ECO372T Economics Study Questions 5

ECO372T Economics Study Questions 5

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Question 22

Use the following graph to answer the next question.

When output increases from Q1 and the price level decreases from P1, this change will _____.

Multiple Choice

be caused by a shift in the aggregate supply curve from AS1 to AS3

result in a movement along the aggregate demand curve from e1 to e2

result in a movement along the aggregate demand curve from e3 to e1

be caused by a shift in the aggregate supply curve from AS1 to AS2

Question 23

In the aggregate demand-aggregate supply model, the economy’s price level is assumed to be _____.

Multiple Choice

variable, unlike in the aggregate expenditures model

constant, just like in the aggregate expenditures model

variable, just like in the aggregate expenditures model

constant, unlike in the aggregate expenditures model

Question 24

The aggregate demand curve or schedule shows the relationship between the total demand for output and the _____.

Multiple Choice

price level

income level

real GDP

interest rate

Question 25

An increase in aggregate demand is most likely to be caused by a(n) _____.

Multiple Choice

decrease in government spending

decrease in the tax rates on household income

decrease in expected returns on investment

increase in real interest rates

Question 26

An increase in personal income taxes will cause a(n) _____.

Multiple Choice

increase (or shift right) in aggregate demand

decrease (or shift left) in aggregate demand

increase in the quantity of real output demanded (or movement down along AD)

decrease in the quantity of real output demanded (or movement up along AD)

Question 27

Which of the following events would most likely reduce aggregate demand?

Multiple Choice

A reduction in the amount of existing capital stock.

An increase in real interest rates.

A reduction in business and personal tax rates.

An increase in expected returns on investment.

Question 28

Which would most likely increase aggregate supply?

Multiple Choice

An increase in productivity

A decrease in personal income taxes

A decrease in business subsidies

An increase in the prices of imported products

Question 29

Use the following table which shows the aggregate demand and aggregate supply schedules for a hypothetical economy to answer the next question.

Real Domestic Output Demanded (in billions) Price Level (index value) Real Domestic Output Supplied (in billions)

$3,000 350 $9,000

4,000 300 8,000

5,000 250 7,000

6,000 200 6,000

7,000 150 5,000

8,000 100 4,000

The equilibrium price and output levels will be _____.

Multiple Choice

250 and $7,000

200 and $5,000

300 and $8,000

200 and $6,000

Question 30

The long-run aggregate supply curve is _____.

Multiple Choice

upward-sloping and becomes flatter at output levels above the full-employment output

upward-sloping and becomes steeper at output levels above the full-employment output

horizontal

vertical

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