1. The aggregate demand curve is:
A. vertical if full employment exists.
B. horizontal when there is considerable unemployment in the economy.
C. downsloping because of the interest-rate, real-balances, and foreign purchases effects.
D. downsloping because production costs decrease as real output rises.
2. The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries will:
A. increase the amount of U.S. real output purchased.
B. increase U.S. imports and decrease U.S. exports.
C. increase both U.S. imports and U.S. exports.
D. decrease both U.S. imports and U.S. exports.
3. Which one of the following would not shift the aggregate demand curve?
A. a change in the price level
B. depreciation of the international value of the dollar
C. a decline in the interest rate at each possible price level
D. an increase in personal income tax rates
4. A decline in investment will shift the AD curve to the:
A. left by a multiple of the change in investment.
B. left by the same amount as the change in investment.
C. right by the same amount as the change in investment.
D. right by a multiple of the change in investment.
5. The economy’s long-run AS curve assumes that wages and other resource prices:
A. eventually rise and fall to match upward or downward changes in the price level.
B. are flexible upward but inflexible downward.
C. rise and fall more rapidly than the price level.
D. are relatively inflexible both upward and downward.
6. The aggregate supply curve:
A. is explained by the interest rate, real-balances, and foreign purchases effects.
B. gets steeper as the economy moves from the top of the curve to the bottom of the curve.
C. shows the various amounts of real output that businesses will produce at each price level.
D. is downsloping because real purchasing power increases as the price level falls.
7. Which of the following would not shift the aggregate supply curve?
A. an increase in labor productivity
B. a decline in the price of imported oil
C. a decline in business taxes
D. an increase in the price level
8. Productivity measures:
A. real output per unit of input.
B. per unit production costs.
C. the changes in real wealth caused by price level changes.
D. the amount of capital goods used per worker.
9. Graphically, cost-push inflation is shown as a:
A. leftward shift of the AD curve.
B. rightward shift of the AS curve.
C. leftward shift of AS curve.
D. rightward shift of the AD curve.
10. If aggregate demand decreases, and as a result, real output and employment decline but the price level remains unchanged, we can assume that:
A. the money supply has declined.
B. the price level is inflexible downward and a recession has occurred.
C. cost-push inflation has occurred.
D. productivity has declined.
11. If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium:
A. output would rise.
B. output would fall.
C. price level would necessarily fall.
D. price level would necessarily rise.
12. Prices and wages tend to be:
A. flexible both upward and downward.
B. inflexible both upward and downward.
C. flexible downward, but inflexible upward.
D. flexible upward, but inflexible downward.
13. Efficiency wages are:
A. above-market-wages that bring forth so much added work effort that per-unit production costs are lower than at market wages.
B. wage payments necessary to compensate workers for unpleasant or risky work conditions.
C. usually less than market wages.
D. relevant to macro economics because they explain rightward shifts in aggregate demand.
14. Other things equal, if the national incomes of the major trading partners of the United States were to rise, the U.S.:
A. aggregate demand curve would shift to the right.
B. aggregate supply curve would shift to the left.
C. aggregate supply curve would shift to the right.
D. aggregate demand curve would shift to the left.
15. The aggregate supply curve (short-run) is upsloping because:
A. wages and other resource prices match changes in the price level.
B. the price level is flexible upward but inflexible downward.
C. per-unit production costs rise as the economy moves toward and beyond its full-employment real output.
D. wages and other resource prices are flexible upward but inflexible downward.
Answers:
| 1. C |
2. B |
3. A |
4. A |
5. A |
6. C |
| 7. D |
8. A |
9. C |
10. B |
11. A |
12. D |
| 13. A |
14. A |
15. C |
|
