An increase in the price of a key input will cause the aggregate demand curve and the short-run aggregate supply curve
to change in which of the following ways?
(A)Aggregate Demand Curve = Shift to the right ; Aggregate Supply Curve = Shift to the right
(B)Aggregate Demand Curve = Shift to the left ; Aggregate Supply Curve = Shift to the left
(C)Aggregate Demand Curve = Shift to the left ; Aggregate Supply Curve = No change
(D)Aggregate Demand Curve = No change ; Aggregate Supply Curve = Shift to the left
(E)Aggregate Demand Curve = No change ; Aggregate Supply Curve = Shift to the right
Given the aggregate demand and aggregate supply curves shown above, if policy makers want to increase real output
without causing inflation, they can pursue a policy that will
(A)increase aggregate demand and decrease aggregate supply by equal amounts
(B)decrease aggregate demand only
(C)decrease aggregate supply only
(D)increase aggregate demand only
(E)increase aggregate supply only
Assume that the aggregate supply curve is upward sloping. If both aggregate supply and aggregate demand increase,
what will happen to the equilibrium output and price level?
(A)Output = Decrease ; Price Level = Decrease
(B)Output = Decrease ; Price Level = Increase
(C)Output = Indeterminate ; Price Level = Increase
(D)Output = Increase ; Price Level = Indeterminate
(E)Output = Increase ; Price Level = Increase
Which of the following would cause both the aggregate demand and aggregate supply curves to shift to the right?
(A)A decrease in corporate income taxes
(B)A decrease in government spending
(C)A decrease in natural resource prices
(D)A decrease in the stock market prices
(E)An increase in the international value of the domestic currency
If the aggregate supply curve is horizontal, an increase in government spending will result in which of the following?
(A)Real Output = Increase ; Price Level = Increase
(B)Real Output = Increase ; Price Level = No change
(C)Real Output = Increase ; Price Level = Decrease
(D)Real Output = No change ; Price Level = Increase
(E)Real Output = No change ; Price Level = No change
If a reduction in aggregate supply is followed by an increase in aggregate demand, which of the following will definitely
occur?
(A)Output will increase.
(B)Output will decrease.
(C)Output will not change.
(D)The price level will increase.
(E)The price level will decrease.
With an upward-sloping short-run aggregate supply curve, an increase in government expenditure will most likely
(A)reduce the price level
(B)reduce the level of nominal gross domestic product
(C)increase real gross domestic product
(D)shift the short-run aggregate supply curve to the right
(E)shift both the aggregate demand curve and the long-run aggregate supply curve to the left
Which of the following are the most likely short-run effects of an increase in government expenditures?
(A)Unemployment Rate = Increase ; Inflation Rate = Increase ; Real Gross Domestic Product = Increase
(B)Unemployment Rate = Increase ; Inflation Rate = Increase ; Real Gross Domestic Product = Decrease
(C)Unemployment Rate = Decrease ; Inflation Rate = Increase ; Real Gross Domestic Product = Increase
(D)Unemployment Rate = Decrease ; Inflation Rate = Decrease ; Real Gross Domestic Product = Increase
(E)Unemployment Rate = No change ; Inflation Rate = Decrease ; Real Gross Domestic Product = Increase
According to the graph above, an increase in aggregate supply will most likely cause income and employment to change
in which of the following ways?
(A)Income = Decrease ; Employment = Decrease
(B)Income = Decrease ; Employment = Increase
(C)Income = No change ; Employment = Increase
(D)Income = Increase ; Employment = Decrease
(E)Income = Increase ; Employment = Increase
In an economy in which all prices, including wages, are completely flexible, an increase in labor productivity will result in
which of the following changes in output and real wages?
(A)Output = Increase ; Real Wages = Increase
(B)Output = Increase ; Real Wages = Decrease
(C)Output = Decrease ; Real Wages = No change
(D)Output = Decrease ; Real Wages = Increase
(E)Output = Decrease ; Real Wages = Decrease
An increase in personal income taxes will most likely cause aggregate demand and aggregate supply to change in which
of the following ways in the short-run?
(A)Aggregate Demand = Not change ; Aggregate Supply = Decrease
(B)Aggregate Demand = Not change ; Aggregate Supply = Increase
(C)Aggregate Demand = Decrease ; Aggregate Supply = Not change
(D)Aggregate Demand = Decrease ; Aggregate Supply = Increase
(E)Aggregate Demand = Increase ; Aggregate Supply = Not change
When firms restructure their operations to decrease production costs, the aggregate supply curve, the price level, and
real output will change in which of the following ways?
(A)Aggregate Supply Curve = Shift to the left ; Price Level = Increase ; Real Output = Increase
(B)Aggregate Supply Curve = Shift to the left ; Price Level = Increase ; Real Output = No change
(C)Aggregate Supply Curve = Shift to the right ; Price Level = Increase ; Real Output = Increase
(D)Aggregate Supply Curve = Shift to the right ; Price Level = Decrease ; Real Output = Increase
(E)Aggregate Supply Curve = Shift to the right ; Price Level = Decrease ; Real Output = Decrease
A decrease in business taxes would lead to an increase in national income by increasing which of the following?
(A)The money supply
(B)Unemployment
(C)Aggregate demand only
(D)Aggregate supply only
(E)Both aggregate demand and aggregate supply
A favorable supply shock, such as a decrease in energy prices, is most likely to have which of the following short-run
effects on the price level and output?
(A)Price Level = Decrease ; Output = No effect
(B)Price Level = Decrease ; Output = Increase
(C)Price Level = Increase ; Output = Increase
(D)Price Level = Increase ; Output = Decrease
(E)Price Level = No effect ; Output = No effect
In an economy with a horizontal aggregate supply curve, an increase in government spending will cause output and the
price level to change in which of the following ways?
(A)Output = Decrease ; Price Level = Increase
(B)Output = Increase ; Price Level = Increase
(C)Output = Increase ; Price Level = No change
(D)Output = No change ; Price Level = Increase
(E)Output = No change ; Price Level = No change
Which of the following events will most likely cause an increase in both the price level and real gross domestic product?
(A)The prime rate increases.
(B)Exports increase.
(C)Income taxes increase.
(D)Crude oil prices decrease.
(E)Inflationary expectations decrease.
If an economy’s aggregate supply curve is upward sloping, an increase in government spending will most likely result in a
decrease in the
(A)real level of output
(B)price level
(C)interest rate
(D)unemployment rate
(E)government’s budget deficit
An increase in which of the following will lead to lower inflation and lower unemployment?
(A)Exports
(B)Aggregate demand
(C)Labor productivity
(D)Government spending
(E)The international value of domestic currency
An increase in energy costs will most likely cause the price level and real gross domestic product to change in which of
the following ways?
(A)Price Level = Increase ; Real Gross Domestic Product = Increase
(B)Price Level = Increase ; Real Gross Domestic Product = Decrease
(C)Price Level = Increase ; Real Gross Domestic Product = Not change
(D)Price Level = Decrease ; Real Gross Domestic Product = Increase
(E)Price Level = Decrease ; Real Gross Domestic Product = Decrease
A contractionary supply shock would most likely result in
(A)an increase in aggregate demand
(B)an increase in national income
(C)an increase in gross domestic product
(D)a decrease in the general price level
(E)a decrease in employment
If the economy is operating in the intermediate range of the aggregate supply curve and if aggregate demand increases
due to an increase in net exports, then the price level, output, and the unemployment rate are most likely to change in
which of the following ways?
(A)Price Level = Increase ; Output = Increase ; Unemployment Rate = Increase
(B)Price Level = Increase ; Output = Increase ; Unemployment Rate = Decrease
(C)Price Level = Increase ; Output = Decrease ; Unemployment Rate = Increase
(D)Price Level = Increase ; Output = Decrease ; Unemployment Rate = Decrease
(E)Price Level = Decrease ; Output = Decrease ; Unemployment Rate = Increase
The intersection of the aggregate supply curve and the aggregate demand curve occurs at the economy's equilibrium
level of
(A)real investment and the interest rate
(B)real disposable income and unemployment
(C)real national output and the price level
(D)government expenditures and taxes
(E)imports and exports