Question 1

Other things the same, when the price level rises more than expected, some firms will have

Accepted Answer

A)  higher than desired prices, which increases their sales.
B)  higher than desired prices, which depresses their sales.
C)  lower than desired prices, which increases their sales.
D)  lower than desired prices, which depresses their sales.E) B) and C)
F) All of the above

Question 2

Refer to Financial Crisis. If nominal wages are sticky, which of the following helps explains the change in output?

Accepted Answer

A)  real wages fall, so firms choose to produce less
B)  real wages fall, so firms choose to produce more
C)  real wages rise, so firms choose to produce less
D)  real wages rise, so firms choose to produce moreE) All of the above
F) A) and B)

Question 3

Refer to Pessimism. In the long run, the change in price expectations created by pessimism shifts

Accepted Answer

A)  long-run aggregate supply right.
B)  long-run aggregate supply left.
C)  short-run aggregate supply right.
D)  short-run aggregate supply left.E) None of the above
F) C) and D)

Question 4

Refer to Political Instability Abroad. What would the change in the exchange rate make happen to U.S. net exports and U.S. aggregate demand?

Accepted Answer

A)  Net exports would rise which by itself would increase U.S. aggregate demand.
B)  Net exports would rise which by itself would decrease U.S. aggregate demand.
C)  Net exports would fall which by itself would increase U.S. aggregate demand.
D)  Net exports would fall which by itself would decrease U.S. aggregate demand.E) A) and C)
F) A) and B)

Question 5

The downward slope of the aggregate demand curve is based on logic that as the price level rises, consumption, investment, and net exports all fall.

Accepted Answer

A) True 
 B)False

Question 6

An unexpected increase in the price level that temporarily lowers real wages and induces more employment and output in an economy, occurs in

Accepted Answer

A)  nominal-supply theory.
B)  stagflation.
C)  misperceptions theory.
D)  sticky-wage theory.E) A) and C)
F) B) and C)

Question 7

Which of the following is correct?

Accepted Answer

A)  Over the business cycle investment fluctuates more than consumption.
B)  Economic fluctuations are easy to predict.
C)  During recessions employment rises.
D)  Because of government policy the U.S. had zero recessions in the last 25 years.E) A) and C)
F) B) and C)

Question 8

As the price level rises,

Accepted Answer

A)  the exchange rate falls, so net exports fall.
B)  the exchange rate falls, so net exports rise.
C)  the exchange rate rises, so net exports fall.
D)  the exchange rate rises, so net exports rise.E) None of the above
F) C) and D)

Question 9

Other things the same, technological progress raises the price level.

Accepted Answer

A) True 
 B)False

Question 10

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

Accepted Answer

A) True 
 B)False

Question 11

Other things the same, an increase in the expected price level shifts

Accepted Answer

A)  short-run aggregate supply right.
B)  short-run aggregate supply left.
C)  aggregate-demand right.
D)  aggregated-demand left.E) A) and C)
F) None of the above

Question 12

Stagflation exists when prices

Accepted Answer

A)  rise and unemployment falls.
B)  rise and unemployment rises.
C)  fall and unemployment rises.
D)  fall and unemployment falls.E) All of the above
F) A) and B)

Question 13

As the price level rises

Accepted Answer

A)  people will want to buy more bonds, so the interest rate rises.
B)  people will want to buy fewer bonds, so the interest rate falls.
C)  people will want to buy more bonds, so the interest rate falls.
D)  people will want to buy fewer bonds, so the interest rate rises.E) A) and B)
F) B) and D)

Question 14

When the dollar depreciates, U.S.

Accepted Answer

A)  exports and imports increase.
B)  exports increase, while imports decrease.
C)  exports decrease, while imports increase.
D)  exports and imports decrease.E) All of the above
F) B) and C)

Question 15

List the three alternative explanations for the upward slope of the short run aggregate supply curve.

Accepted Answer

Sticky wages, sticky...

Question 16

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes. We would expect that the rebuilding increased aggregate demand in

Accepted Answer

A)  both the United States and Europe.
B)  the United States but not Europe.
C)  Europe, but not the United States.
D)  neither the United States, nor Europe.E) A) and B)
F) B) and D)

Question 17

Other things the same, if the U.S. price level rises, then

Accepted Answer

A)  the supply of dollars in the market for foreign-currency exchange increases, and net exports fall.
B)  the supply of dollars in the market for foreign-currency exchange increases, and net exports rise.
C)  the supply of dollars in the market for foreign-currency exchange decreases, and net exports fall.
D)  the supply of dollars in the market for foreign-currency exchange decreases, and net exports rise.E) All of the above
F) A) and D)

Question 18

Which of the following effects provide incentives for consumers to spend less when the price level rises?

Accepted Answer

A)  the wealth effect and the interest-rate effect
B)  the wealth effect but not the interest-rate effect
C)  the interest-rate effect but not the wealth effect
D)  neither the wealth-effect nor the interest rate effectE) All of the above
F) A) and C)

Question 19

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Accepted Answer

A)  the relationship between output and unemployment is erratic and difficult to characterize.
B)  when one macroeconomic variable that measures income or spending is falling, other macroeconomic variables that measure income or spending are likely to be rising.
C)  recessions do not occur at regular intervals.
D)  All of the above are correct.E) A) and C)
F) All of the above

Question 20

An increase in the price level and a reduction in output would result from

Accepted Answer

A)  a fall in stock prices.
B)  a decrease in the supply of an important resource.
C)  an increase in government expenditures.
D)  an increase in taxes.E) A) and C)
F) A) and B)

Exam 33: Aggregate Demand and Aggregate Supply

When we say that economic fluctuations are "irregular and unpredictable," we mean that

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Other things the same, technological progress raises the price level.

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As the price level rises,

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At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes. We would expect that the rebuilding increased aggregate demand in

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Other things the same, when the price level rises more than expected, some firms will have

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An unexpected increase in the price level that temporarily lowers real wages and induces more employment and output in an economy, occurs in

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If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

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The downward slope of the aggregate demand curve is based on logic that as the price level rises, consumption, investment, and net exports all fall.

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Which of the following effects provide incentives for consumers to spend less when the price level rises?

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Other things the same, if the U.S. price level rises, then

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Refer to Pessimism. In the long run, the change in price expectations created by pessimism shifts

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As the price level rises

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List the three alternative explanations for the upward slope of the short run aggregate supply curve.

Correct AnswerverifiedSticky wages, sticky...View AnswerShow Answer

Which of the following is correct?

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Refer to Financial Crisis. If nominal wages are sticky, which of the following helps explains the change in output?

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Stagflation exists when prices

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Other things the same, an increase in the expected price level shifts

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When the dollar depreciates, U.S.

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An increase in the price level and a reduction in output would result from

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Refer to Political Instability Abroad. What would the change in the exchange rate make happen to U.S. net exports and U.S. aggregate demand?

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Sticky wages, sticky...
View Answer

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