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Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
101. Refer to the above table. If the quantity of real domestic output demanded decreased by
$500 and the quantity of real domestic output supplied increased by $500 at each price level,
the new equilibrium price level and quantity of real domestic output would be:
102. Refer to the figure above. If aggregate demand curve shifts from AD2 to AD1, the full
multiplier effect on real GDP will be a decrease from:
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
103. Refer to the figure above. The massive increase in government spending during World
War II moved the economy in the span of a few short years from mass unemployment and
price stability to "overfull" employment. This situation can be best illustrated in the figure
above as a:
104. Refer to the figure above. If the economy is operating at full employment when its
aggregate demand curve is AD2, then a further increase in consumption and investment
spending will cause:
105. A decrease in aggregate supply means:
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
106. Cost-push inflation is characterized by a(n):
107. With cost-push inflation in the short run, there will be:
108. The economy experiences an increase in the price level and a decrease in real domestic
output. Which of the following is a likely explanation?
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
109. The economy experiences an increase in the price level and an increase in real domestic
output. Which is a likely explanation?
110. The economy experiences a decrease in the price level and an increase in real domestic
output. Which is a likely explanation?
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
111. Refer to the above diagram. If aggregate supply shifts from AS1 to AS2, then the price
level will:
112. Refer to the above diagram. When output increases from Q1 and the price level decreases
from P1, this change will:
113. Refer to the above diagram. A shift from AS1 to AS2 would be consistent with what
economic event in U.S. history?
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
114. The U.S. economy was able to achieve full employment with relative price level stability
between 1996 and 2000 because aggregate:
115. Deflation refers to a situation where:
116. Disinflation refers to a situation where:
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
117. Aggregate demand decreases and real output falls but the price level remains the same.
Which of the following factors most likely contributes to downward price inflexibility in the
immediate short run?
118. Collective bargaining agreements that prohibit wage cuts for the duration of the contract
contribute to:
119. Menu costs will:
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
120. Wage contracts, efficiency wages, and the minimum wage are explanations for why:
121. The so-called ratchet effect refers to the characteristic in the economy where product
prices, wages, and per-unit production cost are flexible when:
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
122. Refer to the above graph. The ratchet effect would suggest that:
123. Prior to 1980, changes in oil prices greatly affected U.S. inflation. When oil prices rose,
the U.S. would experience:
124. Prior to 1980, changes in oil prices greatly affected U.S. inflation; but since 1980, they
have had minor effect. This is due to the following factors, except:
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
125. The aggregate demand curve shows that when the price level rises, the quantity of real
GDP demanded decreases.
126. A rise in the price level decreases the real value of financial assets with fixed money
values and, as a result, decreases spending by the holders of these assets.
127. The real-balance and interest-rate effects help explain why aggregate demand might shift
to the right or to the left.
128. An increase in real interest rates will increase investment and aggregate demand.
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
129. When the stock market crashed in 2008, the so-called reverse wealth effect caused
consumer spending to decrease.
130. A decrease in personal and business taxes will cause government spending and aggregate
demand to decrease.
131. Depreciation of the dollar relative to foreign currencies will tend to increase net exports
and aggregate demand.
132. The real-balance effect explains a shift in aggregate demand, while the wealth effect
explains a movement along the AD curve.
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
133. The long-run aggregate supply curve is upward-sloping.
134. The shape of the short-run aggregate supply curve indicates that as the general price
level rises, output will expand but not by much when the economy reaches full employment.
135. A change in business taxes and regulation can affect production costs and aggregate
supply.
136. If productivity increases, then the per-unit production cost decreases.
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
137. If the cost of resources decreases, then real domestic output will increase.
138. When there is an increase in aggregate demand in the short run, there will be an increase
in the price level but not in the level of output or employment.
139. When the economy is experiencing demand-pull inflation, its real GDP tends to be high.
140. The oil crises of the 1970s and 1980s can best be illustrated as a shift of the aggregate
demand curve to the left.
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
141. Cost-push inflation can be described as a rightward shift of the aggregate supply curve.
142. Minimum wage laws tend to make the price level more flexible rather than less flexible.
143. The relationship between the aggregate demand curve and the aggregate expenditures
model is derived from the fact that:
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
144. An increase in the price level, other things equal, will shift the:
145. If the price level decreases, then the aggregate expenditures schedule will shift and this
translates into a:
146. A movement upward along a given aggregate demand curve is equivalent to a(n):
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
147. A decrease in the price level in the aggregate expenditures model would:
148. An increase in the aggregate expenditures schedule:
149. An increase in investment and government spending can be expected to shift the:
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
150. A decrease in consumer spending can be expected to shift the:
151. The aggregate expenditures schedule relates total spending with the price level, while the
aggregate demand schedule relates total demand for output with income.
152. The equivalent of the aggregate supply curve in the aggregate expenditures model is the
45-degree line.
Chapter 12 - Aggregate Demand and Aggregate Supply (+ Appendix)
153. If the price level increases, then the aggregate expenditures schedule will shift down and
the aggregate demand curve will shift to the left.
