demand shifts to the right and supply shifts to the left.E) A) and C)
F) C) and D)

Question 15

Assume you have $1,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 92 at the end of the year,the real value of your savings is closest to

Accepted Answer

A)  $908.
B)  $920.
C)  $1,087.
D)  $1,092.E) B) and D)
F) C) and D)

Question 16

Which of the following results if at a particular price level,the aggregate quantity supplied exceeds the aggregate quantity demanded?

Accepted Answer

A)  Aggregate demand shifts to the right.
B)  Aggregate supply shifts to the left.
C)  A surplus causes the price level to rise.
D)  A surplus causes the price level to fall.E) None of the above
F) A) and D)

Question 17

Cost pressures are most intense

Accepted Answer

A)  At low rates of output.
B)  When unemployment falls.
C)  As the economy approaches capacity.
D)  None of the choices are correct.E) B) and D)
F) B) and C)

Question 18

The aggregate demand curve is downward-sloping because,other things being equal,

Accepted Answer

A)  People buy fewer goods and services at lower average incomes.
B)  People buy more goods and services at lower average prices.
C)  A higher average price level will induce producers to offer more output than otherwise.
D)  People buy more goods and services at higher average prices.E) None of the above
F) B) and C)

Question 19

Say's Law states that

Accepted Answer

A)  Supply creates its own demand.
B)  Shifts of either supply or demand can achieve a given market equilibrium.
C)  Wages and prices are inflexible,which prevents the achievement of market equilibrium.
D)  Increased prices lead to increased supply.E) B) and C)
F) A) and D)

Question 20

Assume you have $1,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 115 at the end of the year,the real value of your savings is closest to

Accepted Answer

A)  $870.
B)  $885.
C)  $1,115.
D)  $1,150.E) A) and B)
F) All of the above

Exam 8: The Business Cycle

The study of aggregate economic activity for the economy as a whole is

Correct AnswerverifiedShow Answer

International trade and money flows can increase aggregate supply and aggregate demand if

Correct AnswerverifiedShow Answer

According to Keynesian theory,the correct fiscal policy to stimulate the economy would be to

Correct AnswerverifiedShow Answer

A positively sloped aggregate supply curve reflects

Correct AnswerverifiedShow Answer

Assume you have $1,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 92 at the end of the year,the real value of your savings is closest to

Correct AnswerverifiedShow Answer

Say's Law states that

Correct AnswerverifiedShow Answer

According to Keynes,when the economy falters,the government should do any of the following except

Correct AnswerverifiedShow Answer

Assume you have $1,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 115 at the end of the year,the real value of your savings is closest to

Correct AnswerverifiedShow Answer

Which combination of shifts of aggregate demand and supply would definitely cause an increase in real GDP?

Correct AnswerverifiedShow Answer

If wages and prices are flexible,then a recession is best eliminated when prices

Correct AnswerverifiedShow Answer

Assume the economy is initially in equilibrium on AD2 and AS2.Which curve would have shifted,and in what direction would it have shifted,if a new equilibrium were to occur at an output level of $300 billion and a price level of P3 in Figure 8.3?

Correct AnswerverifiedShow Answer

Assume you have $5,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 125 at the end of the year,the real value of your savings is closest to

Correct AnswerverifiedShow Answer

Cost pressures are most intense

Correct AnswerverifiedShow Answer

The aggregate demand curve is downward-sloping because,other things being equal,

Correct AnswerverifiedShow Answer

If aggregate demand decreases and aggregate supply decreases,the level of real output will

Correct AnswerverifiedShow Answer

The growth path of the US economy is considered to be

Correct AnswerverifiedShow Answer

Ceteris paribus,if average prices in the U.S.economy fall,then the

Correct AnswerverifiedShow Answer

A recession can be represented by a point

Correct AnswerverifiedShow Answer

Which of the following results if at a particular price level,the aggregate quantity supplied exceeds the aggregate quantity demanded?

Correct AnswerverifiedShow Answer

Which of the following is true if equilibrium exceeds full employment?

Correct AnswerverifiedShow Answer

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Assume the economy is initially in equilibrium on AD₂ and AS₂.Which curve would have shifted,and in what direction would it have shifted,if a new equilibrium were to occur at an output level of $300 billion and a price level of P₃ in Figure 8.3?

Correct Answer
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