I.

True/False
1. Aggregate demand reflects a positive relationship between the price level and the amount of
real output demanded. F ( supply – supplier)
6. A movement along a fixed aggregate demand curve is the same as a shift in aggregate
demand. F ( not same)
8. a change in aggregate demand is caused by a change in the price level, other things equal. F
10. a large decline in households borrowing will increase consumption spending and aggregate
demand.F
12. appreciation of the dollar relative to foreign currencies will tend to increase net exports and
aggregate demand.F ( Decrease)
13. The aggregate supply curve is vertical in the longrun at the full- employment level of output.
T
16.productivity is a measure of real output per unit of input. T
17. Per unit production cost is determined by dividing total input cost by units of output F total
18. at the equilibrium price level, the real domestic output purchased is equal to the real domestic
output produced T
19. an increase in AD will increase both the price level and real domestic output. T
20. An increase in AD associated with cost push inflation.F ( demanad)
24. A decrease in AS decrease the equilibrium real domestic out put and increase the price level,
resulting in cost push inflation T
II. Multiple choice questions
1.The AD curve is the relationship between the
a. price level and what producers will supply
b.Price level and the real domestic output purchased
c. Price level and the real domestic output produced
d. Real domestic output purchased and the real domestic output produced
5. The aggregate demand curve will be increased by
a. a decrease in the price level
b. a increase in the price level
c. a depreciation in the value of the US dollar
d. an increase in the excess capacity of factories
6. the AS curve is the relationship between the
a. price level and the real domestic output purchased
b. Price level and the real domestic output produced
c.Price level that producer are willing to accept and price level purchasers are willing to pay
d. Real domestic output purchased and the real domestic output produced
8. In the longrun, the AS curve is
a. upsloping
b. downsloping
c. vertical
d. horizontal
9. If the price of imported resources increase, then this event would most likely
a. decrease AS
b. increase AS
c. increase AD
d. decrease AD
Suppose that real domestic output in an economy is 50 units, the quantity of inputs is 10, and the
price of each input is $2. Answer questions 10,11, 12 and 13 on the basis of this information
10. The level of productivity in this economy is
a. 5
b. 4
c. 3
d. 2
11. The per unit cost of production is
a. $0.4
b. $0.5
c. $2.5
d. $3.5
12. If productivity increased such that 60 units are now produced with the quantity of inputs still
equal to 10, then per-unit production costs would
a. remain unchanged and aggregate supply would remain unchanged
b. increase and aggregate supply would decrease
c. decrease and aggregate supply would increase
d. decrease and aggregate supply would remain decrease
13. All else equal, if the price of each input increases from $2 to $4, productivity would
a. decrease from $4 to $2 and aggregate supply would decrease
b. decrease from $5 to $3 and aggregate supply would decrease
c. decrease from $4 to $2 and aggregate supply would increase
d. remain ungchanged and aggregate supply would decrease
14. If Congress passed much stricter laws to control the air pollution from the businesses, this
action would tend to
a. increase per-unit production costs and shift the aggregate supply curve to the right
b. increase per-unit production costs and shift the aggregate supply curve to the left
c. increase per-unit production costs and shift the aggregate demand curve to the left
d. decrease per-unit production costs and shift the aggregate supply curve to the left

15. an increase in business taxes will tend to

a. decrease AD but not change AS
b. decrease AS but not change AD
c. decrease AD and decrease AS
d. increase AS and increase AD
AD price AS
1500 x 4500
2000 150 4000
2500 125 3500
3000 100 3000
3500 75 2500
4000 50 2000

17.the equlibrium price level and quantity of real domestic output will be
a. 100 and 2500
b. 100 and 3000
c. 125 and 3500
d. 150 and 4000
18. if the quantity of real domestic output demanded increase by 2000$ at each price level, the
the equlibrium price level and quantity of real domestic output would be
a. 175 and 4000
b. 150 and 4000
c. 125 and 3500
d. 100 and 3000
19.using the orginal data from the table, if the quantity of real domestic output demanded
increased by 1500 and the quantity of real domestic output supplied increased by 500 at each
price level, the the equlibrium price level and quantity of real domestic output would be
a. 175 and 4000
b. 150 and 4500
c. 125 and 4000
d. 100 and 3500