Deck 28: Aggregate Demand and Aggregate Supply

Question 1

Some call the Great Recession:

A)the period when the economy does not grow for four consecutive quarters.
B)the recession that began in 2007 due to the decline in consumer spending when the housing bubble burst.
C)the period of high inflation that took place in the early 1970s.
D)the period of economic stagnation that took place in the early 1990s.

Answer 1

the recession that began in 2007 due to the decline in consumer spending when the housing bubble burst.

Question 2

The quantity measure in the aggregate demand relationship is the:

A)total quantity of goods and services demanded in the economy.
B)total quantity of goods and services supplied in the economy.
C)market value of the total quantity of goods and services demanded in the economy.
D)market value of the total quantity of goods and services supplied in the economy.

Answer 2

market value of the total quantity of goods and services demanded in the economy.

Question 3

The aggregate demand curve slopes:

A)downward,like individual supply curves.
B)downward,like individual demand curves.
C)upward,like individual supply curves.
D)upward,like individual demand curves.

Answer 3

downward,like individual demand curves.

Question 4

The aggregate supply and aggregate demand model is used to explain:

A)the overall health of the economy.
B)the overall effect of large markets within the economy.
C)the interaction of all sellers and all buyers within a particular market.
D)None of these is true.

Question 5

The aggregate supply and aggregate demand model describes the interaction of which macroeconomic variables?

A)Output and the price level
B)Employment and immigration
C)Prices and immigration
D)Output and number of sellers

Question 6

Which of the following is a component of aggregate demand?

A)Consumption
B)Investment
C)Net exports
D)All of these are components of aggregate demand.

Question 7

In the macroeconomic model of aggregate supply and aggregate demand,price is:

A)the measure of the value of all goods and services produced by the economy.
B)represented by GDP.
C)calculated as a weighted average of the prices of all goods and services.
D)None of these is true.

Question 8

An asset-price bubble is caused by:

A)people buying assets because they believed prices would keep going up and they'd be able to sell for a profit.
B)fads that make owning a certain asset fashionable.
C)severe inflation within a short period of time.
D)the increase in the value of durable goods when the economy is experiencing low inflation.

Question 9

The aggregate supply and aggregate demand model is used to explain:

A)how individual markets affect other markets.
B)how entire markets operate,not just each individual seller within a market.
C)the market price determined by all buyers and all sellers interacting in a market.
D)None of these is true.

Question 10

The aggregate demand curve:

A)shows the relationship between the overall price level and the level of total demand.
B)shows the price level on the horizontal axis and output on the vertical axis.
C)is upward-sloping,which is counter to the individual demand curve.
D)All of these are true.

Question 11

In the macroeconomic model of aggregate supply and aggregate demand,quantity is:

A)represented by GDP.
B)the measure of the value of all goods and services produced by the economy.
C)a measure of total output.
D)All of these are true.

Question 12

During the period that many call the Great Recession:

A)GDP fell.
B)unemployment rose.
C)there was a sharp decrease in consumer spending.
D)All of these are true.

Question 13

Which of the following is a component of aggregate demand?

A)Net exports
B)Income
C)Government revenues
D)All of these are components of aggregate demand.

Question 14

When people buy assets simply because they believe the assets will appreciate and can be sold for a profit,it may cause:

A)a recession.
B)unemployment.
C)inflation.
D)an asset-price bubble.

Question 15

In general,changes in the price level will change:

A)the real value of people's wealth and income.
B)the nominal value of cash balances.
C)the real value of consumption goods only.
D)the nominal value of consumption goods and the real value of durable goods.

Question 16

Which of the following is a component of aggregate demand?

A)Consumption
B)Income
C)Taxes
D)All of these are components of aggregate demand.

Question 17

The equilibrium of aggregate supply and aggregate demand represents:

A)the overall state of the national economy.
B)the total of all goods and services produced.
C)the general price level of the economy.
D)All of these are true.

Question 18

In the macroeconomic model of aggregate supply and aggregate demand:

A)price is the overall price level.
B)quantity represents GDP.
C)price is calculated as a weighted average of the prices of all goods and services.
D)All of these are true.

Question 19

The aggregate demand curve:

A)shows the relationship between the overall price level and the level of total demand.
B)shows the price level on the vertical axis and output on the horizontal axis.
C)slopes downward.
D)All of these are true.

Question 20

Which three macroeconomic variables together best describe the health of the economy?

A)Output,GDP,and inflation
B)Output,inflation,and prices
C)GDP,unemployment,and employment
D)Output,prices,and employment

Question 21

The wealth effect:

A)explains the downward-sloping aggregate demand curve.
B)is the positive relationship between consumer spending and the overall price level.
C)is not present when wages keep pace with inflation.
D)All of these are true.

Question 22

A rise in the overall price level means that:

A)a given number of dollars won't buy as much in terms of real goods and services.
B)dollar-denominated assets have lost their value.
C)the cost of living has gone down.
D)None of these is true.

Question 23

Higher interest rates motivate:

A)firms to invest less in new factories and working capital.
B)firms to invest more in new factories and working capital.
C)individuals to spend more on consumption goods.
D)individuals to spend more on capital goods.

Question 24

When prices rise,the interest rate:

A)tends to rise.
B)tends to fall.
C)is usually not affected.
D)will rise if the wealth effect outweighs the price effect.

Question 25

Consumption spending:

A)is negatively related to the overall price level.
B)is positively related to the overall price level.
C)is equal to the overall price level.
D)is not correlated with the overall price level.

Question 26

The wealth effect:

A)explains the downward-sloping aggregate demand curve.
B)explains the upward-sloping aggregate demand curve.
C)explains the downward-sloping aggregate supply curve.
D)explains the upward-sloping aggregate supply curve.

Question 27

The wealth effect says that if there is an increase in the price level,you will:

A)experience some reduction in your level of wealth as a result.
B)experience some increase in your level of wealth as a result.
C)typically spend more on all goods and services as a result.
D)typically shift your spending to assets from consumption goods.

Question 28

When the price level increases people:

A)feel less wealthy.
B)feel more wealthy.
C)have the same real value of assets,regardless of the change in the price level.
D)experience a bubble forming in the economy overall.

Question 29

Government spending:

A)tends to increase with increases in the price level.
B)tends to increase with decreases in the price level.
C)remains generally unaffected by changes in the price level.
D)is not a component of aggregate demand.

Question 30

Increases in the overall price level:

A)reduce people's dollar-denominated wealth.
B)mean that a given number of dollars won't buy as much in terms of real goods and services.
C)mean people will reduce their consumption.
D)All of these are true.

Question 31

The wealth effect explains the:

A)negative relationship that exists between consumer spending and overall price level.
B)positive relationship that exists between consumer spending and overall price level.
C)negative relationship that exists between consumer spending and overall asset valuation.
D)positive relationship that exists between consumer spending and overall asset valuation.

Question 32

Consumption:

A)is a major component of aggregate demand.
B)is negatively related to the national price level.
C)measures people's expenditures on real goods and services.
D)All of these are true.

Question 33

Higher interest rates make it:

A)more expensive to borrow.
B)harder to get a loan typically.
C)easier to get a loan typically.
D)None of these is true.

Question 34

The relationship between government spending and the price level:

A)explains the upward-sloping aggregate demand curve.
B)explains the downward-sloping aggregate demand curve.
C)explains the perfect elasticity of the aggregate demand curve.
D)None of these is true.

Question 35

U.S.goods will become relatively less expensive than goods from other countries if:

A)prices were to increase in the United States only.
B)prices were to decrease in the United States only.
C)prices were to increase in the United States and foreign countries at the same rate.
D)prices were to decrease in the United States and foreign countries at the same rate.

Question 36

If prices increase only in the United States,then:

A)U.S.goods become relatively more expensive than goods from other countries.
B)U.S.goods become relatively less expensive than goods from other countries.
C)the prices of foreign goods must rise.
D)None of these is true.

Question 37

As prices rise,people:

A)feel less wealthy.
B)want to spend less.
C)demand a smaller quantity of goods and services in the aggregate.
D)All of these are true.

Question 38

Higher interest rates caused by an increase in the price level creates:

A)an indirect negative relationship between the price level and investment spending.
B)an indirect positive relationship between the price level and investment spending.
C)the incentive for firms to invest more in new factories.
D)the incentive for individuals to spend more on consumption goods.

Question 39

Lower interest rates motivate:

A)firms to invest less in new factories and working capital.
B)firms to invest more in new factories and working capital.
C)individuals to spend less on consumption goods.
D)individuals to spend less on capital goods.

Question 40

An increase in the price level causes government spending to:

A)increase.
B)decrease.
C)remain unaffected.
D)increase in social welfare spending only.

Question 41

There is a negative relationship between the price level and which components of GDP?

A)C,I,and G
B)I,G,and NX
C)C,G,and NX
D)C,I,and NX

Question 42

As the U.S.price level increases,expenditures by which of the following will remain unaffected?

A)Consumers
B)Businesses
C)Government
D)The rest of the world

Question 43

If a change in the U.S.price level caused U.S.imports to increase,it must be true that the price level:

A)increased.
B)decreased.
C)became elastic.
D)became negative.

Question 44

If U.S.prices increase relative to the rest of the world,we would expect:

A)net exports to increase.
B)net exports to decrease.
C)net exports to be unaffected.
D)government spending to increase.

Question 45

The downward sloping aggregated demand curve can be explained in part through:

A)the wealth effect.
B)the negative relationship between the price level and net exports.
C)the negative relationship between the price level and investment spending.
D)All of these are true.

Question 46

If U.S.prices increase relative to the rest of the world,we would expect:

A)imports and net exports to increase.
B)exports and net exports to decrease.
C)imports to increase and net exports to decrease.
D)exports to decrease and net exports to increase.

Question 47

The aggregate demand curve slopes downward can be explained in part through:

A)The wealth effect.
B)The negative relationship between the price level and government spending.
C)The positive relationship between the price level and net exports.
D)All of these are true.

Question 48

There is no relationship between the price level and which component of GDP?

A)C
B)I
C)G
D)NX

Question 49

If U.S.prices increase relative to the rest of the world,we would expect:

A)imports to increase and exports to fall.
B)imports to decrease and exports to increase.
C)imports and exports to increase.
D)imports and exports to decrease.

Question 50

The downward-sloping aggregate demand curve is partly due to:

A)the positive relationship between the price level and net exports.
B)the negative relationship between the price level and net exports.
C)the positive relationship between the price level and government spending.
D)the negative relationship between the price level and government spending.

Question 51

Because the price level shares a negative relationship with aggregate expenditures on GDP,the aggregate demand curve is:

A)downward sloping.
B)upward sloping.
C)perfectly elastic.
D)perfectly inelastic.

Question 52

As the U.S.price level decreases,expenditures by which of the following will increase?

A)Consumers
B)Businesses
C)The rest of the world
D)All of these will increase their expenditures.

Question 53

As the U.S.price level decreases,expenditures by which of the following will remain unaffected?

A)Consumers
B)Businesses
C)The rest of the world
D)All of these are true.

Question 54

The aggregate demand curve slopes downward in part due to:

A)the negative relationship between the price level and net exports.
B)the positive relationship between the price level and exports.
C)the negative relationship between the price level and imports.
D)All of these are true.

Question 55

Net exports are:

A)exports minus imports.
B)imports minus exports.
C)imports divided by exports.
D)imports plus exports.

Question 56

The relationship between the price level and net exports is:

A)negative.
B)positive.
C)perfectly correlated.
D)uncorrelated.

Question 57

When the U.S.price level increases,we would expect:

A)a movement downward along the aggregate demand curve.
B)a movement up along the aggregate demand curve.
C)a shift to the right of the aggregate demand curve.
D)a shift to the left of the aggregate demand curve.

Question 58

The downward sloping aggregate demand curve can be explained in part through:

A)the positive relationship between the price level and net exports.
B)the positive relationship between the price level and consumption.
C)the negative relationship between the price level and investment spending.
D)All of these are true.

Question 59

When the U.S.price level decreases relative to the rest of the world:

A)exports and net exports will increase.
B)imports and net exports will increase.
C)exports will increase and net exports will decrease.
D)exports will decrease and net exports will increase.

Question 60

There is a general overall __________ relationship between the price level and ____________.

A)negative;aggregate expenditures on GDP
B)positive;aggregate expenditures from the government
C)negative;nominal expenditures from the government
D)positive;nominal expenditures from households

Question 61

When a nonprice change affects any of the four components of GDP:

A)the aggregate demand curve will shift left or right.
B)the economy will move up or down along the aggregate demand curve.
C)the aggregate demand curve will remain unaffected.
D)None of these is true.

Question 62

Aggregate supply is:

A)total quantity of the production of all the households in the economy.
B)total quantity of goods and services demanded in the economy.
C)market value of the total quantity of goods and services demanded in the economy.
D)market value of the total quantity of goods and services supplied in the economy.

Question 63

A basic factor of production that is used to produce output is:

A)technology.
B)labor.
C)capital.
D)All of these are considered factor inputs.

Question 64

If the government were to increase income taxes,we would predict:

A)a downward movement along the aggregate demand curve.
B)a shift in aggregate demand to the right.
C)a shift in aggregate demand to the left.
D)a shift straight down of aggregate demand.

Question 65

One major difference between the aggregate supply curve and an individual supply curve is:

A)the aggregate supply curve represents production in the economy as a whole rather than just one good or service.
B)the aggregate supply curve represents production in an entire market rather than just one firm.
C)the aggregate supply curve represents goods and services sold rather than the total actually produced by each firm.
D)None of these is true.

Question 66

The relationship between the overall price level in the economy and total production by firms is shown in the:

A)aggregate demand curve.
B)aggregate supply curve.
C)inflation rate.
D)business cycle.

Question 67

Which of the following would likely cause aggregate demand to shift to the right?

A)Consumer confidence regarding future income increases
B)A tax credit for small businesses is issued
C)The government builds new highways
D)All of these are likely to cause aggregate demand to shift to the right.

Question 68

Short-run decisions refer to the:

A)hourly,daily,or weekly decisions that firms have to make.
B)immediate decisions that firms have to make that affect production process,not level of output.
C)immediate decisions that firms have to make that affect level of output,but not the production process.
D)decisions a firm has to make immediately to prepare for either entering or exiting an industry.

Question 69

When the U.S.price level increases,we predict a:

A)movement down along the aggregate demand curve.
B)a shift straight up of the aggregate demand curve.
C)a shift to the right of the aggregate demand curve.
D)None of these is true.

Question 70

When the U.S.price level decreases,we would expect:

A)a movement down along the aggregate demand curve.
B)a shift straight up of the aggregate demand curve.
C)a shift to the right of the aggregate demand curve.
D)None of these is true.

Question 71

Which of the following would cause aggregate demand to shift to the right?

A)Increased income taxes
B)Decreased corporate income taxes
C)Decreased consumer confidence
D)Decreased government spending

Question 72

The aggregate supply curve shows the relationship between:

A)the overall price level in the economy and total production by firms.
B)the unemployment rate and total production by firms.
C)the overall price level in the economy and the unemployment rate.
D)the inflation rate and the overall price level in the economy.

Question 73

In the short run,the aggregate supply curve:

A)slopes upward.
B)slopes downward.
C)is perfectly elastic.
D)is perfectly inelastic.

Question 74

Which of the following would likely cause aggregate demand to shift to the left?

A)Decreased income taxes
B)Decreased consumer confidence
C)Decreased government spending
D)These would all cause aggregate demand to shift to the left.

Question 75

If the government were to decrease corporate income tax,we would predict:

A)a downward movement along the aggregate demand curve.
B)a shift in aggregate demand to the right.
C)a shift in aggregate demand to the left.
D)a shift straight down of aggregate demand.

Question 76

If consumption increases in general:

A)the aggregate demand curve will shift straight down.
B)the aggregate demand curve will shift to the right.
C)the economy will move down along the aggregate demand curve to a higher quantity.
D)it will be cancelled out by business's reaction and the aggregate demand curve will be unaffected.

Question 77

A decrease in consumer confidence will cause:

A)a downward movement along the aggregate demand curve.
B)a shift in aggregate demand to the right.
C)a shift in aggregate demand to the left.
D)an upward movement along the aggregate demand curve.

Question 78

Which of the following would likely cause aggregate demand to shift to the left?

A)Higher interest rates discouraging borrowing
B)Higher tariffs on all imports into the United States
C)Greater consumer confidence about the future
D)All of these would likely cause aggregate demand to shift to the left.

Question 79

An aggregate supply curve that slopes upward must be:

A)a short-run curve.
B)a long-run curve.
C)an individual firm's supply curve.
D)an individual industry's supply curve.

Question 80

The aggregate supply curve is:

A)the relationship between the overall price level and total production by firms.
B)downward-sloping.
C)the sum total of the production of all the firms in the economy for every given price level.
D)All of these are true.