978-1259723223 Test Bank TBChap032 Part 5

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Blooms: Remember

Dif f i c ul t y : 01 Easy

Learning Objective: 32-03 Define aggregate supply AS and explain how it differs in the

immediate short run, the short run, and the long run.

Test Bank: I

Topic: Aggregate Supply

143.

An increase in wealth from a substantial increase in stock prices will move the

economy along a fixed aggregate demand curve.

144.

An increase in imports (independent of a change in the U.S. price level) will increase

both U.S. aggregate supply and U.S. aggregate demand.

145.

An increase in business excise taxes will shift the aggregate supply curve leftward.

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Test Bank: I

To pic: Changes in Aggregate Supply

146.

A decrease in per-unit production costs will shift the aggregate supply curve leftward.

147.

The aggregate supply curve (short run) becomes steeper as the economy moves

rightward and upward along it.

148.

Cost-push inflation is depicted as a rightward shift of the aggregate demand curve along

an upsloping aggregate supply curve.

149.

A negative GDP gap can be caused by either a decrease in aggregate demand or a

decrease in aggregate supply.

150.

The equilibrium price level and equilibrium level of real GDP occur at the intersection

of the aggregate demand curve and the aggregate supply curve.

151.

The greater the upward slope of the AS curve, the larger is the realized multiplier

effect of a change in investment spending.

152.

The price level in the United States is more flexible downward than upward.

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AACSB: Knowledge Application

Accessibility: Keyboard Navigation

Blooms: Understand

Di ffi c ul t y: 02 Medium

Learning Objective: 32-06 Describe how the AD-AS model explains periods of demand-

pull inflation, cost-push inflation, and recession.

Test Bank: I

To pic: Changes in Equilibrium

Multiple Choice Questions

153.

The aggregate expenditures model and the aggregate demand curve can be reconciled

because, other things equal, in the aggregate expenditures model,

154.

In deriving the aggregate demand curve from the aggregate expenditures model, we

note that

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Dif f i c ul t y : 01 Easy

Learning Objective: 32-07 (Appendix) Identify how the aggregate demand curve relates to

the aggregate expenditures model.

Test Bank: I

To pic: The Relationship of the AD Curve to the Aggregate Expenditures Model

155.

An increase in aggregate expenditures resulting from a decrease in the price level is

equivalent to a

156.

Refer to the diagrams. A decline in aggregate expenditures from AE2 to AE1 resulting from

the real-balances, interest-rate, and foreign purchases effects would be depicted as

157.

Refer to the diagrams. Assuming a constant price level, an increase in aggregate

expenditures from AE1 to AE2 would

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C.

increase aggregate demand from AD1 to AD2.

D. decrease aggregate demand from AD2 to AD1.

158.

An increase in net exports will shift the

159.

An increase in investment spending caused by higher expected rates of return will

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To pic: The Relationship of the AD Curve to the Aggregate Expenditures Model

160.

An increase in aggregate expenditures resulting from some factor other than a change in

the price level is equivalent to

161.

When deriving the aggregate demand (AD) curve from the aggregate expenditures

model, an increase in U.S. product prices would cause an increase in

162.

(Advanced analysis) Assume that the MPS is 0.33 in an economy that has an aggregate

supply curve with a slope of 1. An increase in investment spending of $10 billion will shift

the aggregate demand curve rightward by

163.

(Advanced analysis) Assume that the MPC is 0.8 in an economy that has an aggregate

supply curve with a slope of 1. Also, suppose that the price level is flexible downward. A

decrease in investment spending of $10 billion will shift the aggregate demand curve

leftward by

164.

In the aggregate demand-aggregate supply model, the economy’s price level is assumed

to be

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Test Bank: II

Topic: Aggregate Demand

165.

The aggregate demand curve shows the

166.

The labels for the axes of the aggregate demand graph should be

167.

The aggregate demand curve or schedule shows the relationship between the total

demand for output and the

168.

Which of the following effects best explains the downward slope of the aggregate

demand curve?

169.

The following factors explain the inverse relationship between the price level and the

total demand for output, except

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Test Bank: II

Topic: Aggregate Demand

170.

When the price level decreases,

171.

Which of the following is not an effect that occurs when the general price level in our

economy increases?

172.

The foreign purchases effect on aggregate demand suggests that a

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C.

rise in our domestic price level will increase our imports and reduce our exports,

thereby reducing the net exports component of aggregate demand.

D. rise in our domestic price level will decrease our imports and increase our exports,

thereby reducing the net exports component of aggregate demand.

173.

The interest rate effect on aggregate demand indicates that a(n)

174.

The real-balances effect on aggregate demand suggests that a

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D. higher price level will increase the real value of many financial assets and therefore

cause an increase in spending.

175.

The foreign purchases, interest rate, and real-balances effects explain why the

176.

Refer to the graph. Which of the following factors does not explain a movement along the

AD curve?

177.

Refer to the graph, which shows an aggregate demand curve. If the price level decreases

from 200 to 100, the real output demanded will

178.

Refer to the graph, which shows an aggregate demand curve. If the economy is at point C

and the price level increases by 100, then the wealth, interest-rate, and foreign purchases

effects will

179.

A decrease in interest rates caused by a change in the price level would cause a(n)

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C.

decrease in the quantity of real output demanded (or movement up along AD).

D.

increase in the quantity of real output demanded (or movement down along AD).

180.

An increase in personal income tax rates will cause a(n)

181.

An expected increase in the prices of consumer goods in the near future will

182.

A decrease in expected returns on investment will most likely shift the AD curve to the

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A.

right because C will increase.

B.

left because C will decrease.

C.

right because Ig will increase.

D.

left because Ig will decrease.

183.

An increase in personal income taxes would shift AD to the

184.

An increase in expected future income will

185.

An increase in aggregate demand is most likely to be caused by which of the