Question 1

The model of aggregate demand and aggregate supply explains the relationship between

Accepted Answer

A)   the price and quantity of a particular good.
B)   unemployment and output.
C)   wages and employment.
D)   real GDP and the price level.E) A) and B)
F) All of the above

Question 2

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

Accepted Answer

A)   the dollar would appreciate which would cause aggregate demand to shift right.
B)   the dollar would appreciate which would cause aggregate demand to shift left.
C)   the dollar would depreciate which would cause aggregate demand to shift right.
D)   the dollar would depreciate which would cause aggregate demand to shift left.E) None of the above
F) A) and D)

Question 3

Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time.
-Refer to Optimism. How is the new long-run equilibrium different from the original one?

Accepted Answer

A)   both price and real GDP are higher
B)   both price and real GDP are lower.
C)   the price level is the same and GDP is higher.
D)   the price level is higher and real GDP is the same.E) B) and D)
F) None of the above

Question 4

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Accepted Answer

A) True 
 B)False

Question 5

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

Accepted Answer

A) True 
 B)False

Question 6

Aggregate demand shifts right if at a given price level

Accepted Answer

A)   taxes rise and shifts left if the money supply increases.
B)   taxes rise and shifts right if the money supply increases.
C)   taxes fall and shifts left if the money supply increases.
D)   taxes fall and shifts right if the money supply increases.E) B) and C)
F) A) and D)

Question 7

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)   an increase in the price level.
B)   households decide to save a larger fraction of their income.
C)   an increase in net exports.
D)   Congress passes a new investment tax credit.E) A) and C)
F) A) and D)

Question 8

The initial impact of an increase in an investment tax credit is to shift

Accepted Answer

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

Question 9

Other things the same, as the price level rises,

Accepted Answer

A)   the dollar depreciates.
B)   the interest rate falls.
C)   people feel less wealthy.
D)   All of the above are correct.E) None of the above
F) C) and D)

Question 10

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Accepted Answer

When people expect the price l...

Question 11

Most economists believe that classical macroeconomic theory is a good description of the economy

Accepted Answer

A)   in neither the short nor long run.
B)   in the short run and in the long run.
C)   in the short run, but not in the long run.
D)   in the long run, but not in the short run.E) B) and C)
F) A) and D)

Question 12

The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Accepted Answer

A) True 
 B)False

Question 13

In which case can we be sure that real GDP and the price level rise in the short run?

Accepted Answer

A)   foreign economies expand and taxes increase.
B)   foreign economies expand and taxes decrease.
C)   foreign economies contract and taxes decrease.
D)   foreign economies contract and taxes increase.E) C) and D)
F) A) and C)

Question 14

Which of the following statements concerning the aggregate demand and aggregate supply model is correct?

Accepted Answer

A)   The aggregate demand and aggregate supply model is nothing more than a large version of the model of market demand and supply.
B)   The price level and quantity of output adjust to bring aggregate demand and supply into balance.
C)   The aggregate supply curve shows the quantity of goods and services that households, firms, and the government want to buy at each price.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 15

In order to understand how the economy works in the short run, we need to

Accepted Answer

A)   study the classical model.
B)   study a model in which real and nominal variables interact.
C)   understand that "money is a veil."
D)   understand that money is neutral in the short run.E) None of the above
F) C) and D)

Question 16

Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time.
-Refer to Financial Crisis. How is the new long-run equilibrium different from the original one?

Accepted Answer

A)   both price and real GDP are higher.
B)   both price and real GDP are lower.
C)   the price level is the same and GDP is lower.
D)   the price level is lower and real GDP is the same.E) None of the above
F) B) and D)

Question 17

Figure 33-4 
-Refer to Figure 33-4. The economy would be moving to long-run equilibrium if it started at

Accepted Answer

A)   A and moved to B.
B)   C and moved to B.
C)   D and moved to C.
D)   None of the above is correct.E) C) and D)
F) All of the above

Question 18

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U. S. Which pair of GDP growth rates and unemployment rates is realistic?

Accepted Answer

A)   5 percent, 1 percent
B)   3 percent, 5 percent
C)   -1 percent, 3 percent
D)   -2 percent, 4 percentE) A) and B)
F) A) and C)

Question 19

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

Accepted Answer

A)   an increase in the money supply.
B)   an increase in government expenditures.
C)   a fall in stock prices.
D)   bad weather in farm states.E) C) and D)
F) None of the above

Question 20

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Accepted Answer

A) True 
 B)False

Exam 15: Aggregate Demand and Aggregate Supply

The model of aggregate demand and aggregate supply explains the relationship between

Correct Answer
verified

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U. S. Which pair of GDP growth rates and unemployment rates is realistic?

Correct Answer
verified

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

Correct Answer
verified

The initial impact of an increase in an investment tax credit is to shift

Correct Answer
verified

Most economists believe that classical macroeconomic theory is a good description of the economy

Correct Answer
verified

In order to understand how the economy works in the short run, we need to

Correct Answer
verified

Figure 33-4 -Refer to Figure 33-4. The economy would be moving to long-run equilibrium if it started at

Correct Answer
verified

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

Correct Answer
verified

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

Correct Answer
verified

Aggregate demand shifts right if at a given price level

Correct Answer
verified

Which of the following statements concerning the aggregate demand and aggregate supply model is correct?

Correct Answer
verified

Correct Answer
verified

Other things the same, as the price level rises,

Correct Answer
verified

Which of the following shifts aggregate demand to the left?

Correct Answer
verified

The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Correct Answer
verified

In which case can we be sure that real GDP and the price level rise in the short run?

Correct Answer
verified

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Correct Answer
verified

Correct Answer
verified

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Correct Answer
verified
When people expect the price l...
View Answer

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Correct Answer
verified

Exam 15: Aggregate Demand and Aggregate Supply

The model of aggregate demand and aggregate supply explains the relationship between

Correct AnswerverifiedShow Answer

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U. S. Which pair of GDP growth rates and unemployment rates is realistic?

Correct AnswerverifiedShow Answer

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

Correct AnswerverifiedShow Answer

The initial impact of an increase in an investment tax credit is to shift

Correct AnswerverifiedShow Answer

Most economists believe that classical macroeconomic theory is a good description of the economy

Correct AnswerverifiedShow Answer

In order to understand how the economy works in the short run, we need to

Correct AnswerverifiedShow Answer

Figure 33-4 -Refer to Figure 33-4. The economy would be moving to long-run equilibrium if it started at

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

Correct AnswerverifiedShow Answer

Aggregate demand shifts right if at a given price level

Correct AnswerverifiedShow Answer

Which of the following statements concerning the aggregate demand and aggregate supply model is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things the same, as the price level rises,

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Correct AnswerverifiedShow Answer

In which case can we be sure that real GDP and the price level rise in the short run?

Correct AnswerverifiedShow Answer

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Correct AnswerverifiedWhen people expect the price l...View AnswerShow Answer

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Correct AnswerverifiedShow Answer

Correct Answer
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When people expect the price l...
View Answer

Correct Answer
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