Chapter 12 quiz

The size of the multiplier associated with an initial increase in spending will be: the same whether or not inflation occurs. diminished if inflation occurs. zero if any increase in the price level occurs. enhanced if inflation occurs.

diminished if inflation occurs.

The economy's long-run AS curve assumes that wages and other resource prices: eventually rise and fall to match upward or downward changes in the price level. are flexible upward but inflexible downward. rise and fall more rapidly than the price level. are relatively inflexible both upward and downward.

eventually rise and fall to match upward or downward changes in the price level.

When aggregate demand declines, the price level may remain constant, at least for a time, because: firms individually may fear that their price cut may set off a price war. menu costs rise. price cuts tend to increase efficiency wages. product markets are highly competitive.

firms individually may fear that their price cut may set off a price war.

The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries will: increase the amount of U.S. real output purchased. increase U.S. imports and decrease U.S. exports increase both U.S. imports and U.S. exports. decrease both U.S. imports and U.S. exports.

increase U.S. imports and decrease U.S. exports

Item23 Answer the question on the basis of the following table for a particular country in which C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports. All figures are in billions of dollars. Each question is independent of other question using the same table, unless otherwise stated. Refer to the table. If the equilibrium level of real GDP is $43 billion, its level of consumption will be: Multiple Choice $20 billion. $22 billion. $24 billion. $26 billion.

$26 billion.

The interest-rate effect suggests that: (A)a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending. (B)an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending. (C) an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending. (D) an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending.

(C) an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.

Q17: Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: Refer to the data. If the amount of real output demanded at each price level falls by $200, the equilibrium price level and equilibrium level of real domestic output will fall to: 250 and $200, respectively. 200 and $300, respectively. 150 and $300, respectively. 150 and $200, respectively.

150 and $300, respectively.

Q7: In the diagram, the economy's immediate-short-run AS curve is line ______, its short-run AS curve is _____, and its long-run AS curve is line ______. 1; 2; 4 1; 2; 3 2; 3; 4 3; 2; 1

3; 2; 1

Which one of the following would not shift the aggregate demand curve? A change in the price level. Depreciation of the international value of the dollar. A decline in the interest rate at each possible price level. An increase in personal income tax rates.

A change in the price level

Which of the following is a true statement? Firms and resource suppliers generally find it easier to reduce prices than to raise them. As the price level increases, interest rates will rise and therefore consumption and investment spending will also rise. An initial increase in aggregate demand may cause a further increase in aggregate demand because higher prices mean higher incomes. A decline in aggregate demand will primarily affect real output and employment if prices are inflexible downward.

A decline in aggregate demand will primarily affect real output and employment if prices are inflexible downward.

Which of the following would most likely shift the aggregate demand curve to the right? An increase in stock prices that increases consumer wealth. Increased fear that a recession will cause workers to lose their jobs. An increase in personal income tax rates. A reduction in household borrowing because of tighter lending practices.

An increase in stock prices that increases consumer wealth.

Q 16: Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: Refer to the data. If the price level is 250 and producers supply $450 of real output: a shortage of real output of $150 will occur. a shortage of real output of $100 will occur. a surplus of real output of $150 will occur. neither a shortage nor a surplus of real output will occur.

a surplus of real output of $150 will occur.

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: Refer to the data. If the amount of real output demanded at each price level falls by $200, this might have been caused by: an increase in net exports. a worsening of business expectations. an increase in consumer wealth. a decrease in the personal income tax.

a worsening of business expectations.

Efficiency wages are: above-market wages that bring forth so much added work effort that per-unit production costs are lower than at market wages. wage payments necessary to compensate workers for unpleasant or risky work conditions. usually less than market wages. relevant to macroeconomics because they explain rightward shifts in aggregate demand.

above-market wages that bring forth so much added work effort that per-unit production costs are lower than at market wages.

In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to: affect neither aggregate supply nor aggregate demand. increase aggregate demand. reduce aggregate demand. reduce aggregate supply.

increase aggregate demand.

Other things equal, a reduction in personal and business taxes can be expected to: increase aggregate demand and decrease aggregate supply. increase both aggregate demand and aggregate supply. decrease both aggregate demand and aggregate supply. decrease aggregate demand and increase aggregate supply.

increase both aggregate demand and aggregate supply.

Q10: In the diagram, a shift from AS1 to AS3 might be caused by a(n): increase in productivity. increase in the prices of imported resources. decrease in the prices of domestic resources. decrease in business taxes.

increase in the prices of imported resources.

The aggregate supply curve (short run): graphs as a horizontal line. is steeper above the full-employment output than below it. slopes downward and to the right. presumes that changes in wages and other resource prices match changes in the price level.

is steeper above the full-employment output than below it.

If investment decreases by $20 billion and the economy's MPC is .5, the aggregate demand curve will shift: leftward by $40 billion at each price level. rightward by $20 billion at each price level. rightward by $40 billion at each price level. leftward by $20 billion at each price level.

leftward by $40 billion at each price level.

Item22 Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Other things equal, a decline in net exports caused by a change in incomes abroad is depicted by: panel (A) only. panel (B) only. panel (C) only. panels (B) and (C).

panel (A) only.

Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Cost-push inflation is depicted by: panel (A) only. panel (B) only. panel (C) only. panels (B) and (C).

panel (B) only.

Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. A recession is depicted by: panel (A) only. panel (B) only. panel (C) only. panels (A) and (B).

panels (A) and (B).

Skip to main content Macro Chapter 12 Quiz The aggregate supply curve (short run) is upsloping because: wages and other resource prices match changes in the price level. the price level is flexible upward but inflexible downward. per-unit production costs rise as the economy moves toward and beyond its full-employment real output. wages and other resource prices are flexible upward but inflexible downward.

per-unit production costs rise as the economy moves toward and beyond its full-employment real output.

A rightward shift in the aggregate supply curve is best explained by an increase in: business taxes. productivity. nominal wages. the price of imported resources.

productivity.

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question on the basis of this information. Refer to the information. All else being equal, if the price of each input increased from $4 to $6, productivity would: fall from 2 to 3. fall from .50 to .33. rise from 1 to 2. remain unchanged.

remain unchanged.

Graphically, the full-employment, low-inflation, rapid-growth economy of the last half of the 1990s is depicted by a: rightward shift of the aggregate demand curve along a fixed aggregate supply curve. rightward shift of the aggregate supply curve along a fixed aggregate demand curve. rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve. leftward shift of the aggregate demand curve and a leftward shift of the aggregate supply curve.

rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve.

Suppose that nominal wages fall and productivity rises in a particular economy. Other things equal, the aggregate: demand curve will shift leftward. supply curve will shift rightward. supply curve will shift leftward. expenditures curve will shift downward.

supply curve will shift rightward.