macro exam 3 ch.11 study guide

The slope of the ________ is negative and the slope of the ________ is positive. A) IS curve; Fed rule B) AS curve; IS curve C) Fed rule; AD curve D) AS curve; AD curve

A) IS curve; Fed rule

Which of the following will, unambiguously, increase the price level? A) an increase in government spending and an increase in costs B) an increase in government spending and a decrease in costs C) a decrease in government spending and an increase in costs D) a decrease in government spending and a decrease in costs

A) an increase in government spending and an increase in costs

When the general price level rises A) consumption falls as a result of the real wealth effect. B) consumption increases as a result of the multiplier effect. C) investment rises as a result of the real wealth effect. D) investment rises as a result of the multiplier effect.

A) consumption falls as a result of the real wealth effect.

The level of aggregate output demanded rises when the price level falls, because the resulting decrease in the interest rate will lead to A) higher investment spending and higher consumption spending. B) lower investment spending and higher consumption spending. C) higher investment spending and lower consumption spending. D) lower investment spending and lower consumption spending.

A) higher investment spending and higher consumption spending.

Other things equal, a decrease in government spending shifts A) the AD curve to the left. B) the AD curve to the right. C) the AS curve to the left. D) the AS curve to the right

A) the AD curve to the left.

Natural gas is used as a source of energy in many manufacturing processes. Assume large new deposits of natural gas are discovered in Nebraska, which increase the supply of natural gas and decreased the price of natural gas. This would cause 4 A) the short-run aggregate supply curve to shift to the right. B) the short-run aggregate supply curve to become flatter. C) the short-run aggregate supply curve to shift to the left. D) the short-run aggregate supply curve to become nearly vertical at all levels of output

A) the short-run aggregate supply curve to shift to the right.

If wages and other costs fully adjust to changes in prices in the long run, the long-run aggregate supply curve is A) vertical. B) horizontal. C) positively sloped. D) negatively sloped.

A) vertical.

Each point on the IS curve represents ________ in the goods market for the given interstate. A) maximum investment B) an equilibrium point C) a positive relationship between the price level and aggregate output D) minimum pricing

B) an equilibrium point

Other things equal, an increase in the price level ________ the equilibrium interest rate and________ equilibrium output. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases

B) increases; decreases

The aggregate demand curve slopes downward because at lower price levels the purchasing power of consumers' assets ________, which ________ real wealth. A) decreases; decreases B) increases; increases C) decreases; increases D) increases; decreases

B) increases; increases

Refer to Figure 11.7. Potential output A) is $400 million. B) is $700 million. C) is $800 million. D) cannot be determined from this information because aggregate demand is not given

B) is $700 million.

Refer to Figure 11.7. The level of aggregate output that can be sustained in the long run without inflation A) is $400 million. B) is $700 million. C) is $800 million. D) cannot be determined from this information because aggregate demand is not given

B) is $700 million.

The aggregate demand curve A) is an upward-sloping curve B) is a downward-sloping curve. C) may slope upward or downward. D) is horizontal.

B) is a downward-sloping curve.

Refer to Figure 11.4. Which of the following causes the economy to move from Point E to Point A? A) an oil embargo that increases the price of oil B) technological progress C) stricter immigration enforcement D) an increase in the price level

B) technological progress

Other things equal, a decrease in the Z factors shifts A) the AD curve to the left. B) the AD curve to the right. C) the AS curve to the left. D) the AS curve to the right.

B) the AD curve to the right.

Refer to Figure 11.1. This economy reaches capacity at A) $500 billion. B) $1,000 billion. C) $1,500 billion. D) an output level that is indeterminate from this information because aggregate demand is notgiven.

C) $1,500 billion.

Refer to Figure 11.3. A decrease in aggregate supply is represented by A) a movement from Point B to Point A along AS1. B) a movement from Point B to Point C along AS1. C) a shift from AS1 to AS2. D) a shift from AS1 to AS0

C) a shift from AS1 to AS2.

An increase in government purchases shifts the ________ curve to the ________. A) aggregate demand; left B) aggregate supply; left C) aggregate demand; right D) aggregate supply; right

C) aggregate demand; right

The quantity of output supplied at different price levels is represented by the A) production function. B) aggregate demand curve C) aggregate supply curve. D) aggregate expenditures curve

C) aggregate supply curve.

If the economy is operating on the relatively vertical segment of the aggregate supply curve, an increase in aggregate demand causes a ________ change in the price level and a ________change in output A) small; small B) big; big C) big; small D) small; big

C) big; small

The change in ________ brought about by a change in real wealth that results from a change in the ________ is the real wealth effect. A) the money supply; money demand B) taxes; interest rate C) consumption; price level D) aggregate output; level of investment

C) consumption; price level

Other things equal, a decrease in the Z factors ________ the equilibrium interest rate and________ equilibrium output. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases

C) decreases; increases

a decrease in the price level ________ the equilibrium interest rate and________ equilibrium output. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases

C) decreases; increases

Refer to Figure 11.6. Suppose the equilibrium price level is 110. An increase in the supply of oil would probably A) increase both the equilibrium output and the price level. B) decrease the equilibrium output and increase the price level. C) increase the equilibrium output and decrease the price level. D) decrease both the equilibrium output and the price level.

C) increase the equilibrium output and decrease the price level.

Refer to Figure 11.6. Suppose the equilibrium output is initially $600 billion. A decrease in the Z factors ________ equilibrium output and ________ the price level. A) decreases; leaves unchanged B) leaves unchanged; increases C) increases; increases D) increases; decreases

C) increases; increases

The slope of the IS curve is ________ and the slope of the Fed rule is ________. A) positive; positive B) positive; negative C) negative; positive D) negative; negative

C) negative; positive

Refer to Figure 11.1. Between the output levels of $1,000 billion and $1,500 billion, the relationship between the price level and output is A) constant. B) negative C) positive. D) indeterminate.

C) positive

Refer to Figure 11.1. Between the output levels of $500 billion and $1,000 billion, the relationship between the price level and output is A) constant. B) negative. C) positive. D) indeterminate

C) positive.

If the economy is operating way below capacity, an increase in aggregate demand causes a________ change in the price level and ________ change in output. A) big; big B) big; small C) small; big D) small; small

C) small; big

The aggregate demand curve slopes downward because at higher price levels A) the purchasing power of consumers' assets declines and consumption increases. B) producers can get more for what they produce, and they increase production. 8 C) the purchasing power of consumers' assets declines and consumption decreases. D) the purchasing power of consumers' assets increases and consumption increases

C) the purchasing power of consumers' assets declines and consumption decreases.

(11.4) Suppose the economy is at Point A, an oil price decrease could move the economy to Point A) E. B) B. C) C. D) D

D

Which of the following equations represents equilibrium in the goods market? A) AE = I(r) B) Y = AD + AS C) Y = S + I D) AE = C + I + G

D) AE = C + I + G

Refer to Figure 11.6. Suppose the equilibrium price level is 110. An increase in the Z factors________ equilibrium output and ________ the price level. A) decreases; leaves unchanged B) leaves unchanged; increases C) increases; increases D) decreases; decreases

D) decreases; decreases

Related to the Economics in Practice on p. 546: Which of the following categories of personal consumption expenditures are mostly left out of the Core PCE measure of the aggregate price level? A) housing and transportation B) health care and education C) recreation and apparel D) food and energy

D) food and energy

Potential output is equal to A) long run aggregate demand. B) short-run aggregate demand. C) short-run aggregate supply. D) long-run aggregate supply

D) long-run aggregate supply

The level of aggregate output demanded falls when the price level rises, because the resulting increase in the interest rate will lead to A) higher investment spending and higher consumption spending. B) lower investment spending and higher consumption spending. C) higher investment spending and lower consumption spending. D) lower investment spending and lower consumption spending

D) lower investment spending and lower consumption spending

The aggregate demand curve shows a ________ relationship between ________ and aggregate output ________. A) positive; the interest rate; demanded B) negative; the price level; supplied C) positive; the price level; demanded D) negative; the price level; demanded

D) negative; the price level; demanded

Which of the following would cause the short-run aggregate supply curve to shift to the right? A) higher energy prices B) an increase in taxes C) increases in government regulation D)retired workers reentering the labor force

D) retired workers reentering the labor force

Refer to Figure 11.6. Suppose the equilibrium output is initially $600 billion. An oil embargo would probably A) increase both the equilibrium output and the price level. B) decrease the equilibrium output and increase the price level. C) increase the equilibrium output and decrease the price level. D) decrease both the equilibrium output and the price level.

b) decrease the equilibrium output and increase the price level.