Deck 14: The Aggregate Model of the Macro Economy

Question 1

A decrease in government expenditure would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Answer 1

B

Question 2

The curve that shows alternative combinations of the price level and real income that result in equilibrium in both the real goods and the money markets is called the:

A)aggregate demand curve.
B)short-run aggregate supply curve.
C)long-run aggregate supply curve.
D)none of the above.

Answer 2

A

Question 3

A decrease in consumer confidence would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Answer 3

B

Question 4

Unemployment compensation is an example of:

A)non-discretionary expenditures.
B)discretionary expenditures.
C)taxes.
D)none of the above.

Question 5

If there is an autonomous decrease in spending (a leftward shift in the aggregate demand curve)and the Fed wishes to hold real income constant, then the Fed would:

A)decrease the money supply yielding a leftward shift in the aggregate demand curve.
B)increase the money supply yielding a rightward shift in the aggregate demand curve.
C)hold the money supply constant.
D)none of the above.

Question 6

A decrease in taxes would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Question 7

If there is an autonomous increase in spending (a rightward shift in the aggregate demand curve)and the Fed wishes to hold real income constant, then the Fed would:

A)decrease the money supply yielding a leftward shift in the aggregate demand curve.
B)increase the money supply yielding a rightward shift in the aggregate demand curve.
C)hold the money supply constant.
D)none of the above.

Question 8

An income tax system where higher tax rates are applied to increased amounts of income is called:

A)a regressive tax system.
B)a proportional tax system.
C)a progressive tax system.
D)a flat rate tax system.

Question 9

An increase in foreign real income would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Question 10

An increase in consumer confidence would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Question 11

A depreciation of the U.S.dollar would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Question 12

A decrease in foreign real income would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Question 13

An increase in government expenditure would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Question 14

An appreciation of the U.S.dollar would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Question 15

A decrease in the nominal money supply would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Question 16

An increase in the nominal money supply would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Question 17

Features of the U.S.federal government expenditure and taxation programs that tend to automatically slow the economy during times of high economic activity and boost the economy during periods of recession are called:

A)discretionary expenditures.
B)automatic stabilizers.
C)non-automatic stabilizers.
D)none of the above.

Question 18

A decrease in wealth would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Question 19

An increase in wealth would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Question 20

An increase in taxes would shift the:

A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.

Question 21

Expansionary monetary policy should be used if:

A)aggregate demand-aggregate supply equilibrium is below potential output.
B)aggregate demand-aggregate supply equilibrium is above potential output.
C)aggregate demand-aggregate supply equilibrium is equal to potential output.
D)none of the above.

Question 22

Contractionary fiscal policy should be used if:

A)aggregate demand-aggregate supply equilibrium is below potential output.
B)aggregate demand-aggregate supply equilibrium is above potential output.
C)aggregate demand-aggregate supply equilibrium is equal to potential output.
D)none of the above.

Question 23

The full-employment level of output is called:

A)aggregate demand.
B)aggregate supply.
C)potential output.
D)none of the above.

Question 24

An income tax system where higher tax rates are applied to increased amounts of income is called a:

A)regressive tax system.
B)proportional tax system.
C)progressive tax system.
D)flat tax system.

Question 25

An increase in the price level will shift the aggregate demand curve:

A)rightward.
B)leftward.
C)both.
D)none of the above.

Question 26

A decrease in resources, efficiency, or technology will shift the:

A)short-run aggregate supply curve rightward.
B)short-run aggregate supply curve leftward.
C)long-run aggregate supply curve rightward.
D)long-run aggregate supply curve leftward.

Question 27

Contractionary monetary policy should be used if:

A)aggregate demand-aggregate supply equilibrium is below potential output.
B)aggregate demand-aggregate supply equilibrium is above potential output.
C)aggregate demand-aggregate supply equilibrium is equal to potential output.
D)none of the above.

Question 28

At a given price level, an increase in stock market wealth will shift the aggregate demand curve:

A)rightward.
B)leftward.
C)both.
D)none of the above.

Question 29

An aggregate supply curve that is either horizontal or upward sloping, depending on whether the absolute price level increases as firms produce more output is called:

A)short-run aggregate supply curve.
B)long-run aggregate supply curve.
C)potential GDP.
D)NAIRU.

Question 30

An increase in the costs of resources or inputs of production would shift the:

A)short-run aggregate supply curve rightward.
B)short-run aggregate supply curve leftward.
C)long-run aggregate supply curve rightward.
D)long-run aggregate supply curve leftward.

Question 31

An increase in resources, efficiency, or technology will shift the:

A)short-run aggregate supply curve rightward.
B)short-run aggregate supply curve leftward.
C)long-run aggregate supply curve rightward.
D)long-run aggregate supply curve leftward.

Question 32

The aggregate supply curve that defines the level of full employment or potential output based on a given amount of resources, efficiency, and technology in the economy is called:

A)short-aggregate supply curve.
B)long-run aggregate supply curve.
C)intermediate aggregate supply curve.
D)none of the above.

Question 33

The decrease in consumption and investment interest-related spending that occurs when the interest rate rises as government spending increases is called:

A)crowding in.
B)crowding out.
C)neutral.
D)none of the above.

Question 34

Expansionary fiscal policy should be used if:

A)aggregate demand-aggregate supply equilibrium is below potential output.
B)aggregate demand-aggregate supply equilibrium is above potential output.
C)aggregate demand-aggregate supply equilibrium is equal to potential output.
D)none of the above.

Question 35

At a given price level, a decrease in consumer credit will shift the aggregate demand curve:

A)rightward.
B)leftward.
C)both.
D)none of the above.

Question 36

A decrease in the costs of resources or inputs of production would shift the:

A)short-run aggregate supply curve rightward.
B)short-run aggregate supply curve leftward.
C)long-run aggregate supply curve rightward.
D)long-run aggregate supply curve leftward.

Question 37

A curve that shows the price level at which firms in the economy are willing to produce different levels of goods and services and the resulting level of real income is called:

A)aggregate demand.
B)aggregate supply.
C)potential output.
D)natural rate of unemployment.

Question 38

At a given price level, an increase in expected profits and business confidence will shift the aggregate demand curve:

A)rightward.
B)leftward.
C)both.
D)none of the above.

Question 39

The portion of the short-run aggregate supply that reflects the economy's resources are not fully employed is the:

A)vertical portion.
B)horizontal portion.
C)upward sloping portion.
D)none of the above.

Question 40

An increase in production costs will shift the:

A)aggregate demand curve.
B)short-run aggregate supply curve.
C)long-run aggregate supply curve.
D)none of the above.

Question 41

Higher prices and price increases combined with lower real output and income, resulting from a major increase in input prices in the economy is called:

A)deflation.
B)inflation.
C)stagflation.
D)none of the above.

Question 42

Decreases in the NAIRU represent a:

A)leftward shift in the aggregate demand curve.
B)leftward shift of the long-run aggregate supply curve.
C)rightward shift of the long-run aggregate supply curve.
D)rightward shift in the aggregate demand curve.

Question 43

The OPEC oil shocks in 1973-1974 are an example of:

A)favorable supply shock, shifting the short-run aggregate supply curve rightward.
B)favorable supply shock, shifting the short-run aggregate supply curve leftward.
C)adverse supply shock, shifting the short-run aggregate supply curve rightward.
D)adverse supply shock, shifting the short-run aggregate supply curve leftward.

Question 44

An increase in the amount of resources would shift the long-run aggregate supply curve:

A)rightward.
B)leftward.
C)no shift.
D)none of the above.

Question 45

The long-run aggregate supply curve is influenced by:

A)resources available.
B)efficiency levels.
C)level of technology.
D)all of the above.

Question 46

Economic variables that generally move in tandem with the overall phases of the business cycle are called:

A)leading indicators.
B)coincident indicators.
C)lagging indicators.
D)none of the above.

Question 47

Leading, coincident, and lagging indicators are based on the concept that:

A)expectations of future inflation is the driving force of the economy.
B)expectations of future profits are the driving force of the economy.
C)expectations of future unemployment is the driving force of the economy.
D)none of the above.

Question 48

A vertical curve that defines the level of full-employment or potential output based on a given amount of resources, efficiency, and technology in the economy is called:

A)the short-run aggregate supply curve.
B)the long-run aggregate supply curve.
C)the aggregate demand curve.
D)none of the above.

Question 49

Economic variables that generally turn down after a recession begins and turn back up after the recovery starts are called:

A)leading indicators.
B)coincident indicators.
C)lagging indicators.
D)none of the above.

Question 50

In the short-run along the horizontal portion of the aggregate supply curve, an increase in the budget deficit and an expansionary monetary policy would:

A)increase the price level only.
B)increase both the price level and real income.
C)increase real income only.
D)none of the above.

Question 51

In the long-run, an increase in the budget deficit and an expansionary monetary policy would:

A)increase the price level only.
B)increase both the price level and real income.
C)increase real income only.
D)none of the above.

Question 52

The combination of rising inflation and higher unemployment is called:

A)recession.
B)expansion.
C)stagflation.
D)deflation.

Question 53

If the government spending increases without an equal increase in taxes, the government must borrow funds in the financial markets.

Question 54

Economic variables that generally turn down before a recession begins and turn back up before the recovery starts are called:

A)leading indicators.
B)coincident indicators.
C)lagging indicators.
D)none of the above.

Question 55

Industrial production is an example of a:

A)leading indicator.
B)coincident indicator.
C)lagging indicator.
D)none of the above.

Question 56

The increase in income generated by the additional government expenditure decreases the demand for money.

Question 57

Average duration of unemployment is an example of a:

A)leading indicator.
B)coincident indicator.
C)lagging indicator.
D)none of the above.

Question 58

An adverse oil price increase will shift the short-run aggregate supply curve:

A)leftward.
B)rightward.
C)will not shift.
D)none of the above.

Question 59

A decrease in efficiency would shift the long-run aggregate supply curve:

A)rightward.
B)leftward.
C)no shift.
D)none of the above.

Question 60

Average weekly hours in manufacturing is an example of a:

A)leading indicator.
B)coincident indicator.
C)lagging indicator.
D)none of the above.

Question 61

A decrease in personal taxes would shift the aggregate demand curve rightward.

Question 62

The aggregate demand curve shows the alternative combinations of the price level and real income that result in simultaneous equilibrium in both the goods and money markets.

Question 63

Aggregate supply changes much faster than aggregate demand.

Question 64

An open market purchase of government securities by the Fed would shift the aggregate demand curve leftward.

Question 65

Contractionary monetary policy will shift the AD curve rightward.

Question 66

The aggregate production function shows the quantity and quality of resources used in production given the efficiency with which resources are utilized and the prevailing technology.

Question 67

Decreases in autonomous spending cause rightward shifts of the aggregate demand and supply curves.

Question 68

Increases in autonomous spending cause leftward shifts of the aggregate demand and supply curves.

Question 69

An open market purchase, a decrease in the discount rate, and a decrease in the reserve requirement would shift the aggregate demand curve rightward.

Question 70

Expansionary fiscal policy will shift the AD curve leftward.

Question 71

A decrease in the currency exchange rate would shift the aggregate demand curve rightward, resulting in a higher equilibrium income and price level in the long-run.

Question 72

Federal spending and taxation both affect and are influenced by the overall level of economic activity.

Question 73

Lower interest rates are generally charged on more risky investments and on securities that have longer maturities.

Question 74

The horizontal portion of the short-run aggregate supply curve reflects the Keynesian assumption of "sticky" prices.

Question 75

Discretionary expenditures are federal government expenditures for programs whose funds are authorized and appropriated by Congress and signed by the President, where explicit decisions are made on the size of the programs.

Question 76

An increase in consumer wealth would shift the aggregate demand curve rightward.

Question 77

The level of potential GDP does not change because the factors determining potential output are fixed in the short run.

Question 78

A decrease in consumer confidence would shift the aggregate demand curve rightward.

Question 79

Depreciation of the U.S.dollar will shift the AD curve leftward.

Question 80

An open market sale, an increase in the discount rate, and an increase in the reserve requirement would shift the aggregate demand curve leftward.