Question 1

Which of the following is not a reason why the AD curve slopes downward?

Accepted Answer

A)  International effect
B)  Interest rate effect
C)  Substitution effect
D)  Money wealth effect

Question 2

Starting from a long-run equilibrium, an increase in government expenditures increases output in the short run but not in the long run.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following would shift the aggregate demand curve to the left?

Accepted Answer

A)  An increase in foreign income
B)  A depreciation in the value of the country's currency
C)  A higher future expected price level
D)  A decrease in exports

Question 4

In the AS/AD model, as the price level falls, the holders of money become richer and buy more.This is one reason why the aggregate demand curve is downward sloping.

Accepted Answer

A) True 
 B)False

Question 5

If actual output exceeds potential output, eventually:

Accepted Answer

A)  input prices will rise and output will fall.
B)  both input prices and output will rise.
C)  input prices will fall and output will rise.
D)  both input prices and output will fall.

Question 6

The interest rate effect helps to explain why:

Accepted Answer

A)  an increase in the price level reduces the quantity of aggregate demand.
B)  an increase in the price level raises investment.
C)  a decrease in the price level reduces the quantity of aggregate demand.
D)  a decrease in the price level reduces investment.

Question 7

A decrease in the expected future income of the United States would likely:

Accepted Answer

A)  shift its AD curve to the left.
B)  shift its AD curve to the right.
C)  make its AD curve flatter.
D)  make its AD curve steeper.

Question 8

Most economists agree that it is possible for fiscal policy to fine tune the economy.

Accepted Answer

A) True 
 B)False

Question 9

From 1975 to 1995, the value of the dollar in terms of yen fell from over 300 yen per dollar to about 100 yen per dollar.Considering the impact of this alone, this would likely:

Accepted Answer

A)  shift the U.S.AD curve to the left.
B)  shift the U.S.AD curve to the right.
C)  make the U.S.AD curve flatter.
D)  make the U.S.AD curve steeper.

Question 10

The multiplier effect exists because:

Accepted Answer

A)  production and expenditures are interdependent.
B)  when one person increases expenditures, everyone decreases expenditures.
C)  production and expenditures are independent.
D)  production lowers expenditures.

Question 11

Refer to the graph shown.A movement from A to B is most likely to be caused by:

Accepted Answer

A)  an increase in input prices.
B)  a decrease in input prices.
C)  an increase in aggregate demand.
D)  a decrease in aggregate demand.

Question 12

In the long run, the position of the short-run aggregate supply curve determines:

Accepted Answer

A)  output.
B)  the price level.
C)  both output and the price level.
D)  neither output nor the price level.

Question 13

If productivity and wages both rise by 3 percent, then the aggregate supply curve shifts up.

Accepted Answer

A) True 
 B)False

Question 14

As prices fall, the value of people's existing assets rises and people increase expenditures.This occurs as a result of the:

Accepted Answer

A)  international effect.
B)  multiplier effect.
C)  interest rate effect.
D)  money wealth effect.

Question 15

A sharp increase in oil prices along with a decline in labor productivity decline will likely shift the:

Accepted Answer

A)  short-run aggregate supply curve up (to the left) .
B)  short-run aggregate supply curve down (to the right) .
C)  aggregate demand curve to the right.
D)  aggregate demand curve to the left.

Question 16

Refer to the following graph.  The upward sloping relationship in the diagram represents the:

Accepted Answer

A)  aggregate demand curve.
B)  short-run aggregate supply curve.
C)  long-run aggregate supply curve.
D)  quantity adjustment curve.

Question 17

During the early years of the Reagan administration, some of the presidential advisors argued that tax cuts could reduce inflation because they would give people an incentive to produce more.Critics of this argument believed that tax cuts would increase inflation, not reduce it.The critics were arguing that tax cuts move the:

Accepted Answer

A)  aggregate demand curve to the right with little change in long-run aggregate supply.
B)  aggregate demand curve to the left with little change in long-run aggregate supply.
C)  long-run aggregate supply curve to the right with little change in aggregate demand.
D)  long-run aggregate supply curve to the left with little change in aggregate demand.

Question 18

The paradox of thrift occurs when:

Accepted Answer

A)  an increase in saving raises output.
B)  an increase in saving reduces output.
C)  saving is unrelated to output.
D)  a decrease in saving reduces output.

Question 19

According to the short-run aggregate supply curve, firms are most likely to respond to an increase in aggregate demand by raising:

Accepted Answer

A)  prices.
B)  production.
C)  both production and prices.
D)  neither production nor prices.

Question 20

Why would one expect the AD curve to be vertical?

Accepted Answer

A)  If the price level rises, relative prices haven't changed so people would not change their choices.
B)  If the price level rises, changes in choices by suppliers are offset by changes in demanders.
C)  People do not make choices based on relative prices, but instead based on absolute prices.
D)  Substitution is not one of the reasons why the AD curve has its slope.

Exam 26: The Keynesian Short-Run Policy Model: Demand-Side Policies

According to the short-run aggregate supply curve, firms are most likely to respond to an increase in aggregate demand by raising:

Correct Answer
verified

A decrease in the expected future income of the United States would likely:

Correct Answer
verified

The multiplier effect exists because:

Correct Answer
verified

Which of the following would shift the aggregate demand curve to the left?

Correct Answer
verified

Correct Answer
verified

Refer to the graph shown.A movement from A to B is most likely to be caused by:

Correct Answer
verified

If productivity and wages both rise by 3 percent, then the aggregate supply curve shifts up.

Correct Answer
verified

From 1975 to 1995, the value of the dollar in terms of yen fell from over 300 yen per dollar to about 100 yen per dollar.Considering the impact of this alone, this would likely:

Correct Answer
verified

Why would one expect the AD curve to be vertical?

Correct Answer
verified

A sharp increase in oil prices along with a decline in labor productivity decline will likely shift the:

Correct Answer
verified

The paradox of thrift occurs when:

Correct Answer
verified

Starting from a long-run equilibrium, an increase in government expenditures increases output in the short run but not in the long run.

Correct Answer
verified

Refer to the following graph. The upward sloping relationship in the diagram represents the:

Correct Answer
verified

In the AS/AD model, as the price level falls, the holders of money become richer and buy more.This is one reason why the aggregate demand curve is downward sloping.

Correct Answer
verified

Most economists agree that it is possible for fiscal policy to fine tune the economy.

Correct Answer
verified

In the long run, the position of the short-run aggregate supply curve determines:

Correct Answer
verified

Which of the following is not a reason why the AD curve slopes downward?

Correct Answer
verified

If actual output exceeds potential output, eventually:

Correct Answer
verified

The interest rate effect helps to explain why:

Correct Answer
verified

As prices fall, the value of people's existing assets rises and people increase expenditures.This occurs as a result of the:

Correct Answer
verified

Exam 26: The Keynesian Short-Run Policy Model: Demand-Side Policies

According to the short-run aggregate supply curve, firms are most likely to respond to an increase in aggregate demand by raising:

Correct AnswerverifiedShow Answer

A decrease in the expected future income of the United States would likely:

Correct AnswerverifiedShow Answer

The multiplier effect exists because:

Correct AnswerverifiedShow Answer

Which of the following would shift the aggregate demand curve to the left?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the graph shown.A movement from A to B is most likely to be caused by:

Correct AnswerverifiedShow Answer

If productivity and wages both rise by 3 percent, then the aggregate supply curve shifts up.

Correct AnswerverifiedShow Answer

From 1975 to 1995, the value of the dollar in terms of yen fell from over 300 yen per dollar to about 100 yen per dollar.Considering the impact of this alone, this would likely:

Correct AnswerverifiedShow Answer

Why would one expect the AD curve to be vertical?

Correct AnswerverifiedShow Answer

A sharp increase in oil prices along with a decline in labor productivity decline will likely shift the:

Correct AnswerverifiedShow Answer

The paradox of thrift occurs when:

Correct AnswerverifiedShow Answer

Starting from a long-run equilibrium, an increase in government expenditures increases output in the short run but not in the long run.

Correct AnswerverifiedShow Answer

Refer to the following graph. The upward sloping relationship in the diagram represents the:

Correct AnswerverifiedShow Answer

In the AS/AD model, as the price level falls, the holders of money become richer and buy more.This is one reason why the aggregate demand curve is downward sloping.

Correct AnswerverifiedShow Answer

Most economists agree that it is possible for fiscal policy to fine tune the economy.

Correct AnswerverifiedShow Answer

In the long run, the position of the short-run aggregate supply curve determines:

Correct AnswerverifiedShow Answer

Which of the following is not a reason why the AD curve slopes downward?

Correct AnswerverifiedShow Answer

If actual output exceeds potential output, eventually:

Correct AnswerverifiedShow Answer

The interest rate effect helps to explain why:

Correct AnswerverifiedShow Answer

As prices fall, the value of people's existing assets rises and people increase expenditures.This occurs as a result of the:

Correct AnswerverifiedShow Answer

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