question

The aggregate demand curve is the relationship between the:

answer

Price level and the purchasing of real domestic output

question

The amount of real domestic output that will be purchased at each possible price level is best shown by the:

answer

Aggregate demand curve

question

Which effect best explains the downward slope of the aggregate demand curve?

answer

A real-balances effect

question

What is one likely reason the level of domestic output purchased will be higher when the price level is lower?

answer

The interest-rate effect

question

The foreign purchases effect suggests that a:

answer

Rise in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand

question

The real-balances effect suggests that a:

answer

Lower price level will increase the real value of many financial assets and therefore cause an increase in spending

question

The foreign purchases, interest rate, and real-balances effects explain:

answer

Why the aggregate demand curve is downsloping

question

The foreign purchases effect provides an explanation why the:

answer

Lower the price level, the higher the level of domestic output purchased

question

One explanation for the downward slope of the aggregate demand curve is that a change in the

answer

A real-balances effect

question

Refer to the above graph, which shows an aggregate demand curve for a hypothetical economy. If the price level is 200, the quantity of real GDP demanded is:

answer

$600 billion

question

Refer to the above graph, which shows an aggregate demand curve for a hypothetical economy. If the economy is at point C and the price level increases by 100 points, the wealth, interest-rate, and foreign purchases effects will:

answer

Move the economy to point A

question

A decrease in interest rates caused by a change in the price level would cause a(n):

answer

Increase in the quantity of real domestic output demanded

question

An expected decline in the prices of consumer goods will:

answer

Decrease aggregate demand

question

An expected rise in the rate of inflation for consumer goods will:

answer

Increase aggregate demand

question

Which set of events would most likely decrease aggregate demand?

answer

An increase in personal income tax rates

question

When the excess capacity of business rises, aggregate:

answer

Demand decreases

question

An increase in government spending will cause a(n):

answer

Increase in aggregate demand

question

When national income in other nations increases:

answer

Aggregate demand increases

question

If the dollar depreciates in value relative to foreign currencies, aggregate:

answer

Demand increases

question

If the U.S. dollar appreciates in value relative to foreign currencies, then this will:

answer

Decrease aggregate demand

question

Which set of events would most likely increase aggregate demand?

answer

An increase in incomes in foreign nations and a depreciation of the dollar

question

A sharp rise in the real value of stock prices, which is independent of a change in the price level, would best be an example of:

answer

A change in real value of consumer wealth

question

Which of the following will lead to an increase in aggregate demand?

answer

An increase in national incomes abroad

question

Which event would most likely increase aggregate demand?

answer

A depreciation of the dollar

question

An aggregate supply curve represents the relationship between the:

answer

Price level and the production of real domestic output

question

The slope of the immediate-short-run aggregate supply curve is based on the assumption that:

answer

Both input and output prices are fixed

question

The upward slope of the short-run aggregate supply curve is based on the assumption that:

answer

Nominal wages and other resource costs do not respond to price level changes

question

A change in aggregate supply would be caused by a change in:

answer

An aggregate supply determinant

question

Which would most likely shift the aggregate supply curve? A change in:

answer

Prices of imported resources

question

An increase in productivity will:

answer

Increase aggregate supply

question

If the price per barrel of Crude decreases in the international market, then this event would most likely:

answer

Increase aggregate supply in the United States

question

Suppose that real domestic output in an economy is 2400 units, the quantity of inputs is 60, and the price of each input is $30.If Congress raised taxes on businesses, this action would:

answer

Increase per-unit production costs and thus decrease aggregate supply

question

Suppose that real domestic output in an economy is 2400 units, the quantity of inputs is 60, and the price of each input is $30.An increase in business taxes would tend to:

answer

Decrease aggregate demand and decrease aggregate supply

question

Which would most likely increase aggregate supply?

answer

A decrease in net exports

question

If the U.S. dollar appreciates in value relative to foreign currencies, then this will:

answer

Decrease aggregate demand and increase aggregate supply

question

If personal income taxes and business taxes increase, then this will:

answer

Decrease aggregate demand and aggregate supply

question

A decrease in business taxes will most likely result in a(n):

answer

Increase in aggregate demand and aggregate supply

question

The long run in macroeconomics is a period in which nominal wages:

answer

Change as the price level changes

question

The long-run aggregate supply curve is:

answer

Vertical

question

A graph of the long-run aggregate supply curve is:

answer

Vertical, and a graph of the short-run aggregate supply is upsloping

question

The intersection of the aggregate demand and aggregate supply curves determines the:

answer

Equilibrium level of real domestic output and prices

question

If at a particular price level, real domestic output from producers is greater than real domestic output desired by purchasers, there will be a:

answer

Surplus and the price level will fall

question

A decrease in aggregate demand will decrease:

answer

Both real output and the price level

question

Demand-pull inflation is associated with a(n):

answer

Increase in aggregate demand

question

One reason why the aggregate supply curve might shift to the left is that:

answer

Per unit production costs have increased

question

Cost-push inflation is characterized by a(n):

answer

Decrease in aggregate supply and no change in aggregate demand

question

The economy experiences an increase in the price level and a decrease in real domestic output.

answer

Input prices have increased

question

The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation?

answer

Interest rates and wage rates have decreased

question

Disinflation refers to a situation where:

answer

The rate of inflation falls, but the price level does not

question

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to:

answer

A price level that is inflexible downward

question

Menu costs will:

answer

Make prices inflexible downward

question

Aggregate demand decreases and real output falls but the price level remains the same. Which factor would most likely contribute to downward price inflexibility?

answer

Menu cost

question

When aggregate demand decreases, product prices, wage rates, and per-unit production costs are inflexible downward because of a:

answer

Ratchet effect

Economics Ch.12 practice questions – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards