Question Question 1 1 / 1 point As the aggregate price level in an economy decreases, a) consumer demand decreases. b) investment decreases. c) interest rates decrease. d) imports decrease. Question 2 0 / 1 point In an AD/ASAD/AS model: a) the GDP deflator is shown on the vertical axis. b) the Consumer Price Index always slopes upwards. c) real GDP is shown on the horizontal axis. d) the potential GDP always slopes downwards. Question 3 0 / 1 point The _________________ means that a higher price level leads to lower real wealth. a) foreign price effect b) employment effect c) wealth effect d) interest rate effect Question 4 1 / 1 point _______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________. a) Keynesian economists; short run b) Neoclassical economists; short run c) Neoclassical economists; long run d) Keynesian economists; long run Question 5 1 / 1 point When prices of outputs in an economy become sufficiently high causing production to exceed potential GDP, the resulting: a) downward slope in aggregate supply curve will be short run. b) hyper-intense production will be unsustainable in the long run. c) lower prices will lead to a lower quantity of demand. d) higher wages will encourage workers to produce more at high prices. Question 6 1 / 1 point Economic production has fallen to less than full potential due to inadequate incentives for firms to produce. The duration of this economic condition will likely be: a) unknown b) short-term c) long-term d) indefinite Question 7 1 / 1 point The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called: a) real GDP. b) aggregate demand. c) potential GDP. d) aggregate supply. Question 8 1 / 1 point The ____________ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment. a) wealth effect b) interest rate effect c) price effect d) inflation rate effect Question 9 1 / 1 point In an AD/AS model, the point where the economy has excess capacity is called the: a) crossing point of the potential GDP line b) intermediate zone of the AS curve c) neoclassical zone of the AS curve d) Keynesian zone of the AS curve Question 10 1 / 1 point Changes in the price level of the different components of aggregate demand are reflected in the AD/ASAD/AS macroeconomic model by a ________________________. a) flatter top portion of AD curve b) downward sloping AD curve c) shorter distance to equilibrium point d) longer distance to equilibrium point Chapter 11 Problems Question 11 1 / 1 point The graph above reflects a significant increase in world oil prices. What will the impact on aggregate supply most likely lead to? a) an increase in economic growth b) a decrease in the natural unemployment rate c) less inflationary pressures d) an increase in input prices Question 12 1 / 1 point The following table shows the aggregate supply and demand data for a country. Price Level Aggregate Demand Aggregate Supply 100 10,000 4,000 200 9,000 5,000 300 8,000 5,000 400 7,000 7,000 500 6,000 8,500 600 5,000 9,000 700 4,000 9,500 What is the equilibrium output? a) 8,000 b) 7,000 c) 9,000 d) 4,000 Chapter 12 Random Question 13 1 / 1 point The Keynesian economic framework is based on an assumption that: a) people can afford a high level of government services. b) an increase in government spending will cause the aggregate demand curve to shift to the left. c) an increase in government spending will cause the aggregate demand curve to shift to the left. d) prices and wages are sticky and do not adjust rapidly. Question 14 1 / 1 point The sum of all the income received for contributing resources to GDP is called ___________________. a) marginal revenue (X) b) national revenue (Y) c) marginal income (X) d) national income (Y) Question 15 1 / 1 point Which of the following data would be analyzed to determine whether any shift in the MPI has occurred over the course of the past 5 year period? a) foreign income b) MPS c) interest rates d) exchange rates Question 16 1 / 1 point If a Keynesian expenditure-output model shows that aggregate demand for both goods and labor has shifted to the left to D1, while wages remained at w0 and prices remained at P0, what will be the result? a) excess supply b) coordinated wage reductions c) depression d) natural rate of unemployment Question 17 1 / 1 point When an economy is experiencing higher real interest rates, business firms will most likely be discouraged from investing in: a) mechanical devices. b) specialized services. c) computer or other technologies. d) tangible and/or intangible capital. Question 18 1 / 1 point Consumption, investment, government spending, exports, and imports are: a) some of the building blocks of Keynesian analysis. b) some of the opposing elements found in a market-orientated economy. c) all components of aggregate demand. d) all complementary elements of a market-orientated economy. Question 19 1 / 1 point Which of the following is a distinguishing characteristic of a Keynesian cross diagram? a) real GDP on the horizontal axis b) several different Phillips curves c) 45-degree line d) a flat line Question 20 1 / 1 point If a Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy: a) is producing at its potential GDP. b) is producing at a point where output is less than potential GDP. c) is producing at its equilibrium point. d) is producing at a point where output is more than potential GDP. Question 21 1 / 1 point If markets throughout the global economy all have flexible and continually adjusting prices, then: a) all changes in prices and wages will create additional employment. b) all market-oriented economies will implement coordinated wage reductions. c) each economy must shift in aggregate demand and create additional employment. d) each economy will always head for its natural rate of unemployment. Question 22 1 / 1 point In a Keynesian cross diagram, what name is given to the distance between an output level that is below potential GDP and the level of potential GDP? a) inflationary gap b) expenditure-output c) national income (Y) d) recessionary gap Chapter 12 Problems with graphs Question 23 1 / 1 point Refer to the graph shown below. At point B: a) economic growth it low or even negative. b) output is expanding. c) businesses may raise prices. d) unemployment is very low. Chapter 12 Problems Question 24 1 / 1 point When the economy is in a recession, the government will want to increase output. If the multiplier equals 2.5 and the government increases spending by 200, how much will output increase by? a) 900 b) 300 c) 100 d) 500 Question 25 1 / 1 point Suppose that out of the original 100 increase in government spending, 33 will be recycled back into purchases of domestically produced goods and services in the second round and 10.89 is spent in the third round. Following this multiplier effect, what value would be recycled in the fourth round of this cycle? a) 3.37 b) 9.89 c) 5.23 d) 3.59
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