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5 Written questions

5 Matching questions

  1. Spending on the war in Iraq is essentially categorized as government purchases. How do increases in spending
    on the war in Iraq affect the aggregate demand curve?
    A) They will shift the aggregate demand curve to the left.
    B) They will move the economy up along a stationary aggregate demand curve.
    C) They will move the economy down along a stationary aggregate demand curve.
    D) They will shift the aggregate demand curve to the right.
  2. Which of the following statements is correct?
    a. If households become more optimistic about their future incomes, the aggregate demand curve
    will shift to the right.
    b. If firms become more optimistic about the future profitability of investment spending, the
    aggregate demand curve will shift to the right.
    c. Both a. and b.
    d. Neither a. nor b. Optimism or pessimism do not have anything to do with shifts in the aggregate
    demand curve
  3. Describe aggregate demand.
  4. Why does the short-run aggregate supply curve slope upward?
    a. because profits rise when the prices of the goods and services firms sell rise more rapidly than the
    prices they pay for inputs
    b. because an increase in market price results in an increase in quantity supplied, as stated by the
    law of supply
    c. because, as the number of workers, machinery, equipment, and technological changes increase,
    quantity supplied increases
    d. all of the above
  5. . If short-run aggregate supply increases (shifts to the right) by less than long-run aggregate supply, then, at the
    short-run equilibrium,
    A) GDP will be above potential GDP.
    B) aggregate demand will increase.
    C) GDP will be below potential GDP.
    D) GDP will be equal to potential GDP.
  1. a D) They will shift the aggregate demand curve to the right
  2. b shows the relationship between the price level and the quantity of real GDP
    demanded by households, firms, and the government
  3. c C) GDP will be below potential GDP
  4. d a. because profits rise when the prices of the goods and services firms sell rise more rapidly than the
    prices they pay for inputs
  5. e c. Both a. and b.

5 Multiple choice questions

  1. B) GDP = potential GDP
  2. C) Unemployment will decline
  3. D) an unexpected increase in the price of natural gas
  4. shows the relationship between the price level and the level of planned
    aggregate expenditure by households, firms, and the government
  5. consumption
    (C), investment (I), government purchases (G), and net exports (NX)

5 True/False questions

  1. An increase in net exports that results from a change in the price level in the United States
    a. will shift the aggregate demand curve to the right.
    b. will shift the aggregate demand curve to the left.
    c. will not cause the aggregate demand curve to shift.
    d. will have an indeterminate effect on aggregate demand.
    c. will not cause the aggregate demand curve to shift

          

  2. Potential GDP is also referred to as
    A) balanced-budget GDP
    B) realized GDP
    C) full-employment GDP
    D) politico-economic GDP
    C) full-employment GDP

          

  3. A supply shock will
    a. increase the real GDP in the short-run.
    b. not change real GDP in the long-run.
    c. shift the long-run aggregate supply curve to the right.
    d. decrease both the price level and real GDP in the short-run
    b. not change real GDP in the long-run.

          

  4. What are the three factors that cause the AD curve to shift?consumption
    (C), investment (I), government purchases (G), and net exports (NX)

          

  5. Describe the wealth effect.A higher price level will make U.S. goods relatively more
    expensive compared to other countries' goods. This will reduce exports, increase imports,
    and, therefore, reduce net exports.