Chapter 11

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

All of the following shift the short-run aggregate supply curve except A) a change in the price level. B) a change in the price of oil. C) a change in the price of raw material. D) a change in wages as a result of a labor strike.

A) a change in the price level.

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

A) aggregate demand; left

The aggregate supply curve shows the relationship between the aggregate quantity of output supplied by ________ and ________. A) all the firms in an economy; the overall price level B) the government; aggregate demand C) domestically owned firms in the economy; the interest rate D) the world; the money supply

A) all the firms in an economy; the overall price level

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.

When the aggregate supply curve is ________ the price of factors of production is fixed, with little or no upward pressure on price. A) horizontal B) vertical C) upward sloping D) downward sloping

A) horizontal

To increase output the government could adopt policies that A) increase aggregate supply and aggregate demand. B) decrease aggregate supply and aggregate demand. C) increase aggregate supply and decrease aggregate demand. D) decrease aggregate supply and increase aggregate demand.

A) increase aggregate supply and aggregate demand.

Other things equal, an increase in government spending ________ the equilibrium interest rate and ________ equilibrium output. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases

A) increases; increases

When the aggregate supply curve is horizontal A) many firms are likely to have excess capacity. B) the economy is close to full capacity. C) resources are being utilized at full capacity. D) the prices level increases with additional production.

A) many firms are likely to have excess capacity.

If there is an increase in the percentage of employees whose wages adjust automatically with changes in the price level, the aggregate supply curve will become A) steeper. B) flatter. C) horizontal. D) vertical.

A) steeper.

Other things equal, an increase 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.

A) the AD curve to the left.

The graph that shows the relationship between the aggregate quantity of output supplied by all the firms in an economy and the overall price level is A) the aggregate supply curve. B) the aggregate production function. C) the production possibilities frontier. D) the aggregate demand curve.

A) the aggregate supply curve.

In the long run A) the level of output is independent of the price level. B) the level of output is depends on the price level. C) price and output levels are mutually dependent. D) the price level is independent of the level of output.

A) the level of output is independent of the price level.

________ shifts the IS curve to the left. A) An increase in government spending B) A decrease in government spending C) A decrease in the price level D) An increase in the Z factors

B) A decrease in government spending

Which of the following shifts the short-run aggregate supply curve? A) a change in the price level B) a change in the price of oil C) a change in short-run aggregate demand D) all of the above

B) a change in the price of oil

To decrease the price level the government could A) adopt policies that discourage immigration and increase government spending. B) adopt policies that encourage immigration and decrease government spending. C) adopt policies that encourage technological advancement and increase government spending. D) adopt policies that discourage technological advancement and decrease government spending.

B) adopt policies that encourage immigration and decrease government spending.

In an economy, when the price level falls, consumers and firms buy more goods and services. This relationship is represented by the A) aggregate expenditures curve. B) aggregate demand curve. C) short-run aggregate supply curve. D) long-run aggregate supply curve.

B) aggregate demand curve.

The relationship between the level of prices and the total demand for all goods and services is known as A) aggregate supply. B) aggregate demand. C) market supply. D) market demand.

B) aggregate demand.

An increase in aggregate demand when the economy is operating at high levels of output is likely to result in A) a large increase in both output and the overall price level. B) an increase in the overall price level but little or no increase in output. C) an increase in output but little or no increase in the overall price level. D) little or no increase in either output or the overall price level.

B) an increase in the overall price level but little or no increase in output.

An oil price increase would A) increase aggregate demand. B) decrease short-run aggregate supply. C) decrease aggregate demand. D) increase short-run aggregate supply.

B) decrease short-run aggregate supply.

If there is a decrease in the percentage of employees whose wages adjust automatically with changes in the price level, the aggregate supply curve will become A) steeper. B) flatter. C) horizontal. D) vertical.

B) flatter.

Other things equal, an increase in the Z factors ________ the equilibrium interest rate and ________ equilibrium output. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases

B) increases; decreases

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 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.

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

B) negative; the price level; supplied

Assuming a long-run aggregate supply curve, an increase in government spending results in ________ in output and ________ in prices. A) no change; a decrease B) no change; an increase C) a decrease; a decrease

B) no change; an increase

Other things equal, an increase 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.

B) the AD curve to the right.

Aggregate demand refers to the relationship between A) prices and the quantity of a good supplied. B) the price level and aggregate output demanded. C) prices and the quantity of a good demanded. D) the price level and aggregate output supplied.

B) the price level and aggregate output demanded.

An increase in the price level is likely to increase the aggregate amount of output supplied in the short run because A) interest rate is high in the short-run. B) wages are sticky in the short-run. C) wages change in the short-run. D) the aggregate supply curve is vertical in the short-run.

B) wages are sticky in the short-run.

________ shifts the Fed rule to the right. A) An increase in government spending B) A decrease in government spending C) A decrease in the price level D) An increase in the Z factors

C) A decrease in the price level

If ________ equilibrium output ________, the price level decreases. A) potential; is equal to actual aggregate output B) potential; is below actual aggregate output C) actual; is below potential aggregate output D) actual; exceeds potential aggregate output

C) actual; is below potential aggregate output

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.

An increase in aggregate demand when the economy is operating at full capacity is likely to result in A) an increase in both output and the overall price level. B) an increase in output but no increase in the overall price level. C) an increase in the overall price level but no increase in output. D) no increase in either output or the overall price level.

C) an increase in the overall price level but no increase in output.

The aggregate demand curve shows that, ceteris paribus A) at higher price levels, total quantity of output demanded is higher. B) at lower price levels, total quantity of output supplied is lower. C) at lower price levels, total quantity of output demanded is higher. D) at higher price levels, total quantity of output supplied is lower.

C) at lower price levels, total quantity of output demanded is higher.

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

A movement down the aggregate supply curve is caused by a(n) A) decrease in aggregate supply. B) increase in aggregate supply. C) decrease in the price level. D) increase in the price level.

C) decrease in the price level.

The quantity of output supplied at ________ is represented by the aggregate supply curve. A) varying interest rates B) a constant money supply C) different price levels D) various levels of GDP

C) different price levels

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

C) increases in government regulation

The aggregate demand curve shows that, ceteris paribus, at ________ price levels total quantity demanded is ________. A) higher; higher B) lower; lower C) lower; higher D) positive; negative

C) lower; higher

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

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. 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.

Coal is used as a source of energy in many manufacturing processes. Assume a long strike by coal miners reduced the supply of coal and increased the price of coal. This would cause 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.

C) the short-run aggregate supply curve to shift to the left.

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

________ shifts the Fed rule to the left. A) An increase in government spending B) A decrease in government spending C) A decrease in the price level D) An increase in the Z factors

D) An increase in the Z factors

When the aggregate supply curve is vertical, which of the following is not true? A) The economy is at capacity. B) The economy is producing the maximum sustainable level of output. C) Any increase in the price level will not cause an increase in aggregate output. D) The economy is expanding quickly.

D) The economy is expanding quickly.

If ________ equilibrium output ________, the price level rises. A) actual; is below potential GDP B) potential; is equal to actual GDP C) potential; exceeds actual GDP D) actual; exceeds potential GDP

D) actual; exceeds potential GDP

To decrease output the government could A) adopt policies that discourage immigration and increase government spending. B) adopt policies that encourage immigration and decrease government spending. C) adopt policies that encourage technological advancement and increase government spending. D) adopt policies that discourage technological advancement and decrease government spending.

D) adopt policies that discourage technological advancement and decrease government spending.

To increase the price level the government could adopt policies that A) increase aggregate supply and aggregate demand. B) decrease aggregate supply and aggregate demand. C) increase aggregate supply and decrease aggregate demand. D) decrease aggregate supply and increase aggregate demand.

D) decrease aggregate supply and increase aggregate demand.

The rationale underlying policies to deregulate the economy is that these policies would A) increase aggregate demand. B) decrease short-run aggregate supply. C) decrease aggregate demand. D) increase short-run aggregate supply.

D) increase short-run aggregate supply.

The Federal Reserve's policy to "lean against the wind" means that A) interest rates are decreased as the economy expands. B) reserve requirements are decreased as the economy expands. C) reserve requirements are decreased significantly during an economic expansion. D) interest rates are increased gradually as the economy expands.

D) interest rates are increased gradually as the economy expands.

The level of aggregate output that can be sustained in the long run without inflation is known as A) nominal output. B) real output. C) money output. D) potential output.

D) potential output.

f the United States were to pass legislation that would make it easier for people to emigrate to the United States, this would cause A) the short-run aggregate supply curve to become nearly vertical at all levels of output. B) the short-run aggregate supply curve to shift to the left. C) the short-run aggregate supply curve to become flatter. D) the short-run aggregate supply curve to shift to the right.

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