Question 1

Aggregate demand shifts right if

Accepted Answer

A)  net exports rise or the money supply rises.
B)  net exports rise or the price level rises.
C)  net exports fall or the money supply rises.
D)  net exports fall or the price level rises.E) None of the above
F) A) and B)

Question 2

The recession of 2001 appears to have been mostly the result of decreased

Accepted Answer

A)  aggregate demand due to decreases in the money supply.
B)  aggregate demand due to falling stock prices and increased uncertainty.
C)  aggregate supply due to early retirements.
D)  aggregate supply due to changes in labor laws and decreased availability of natural resources.E) A) and B)
F) A) and C)

Question 3

Investment spending decreases when the price level

Accepted Answer

A)  rises and interest rates rise.
B)  rises and interest rates fall.
C)  falls and interest rates rise.
D)  falls and interest rates fall.E) B) and D)
F) A) and C)

Question 4

The Stock Market Boom of 2010
Imagine that in 2010 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time.
-Refer to Stock Market Boom 2010.In the short run what happens to the price level and real GDP?

Accepted Answer

A)  both the price level and real GDP rise.
B)  both the price level and real GDP fall.
C)  the price level rises and real GDP falls.
D)  the price level falls and real GDP rises.E) B) and C)
F) A) and C)

Question 5

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers people become pessimistic regarding the future and retain that level of pessimism for some time.
-Refer to Pessimism.Which curve shifts and in which direction?

Accepted Answer

A)  aggregate demand shifts right
B)  aggregate demand shifts left
C)  aggregate supply shifts right.
D)  aggregate supply shifts left.E) A) and B)
F) All of the above

Question 6

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Accepted Answer

A)  production is more profitable and employment rises.
B)  production is more profitable and employment falls.
C)  production is less profitable and employment rises.
D)  production is less profitable and employment falls.E) A) and B)
F) None of the above

Question 7

Political Instability Abroad
Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets.
-Refer to Political Instability Abroad.What would happen to the dollar?

Accepted Answer

A)  It would appreciate in foreign exchange markets making U.S goods more expensive compared to foreign goods.
B)  It would appreciate in foreign exchange markets making U.S.goods less expensive compared to foreign goods.
C)  It would depreciate in foreign exchange markets making U.S.goods more expensive compared to foreign goods.
D)  It would depreciate in foreign exchange markets making U.S.goods less expensive compared to foreign goods.E) A) and C)
F) None of the above

Question 8

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher 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) A) and C)
F) A) and B)

Question 9

Suppose a stock market crash makes people feel poorer.This decrease in wealth would induce people to

Accepted Answer

A)  decrease consumption, which shifts aggregate supply left.
B)  decrease consumption, which shifts aggregate demand left.
C)  increase consumption, which shifts aggregate supply right.
D)  increase consumption, which shifts aggregate demand right.E) C) and D)
F) All of the above

Question 10

Other things the same,an increase in the price level induces people to hold

Accepted Answer

A)  less money, so they lend less, and the interest rate rises.
B)  less money, so they lend more, and the interest rate falls.
C)  more money, so they lend more, and the interest rate falls.
D)  more money, so they lend less, and the interest rate rises.E) None of the above
F) C) and D)

Question 11

Which of the following would cause prices and real GDP to rise in the short run?

Accepted Answer

A)  an increase in the expected price level
B)  an increase in the money supply
C)  a decrease in the capital stock
D)  None of the above is correct.E) B) and D)
F) A) and C)

Question 12

The change in the quantity of goods and services demanded in the U.S.is based on the logic that as the price level rises,

Accepted Answer

A)  real wealth falls, interest rates rise, and the dollar appreciates.
B)  real wealth falls, interest rates rise, and the dollar depreciates.
C)  real wealth rises, interest rates fall, and the dollar appreciates.
D)  real wealth rises, interest rates fall, and the dollar depreciates.E) B) and C)
F) B) and D)

Question 13

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Accepted Answer

A)  the price level is higher than expected making production more profitable.
B)  the price level is higher than expected making production less profitable.
C)  the price level is lower than expected making production more profitable.
D)  the price level is higher than expected making production less profitableE) None of the above
F) All of the above

Question 14

Illustrate the classical analysis of growth and inflation with aggregate demand and long-run aggregate supply curves.

Accepted Answer

See graph.

Over time,technological adv...

Question 15

The change in the aggregate quantity of goods and services demanded in the U.S.is based on the logic that as the price level falls,

Accepted Answer

A)  real wealth rises, interest rates rise, and the dollar appreciates.
B)  real wealth rises, interest rates fall, and the dollar depreciates.
C)  real wealth falls, interest rates rise, and the dollar appreciates.
D)  real wealth falls, interest rates fall, and the dollar depreciates.E) A) and B)
F) B) and C)

Question 16

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) C) and D)
F) A) and D)

Question 17

An increase in the actual price level does not shift the short-run aggregate supply curve,but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 18

Keynes believed that economies experiencing high unemployment should adopt policies to

Accepted Answer

A)  reduce the money supply.
B)  reduce government expenditures.
C)  increase aggregate demand.
D)  increase aggregate supply.E) None of the above
F) B) and C)

Question 19

Other things the same,if prices fell when firms and workers were expecting them to rise,then

Accepted Answer

A)  employment and production would rise.
B)  employment would rise and production would fall.
C)  employment would fall and production would rise.
D)  employment and production would fall.E) B) and C)
F) A) and B)

Question 20

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

Accepted Answer

A) True 
 B)False

Exam 33: Aggregate Demand and Aggregate Supply

Other things the same,an increase in the price level induces people to hold

Correct Answer
verified

Which of the following would cause prices and real GDP to rise in the short run?

Correct Answer
verified

The change in the quantity of goods and services demanded in the U.S.is based on the logic that as the price level rises,

Correct Answer
verified

Political Instability Abroad Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets. -Refer to Political Instability Abroad.What would happen to the dollar?

Correct Answer
verified

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Correct Answer
verified

Other things the same,if prices fell when firms and workers were expecting them to rise,then

Correct Answer
verified

An increase in the actual price level does not shift the short-run aggregate supply curve,but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Correct Answer
verified

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected,some firms will have

Correct Answer
verified

As the price level rises

Correct Answer
verified

Illustrate the classical analysis of growth and inflation with aggregate demand and long-run aggregate supply curves.

Correct Answer
verified
See graph.
Over time,technological adv...
View Answer

Investment spending decreases when the price level

Correct Answer
verified

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Correct Answer
verified

Aggregate demand shifts right if

Correct Answer
verified

Suppose a stock market crash makes people feel poorer.This decrease in wealth would induce people to

Correct Answer
verified

The change in the aggregate quantity of goods and services demanded in the U.S.is based on the logic that as the price level falls,

Correct Answer
verified

Correct Answer
verified

Keynes believed that economies experiencing high unemployment should adopt policies to

Correct Answer
verified

The Stock Market Boom of 2010 Imagine that in 2010 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. -Refer to Stock Market Boom 2010.In the short run what happens to the price level and real GDP?

Correct Answer
verified

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

Correct Answer
verified

The recession of 2001 appears to have been mostly the result of decreased

Correct Answer
verified

Exam 33: Aggregate Demand and Aggregate Supply

Other things the same,an increase in the price level induces people to hold

Correct AnswerverifiedShow Answer

Which of the following would cause prices and real GDP to rise in the short run?

Correct AnswerverifiedShow Answer

The change in the quantity of goods and services demanded in the U.S.is based on the logic that as the price level rises,

Correct AnswerverifiedShow Answer

Political Instability Abroad Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets. -Refer to Political Instability Abroad.What would happen to the dollar?

Correct AnswerverifiedShow Answer

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Correct AnswerverifiedShow Answer

Other things the same,if prices fell when firms and workers were expecting them to rise,then

Correct AnswerverifiedShow Answer

An increase in the actual price level does not shift the short-run aggregate supply curve,but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Correct AnswerverifiedShow Answer

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected,some firms will have

Correct AnswerverifiedShow Answer

As the price level rises

Correct AnswerverifiedShow Answer

Illustrate the classical analysis of growth and inflation with aggregate demand and long-run aggregate supply curves.

Correct AnswerverifiedSee graph. Over time,technological adv...View AnswerShow Answer

Investment spending decreases when the price level

Correct AnswerverifiedShow Answer

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Correct AnswerverifiedShow Answer

Aggregate demand shifts right if

Correct AnswerverifiedShow Answer

Suppose a stock market crash makes people feel poorer.This decrease in wealth would induce people to

Correct AnswerverifiedShow Answer

The change in the aggregate quantity of goods and services demanded in the U.S.is based on the logic that as the price level falls,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Keynes believed that economies experiencing high unemployment should adopt policies to

Correct AnswerverifiedShow Answer

The Stock Market Boom of 2010 Imagine that in 2010 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. -Refer to Stock Market Boom 2010.In the short run what happens to the price level and real GDP?

Correct AnswerverifiedShow Answer

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

Correct AnswerverifiedShow Answer

The recession of 2001 appears to have been mostly the result of decreased

Correct AnswerverifiedShow Answer

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Correct Answer
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See graph.
Over time,technological adv...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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