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Exam 12: Aggregate Demand and Aggregate Supply

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Question 101

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

A) rightward shift of the aggregate demand curve.
B) leftward shift of the aggregate demand curve.
C) movement downward along a fixed aggregate demand curve.
D) decrease in aggregate supply.

E) None of the above
F) A) and B)

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Question 102

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The interest-rate effect suggests that:

A) a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending.
B) an increase in the price level will increase the demand for money,reduce interest rates,and decrease consumption and investment spending.
C) an increase in the price level will increase the demand for money,increase interest rates,and decrease consumption and investment spending.
D) an increase in the price level will decrease the demand for money,reduce interest rates,and increase consumption and investment spending.

E) C) and D)
F) All of the above

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Question 103

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-Which of the above diagrams best portrays the effects of an increase in foreign spending on our products?

Refer to the table below.If this nation's aggregate supply schedule graphs as a vertical line at the $25 billion level of real GDP,its price level will be: The following table is for a particular country in which C is consumption expenditures,I_g is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars.

-Refer to the above diagrams.Assuming a constant price level,an increase in aggregate expenditures from AE₁ to AE₂ would:

Using the aggregate demand-aggregate supply (short-run)model,explain the impact of the public's expectations of severe inflation on real GDP and the price level.

Refer to the data below.The vertical range of the aggregate supply curve is associated with price levels: The following aggregate demand and supply schedules are for a hypothetical economy:

-Refer to the above diagram.If AD₁ shifts to AD₂,then the equilibrium output and price level are:

Refer to the above diagram.If the price level rises above P₁ because of an increase in aggregate demand,the:

A rightward shift in the aggregate supply curve might best be explained by:

-Refer to the above diagram.When output increases from Q₁ and the price level decreases from P₁,this change will:

Changes in which of the two factors below would most likely cause a change in consumer spending? The following list of factors,are related to the aggregate demand curve.

-Refer to the above diagram.If the equilibrium price level is P₁,then:

The following table shows the aggregate demand and aggregate supply schedule for a hypothetical economy. -Refer to the above table.The equilibrium price level and quantity of real domestic output will be:

-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f.In the long run,demand-pull inflation could best be shown as:

Suppose the aggregate demand and short-run aggregate supply schedules for a hypothetical economy are as shown below: (a)What will be the equilibrium price and real output level in this hypothetical economy? Is this level of real GDP also the full-employment level of output? Explain. (b)Why won't a price level of 100 be the equilibrium price level? Why won't a price level of 110 index be the equilibrium price level? (c)Suppose aggregate demand increases by $120 billion at each price level.What will be the new equilibrium price and output levels? (d)What factors might cause aggregate demand to increase? (e)Suppose short-run aggregate supply increases by $120 billion at each price level.What will be the new equilibrium price and output levels?

Other things equal,an improvement in productivity will:

The aggregate demand curve can be derived from the aggregate expenditures model as indicated by the fact that:

-In the above figure AD₁ and AS₁ represent the original aggregate supply and demand curves and AD₂ and AS₂ show the new aggregate demand and supply curves.At the original equilibrium price and quantity,this economy is experiencing:

Describe the change in short-run aggregate supply that should result from each of the following changes in determinants.Assume that nothing else is changing besides the identified change.(Use "Decrease" or "Increase.") (a)A rise in the average price of inputs; (b)An increase in worker productivity; (c)Government antipollution regulations become stricter; (d)A new subsidy program is enacted for new business investment in productive equipment; (e)Energy prices decline.