Question 1

Refer to the information provided in Figure 11.2 below to answer the questions that follow.  Figure 11.2
-Refer to Figure 11.2. This economy reaches capacity at

Accepted Answer

A)   $300 billion.
B)   $600 billion.
C)   $900 billion.
D)   an output level that is indeterminate from this information because aggregate demand is not given.

Question 2

To increase the price level the government could

Accepted Answer

A)   increase government spending and encourage immigration.
B)   decrease government spending and discourage immigration.
C)   increase government spending and discourage technological advancement.
D)   decrease government spending and encourage technological advancement.

Question 3

When the ________ increases, then potential output increases.

Accepted Answer

A)   long-run aggregate supply
B)   short-run aggregate supply
C)   long-run aggregate demand
D)   short-run aggregate demand

Question 4

Refer to the information provided in Figure 11.4 below to answer the questions that follow.  Figure 11.4
-Refer to Figure 11.4. Suppose the economy is at Point A, an increase in the price level moves the economy to Point

Accepted Answer

A)   E.
B)   B.
C)   C.
D)   D.

Question 5

An increase in the "Z" factors will decrease the equilibrium price level and decrease aggregate output, ceteris paribus.

Accepted Answer

A) True 
 B)False

Question 6

11.5 The Long-Run AS Curve
Refer to the information provided in Figure 11.7 below to answer the questions that follow.  Figure 11.7
-Refer to Figure 11.7. The level of aggregate output that can be sustained in the long run without inflation

Accepted Answer

A)   is $800 million.
B)   is $700 million.
C)   is $400 million.
D)   cannot be determined from this information because aggregate demand is not given.

Question 7

An increase in aggregate demand when the economy is operating at full capacity is likely to result in

Accepted Answer

A)   an increase in both output and the overall price level.
B)   an increase in output but no increase in the overall price level.
C)   an increase in the overall price level but no increase in output.
D)   no increase in either output or the overall price level.

Question 8

Refer to the information provided in Figure 11.4 below to answer the questions that follow.  Figure 11.4
-Refer to Figure 11.4. Which of the following causes the economy to move from Point E to Point A?

Accepted Answer

A)   an oil embargo that increases the price of oil
B)   technological progress
C)   stricter immigration enforcement
D)   an increase in the price level

Question 9

Refer to the information provided in Figure 11.8 below to answer the questions that follow. 2 (or at Point D)  because A)  the price of raw material and wages will decrease shifting the aggregate supply curve to AS2. B)  the price of inputs will increase, shifting the aggregate supply curve to AS1. C)  the price of raw material will decrease, shifting the aggregate demand curve to AD1. D)  all of the above" class="answers-bank-image d-inline" rel="preload" > Figure 11.8
-Refer to Figure 11.8. This economy cannot continue to produce Y2 (or at Point D)  because

Accepted Answer

A)   the price of raw material and wages will decrease shifting the aggregate supply curve to AS2.
B)   the price of inputs will increase, shifting the aggregate supply curve to AS1.
C)   the price of raw material will decrease, shifting the aggregate demand curve to AD1.
D)   all of the above

Question 10

When the economy is producing at full capacity, the aggregate supply curve becomes

Accepted Answer

A)   horizontal.
B)   downward sloping.
C)   vertical.
D)   upward sloping.

Question 11

Refer to the information provided in Figure 11.3 below to answer the questions that follow. 1 to AS2. B)  the short-run aggregate supply curve to shift from AS1 to AS0. C)  the economy to move from Point B to Point A along AS1. D)  the economy to move from Point C to Point B along AS1." class="answers-bank-image d-inline" rel="preload" > Figure 11.3
-Refer to Figure 11.3. Hurricane Katrina destroyed a large portion of the infrastructure along the Gulf of Mexico coast. This caused

Accepted Answer

A)   the short-run aggregate supply curve to shift from AS1 to AS2.
B)   the short-run aggregate supply curve to shift from AS1 to AS0.
C)   the economy to move from Point B to Point A along AS1.
D)   the economy to move from Point C to Point B along AS1.

Question 12

Refer to the information provided in Figure 11.3 below to answer the questions that follow. 1 to AS2. B)  the short-run aggregate supply curve to shift from AS1 to AS0. C)  the economy to move from Point B to Point A along AS1. D)  the economy to move from Point C to Point B along AS1." class="answers-bank-image d-inline" rel="preload" > Figure 11.3
-Refer to Figure 11.3. The increased use of hydraulic fracturing, or fracking, in North Texas has significantly reduced energy prices across the country. This fracking would cause

Accepted Answer

A)   the short-run aggregate supply curve to shift from AS1 to AS2.
B)   the short-run aggregate supply curve to shift from AS1 to AS0.
C)   the economy to move from Point B to Point A along AS1.
D)   the economy to move from Point C to Point B along AS1.

Question 13

Refer to the information provided in Figure 11.5 below to answer the questions that follow.  Figure 11.5
-Refer to Figure 11.5. A decrease in government spending shifts the ________ to the ________.

Accepted Answer

A)   IS curve; left
B)   Fed rule; right
C)   IS curve; right
D)   Fed rule; left

Question 14

Refer to the information provided in Figure 11.8 below to answer the questions that follow. 1 A)  the economy is operating above full employment. B)  input prices are likely to rise. C)  aggregate supply shifts to the left and the economy ends up at Point C. D)  all of the above" class="answers-bank-image d-inline" rel="preload" > Figure 11.8
-Refer to Figure 11.8. If the economy is currently at Point B producing output level Y1

Accepted Answer

A)   the economy is operating above full employment.
B)   input prices are likely to rise.
C)   aggregate supply shifts to the left and the economy ends up at Point C.
D)   all of the above

Question 15

The relationship between the level of prices and the total demand for all goods and services is known as

Accepted Answer

A)   aggregate supply.
B)   aggregate demand.
C)   market supply.
D)   market demand.

Question 16

Which of the following sequence of events follows an open market purchase by the Fed?

Accepted Answer

A)   r↑ ⇒ I↓ ⇒ AE↓ ⇒ Y↓
B)   r↑ ⇒ I↑ ⇒ AE↓ ⇒ Y↑
C)   r↓ ⇒ I↑ ⇒ AE↑ ⇒ Y↑
D)   r↓ ⇒ I↓ ⇒ AE↓ ⇒ Y↓

Question 17

A decrease in the price level raises the real value of wealth.

Accepted Answer

A) True 
 B)False

Question 18

All of the following shift the short-run aggregate supply curve except

Accepted Answer

A)   a change in the price level.
B)   a change in the price of oil.
C)   a change in the price of raw material.
D)   a change in wages as a result of a labor strike.

Question 19

The rationale underlying policies to deregulate the economy is that these policies would

Accepted Answer

A)   increase aggregate demand.
B)   decrease short-run aggregate supply.
C)   decrease aggregate demand.
D)   increase short-run aggregate supply.

Question 20

A decrease in the price level is likely to decrease the aggregate amount of output supplied in the short run because

Accepted Answer

A)   interest rate is high in the short run.
B)   wages are sticky in the short run.
C)   wages change in the short run.
D)   the aggregate supply curve is vertical in the short run.

Exam 11: The Determination of Aggregate Output, the Price Level, and the Interest Rate

When the ________ increases, then potential output increases.

Correct Answer
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11.5 The Long-Run AS Curve Refer to the information provided in Figure 11.7 below to answer the questions that follow. Figure 11.7 -Refer to Figure 11.7. The level of aggregate output that can be sustained in the long run without inflation

Correct Answer
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Refer to the information provided in Figure 11.4 below to answer the questions that follow. Figure 11.4 -Refer to Figure 11.4. Which of the following causes the economy to move from Point E to Point A?

Correct Answer
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The rationale underlying policies to deregulate the economy is that these policies would

Correct Answer
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Refer to the information provided in Figure 11.3 below to answer the questions that follow. Figure 11.3 -Refer to Figure 11.3. Hurricane Katrina destroyed a large portion of the infrastructure along the Gulf of Mexico coast. This caused

Correct Answer
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An increase in aggregate demand when the economy is operating at full capacity is likely to result in

Correct Answer
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A decrease in the price level raises the real value of wealth.

Correct Answer
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An increase in the "Z" factors will decrease the equilibrium price level and decrease aggregate output, ceteris paribus.

Correct Answer
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Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8 -Refer to Figure 11.8. If the economy is currently at Point B producing output level Y₁

Correct Answer
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Which of the following sequence of events follows an open market purchase by the Fed?

Correct Answer
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Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5. A decrease in government spending shifts the to the .

Correct Answer
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When the economy is producing at full capacity, the aggregate supply curve becomes

Correct Answer
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Refer to the information provided in Figure 11.4 below to answer the questions that follow. Figure 11.4 -Refer to Figure 11.4. Suppose the economy is at Point A, an increase in the price level moves the economy to Point

Correct Answer
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Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8 -Refer to Figure 11.8. This economy cannot continue to produce Y_{2 (or at Point}_D₎ because

Correct Answer
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All of the following shift the short-run aggregate supply curve except

Correct Answer
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The relationship between the level of prices and the total demand for all goods and services is known as

Correct Answer
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Refer to the information provided in Figure 11.2 below to answer the questions that follow. Figure 11.2 -Refer to Figure 11.2. This economy reaches capacity at

Correct Answer
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To increase the price level the government could

Correct Answer
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A decrease in the price level is likely to decrease the aggregate amount of output supplied in the short run because

Correct Answer
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Exam 11: The Determination of Aggregate Output, the Price Level, and the Interest Rate

When the ________ increases, then potential output increases.

Correct AnswerverifiedShow Answer

11.5 The Long-Run AS Curve Refer to the information provided in Figure 11.7 below to answer the questions that follow. Figure 11.7 -Refer to Figure 11.7. The level of aggregate output that can be sustained in the long run without inflation

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 11.4 below to answer the questions that follow. Figure 11.4 -Refer to Figure 11.4. Which of the following causes the economy to move from Point E to Point A?

Correct AnswerverifiedShow Answer

The rationale underlying policies to deregulate the economy is that these policies would

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 11.3 below to answer the questions that follow. Figure 11.3 -Refer to Figure 11.3. Hurricane Katrina destroyed a large portion of the infrastructure along the Gulf of Mexico coast. This caused

Correct AnswerverifiedShow Answer

An increase in aggregate demand when the economy is operating at full capacity is likely to result in

Correct AnswerverifiedShow Answer

A decrease in the price level raises the real value of wealth.

Correct AnswerverifiedShow Answer

An increase in the "Z" factors will decrease the equilibrium price level and decrease aggregate output, ceteris paribus.

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8 -Refer to Figure 11.8. If the economy is currently at Point B producing output level Y1

Correct AnswerverifiedShow Answer

Which of the following sequence of events follows an open market purchase by the Fed?

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5. A decrease in government spending shifts the ________ to the ________.

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 11.3 below to answer the questions that follow. Figure 11.3 -Refer to Figure 11.3. The increased use of hydraulic fracturing, or fracking, in North Texas has significantly reduced energy prices across the country. This fracking would cause

Correct AnswerverifiedShow Answer

When the economy is producing at full capacity, the aggregate supply curve becomes

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 11.4 below to answer the questions that follow. Figure 11.4 -Refer to Figure 11.4. Suppose the economy is at Point A, an increase in the price level moves the economy to Point

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8 -Refer to Figure 11.8. This economy cannot continue to produce Y2 (or at Point D) because

Correct AnswerverifiedShow Answer

All of the following shift the short-run aggregate supply curve except

Correct AnswerverifiedShow Answer

The relationship between the level of prices and the total demand for all goods and services is known as

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 11.2 below to answer the questions that follow. Figure 11.2 -Refer to Figure 11.2. This economy reaches capacity at

Correct AnswerverifiedShow Answer

To increase the price level the government could

Correct AnswerverifiedShow Answer

A decrease in the price level is likely to decrease the aggregate amount of output supplied in the short run because

Correct AnswerverifiedShow Answer

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Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8 -Refer to Figure 11.8. If the economy is currently at Point B producing output level Y₁

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Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5. A decrease in government spending shifts the to the .

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Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8 -Refer to Figure 11.8. This economy cannot continue to produce Y_{2 (or at Point}_D₎ because

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