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- 1. Multiple Choice
Aggregate demand consists of
the quantity of real output that consumers want to buy at different prices
the quantity of real output that consumers and producers want to buy at different price levels
the quantity of real output that all buyers in an economy want to buy at different price levels
the quantity of real output produced in an economy at different price levels
- 2. Multiple Choice
Which of the following is not a component of aggregate demand?
consumption and investment spending
government spending
import minus export spending
net export spending
- 3. Multiple Choice
A leftward shift in the aggregate demand curve may occur as a result of
falling interest rates that lower the cost of borrowing
decreases in income and business taxes that increase after tax incomes and profit
falling consumer and corporate indebtedness
worsening consumer and business confidence
- 4. Multiple Choice
A rightward shift in the aggregate demand curve may occur as a result of
increases in interest rates that raise the cost of borrowing
an improvement in technology that increases investment spending
increases in income and business taxes that reduce incomes and profits
a government decision to reduce spending on education
- 5. Multiple Choice
The total quantity of goods and services produced in any economy at different prices levels is shown by the
AD curve
aggregate expenditure curve
AS curve
PPC
- 6. Multiple Choice
The LRAS curve
is not affected by changes in aggregate demand
is vertical at the level of potential or full employment output
reflects the idea that in the long run, output is independent of the price level
all of the above
- 7. Multiple Choice
The short-run aggregate supply curve shows that
as the price level falls, firms produce more output
as the price level increases, firms produce less output
as the price level increases, firms produce more output
output produced by firms is independent of the price level
- 8. Multiple Choice
When equilibrium real GDP is less than the full employment level of real GDP, the economy is probably experiencing
an inflationary gap
inflation
a deflationary gap
a fall in unemployment
- 9. Multiple Choice
When short-run aggregate supply increases, the SRAS curve
shifts upward
shifts to the left
shifts to the right
remains constant
- 10. Multiple Choice
Which of the following can cause a rightward shift of the SRAS curve?
a fall input prices
a rise in input prices
an increase in costs of production
a negative supply shock
- 11. Multiple Choice
In the monetarist/new classical AD-AS model, an increase in aggregate demand can be expected to lead to
an increase in the price level and a fall in real GDP
a fall in the price level and an increase in real GDP
an increase in the price level and an increase in real GDP
a fall in the price level and a fall in real GDP
- 12. Multiple Choice
In the AD-AS model, a decrease in SRAS can be expected to lead to
an increase in the price level and an increase in real GDP
a fall in the price level and a fall in real GDP
an increase in the price level and a fall in real GDP
a fall in the price level and an increase in real GDP
- 13. Multiple Choice
In the monetarist/new classical model, long run equilibrium occurs
at full employment real GDP
at potential output
where the AD and SRAS curves intersect on the LRAS curve
all of the above
- 14. Multiple Choice
An inflationary gap is said to occur whenever
the economy experiences inflation
equilibrium real GDP is greater than full employment real GDP
equilibrium real GDP is less than potential output
there is an increase in unemployment
- 15. Multiple Choice
The horizontal part of the Keynesian AS curve is based on the assumption that
wages and prices do not fall easily
wages and prices are fully flexible
the price level can fall though wages do not fall easily
wages can fall though the price level does not fall easily
- 16. Multiple Choice
The vertical part of the Keynesian AS curve occurs because
there is maximum employment of all resources
it is not possible for the economy to produce more given its resources
efforts to increase output result in a higher price level
all of the above
- 17. Multiple Choice
Which of the following statements is not a conclusion emerging from the Keynesian model?
As AD increases, the price level always increases.
As AD increases, the price level remains constant when the economy is in recession.
As AD increases, the price level begins to increase when the economy begins to approach full employment.
The economy can remain stuck in a deflationary gap.
- 18. Multiple Choice
An important conclusion arising from the monetarist new classical AD-AS model is that in the long run, changes in aggregate demand
affect only the price level, leaving the level of real GDP unchanged
affect only the level of real GDP, leaving the price level unchanged
affect both the price level and the level of real GDP
affect neither the price level nor the level of real GDP
- 19. Multiple Choice
In the monetarist/new classical model, an economy in a deflationary gap will
return to full employment equilibrium if there are appropriate government policies
return to full employment equilibrium because consumers respond to a higher price level
return to full employment equilibrium due to wage and price inflexibility
none of the above
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