Question 1

Figure 33-8. 
-Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P3 and Y3 , then it must be the case that

Accepted Answer

A)   short run aggregate supply has decreased.
B)   short run aggregate supply has increased.
C)   aggregate demand has increased.
D)   aggregate demand has decreased.E) C) and D)
F) None of the above

Question 2

Wages tend to be sticky

Accepted Answer

A)   because of contracts, social norms, and notions of fairness.
B)   because of contracts, but not social norms or notions of fairness.
C)   because of social norms and notions of fairness, but not contracts.
D)   None of the above are correct.E) A) and B)
F) C) and D)

Question 3

As the price level rises

Accepted Answer

A)   people will want to hold more money, so the interest rate rises.
B)   people will want to hold more money, so the interest rate falls.
C)   people will want to hold less money, so the interest rate falls.
D)   people will want to hold less money, so the interest rate rises.E) A) and B)
F) All of the above

Question 4

Which of the following would shift long-run aggregate supply to the right?

Accepted Answer

A)   increased immigration from abroad
B)   a decrease in the price of an imported natural resource
C)   opening the economy to international trade
D)   All of the above are correct.E) B) and C)
F) All of the above

Question 5

Which of the following by itself is consistent with the directions that the price level and real GDP changed at the onset of the Great Depression?

Accepted Answer

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

Question 6

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 B)
F) B) and C)

Question 7

During the 2008-2009 recession real GDP fell by about

Accepted Answer

A)   2%
B)   4%
C)   6%
D)   8%E) B) and C)
F) B) and D)

Question 8

Aggregate demand shifts right when the Federal Reserve

Accepted Answer

A)   raises personal income taxes.
B)   increases the money supply.
C)   institutes an investment tax credit.
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 9

Other things the same, a decrease in the price level makes consumers feel

Accepted Answer

A)   less wealthy, so the quantity of goods and services demanded falls.
B)   less wealthy, so the quantity of goods and services demanded rises.
C)   more wealthy, so the quantity of goods and services demanded rises.
D)   more wealthy, so the quantity of goods and services demanded falls.E) A) and D)
F) A) and C)

Question 10

Other things the same, what happens in the short run to the price level and quantity of output when the aggregate demand curve shifts to the left?

Accepted Answer

The price ...

Question 11

During the 2008-2009 unemployment rose from about 4.4% to about

Accepted Answer

A)   6%
B)   8%
C)   10%
D)   12%E) B) and C)
F) C) and D)

Question 12

A decrease in U.S. interest rates leads to

Accepted Answer

A)   a depreciation of the dollar that leads to greater net exports.
B)   a depreciation of the dollar that leads to smaller net exports.
C)   an appreciation of the dollar that leads to greater net exports.
D)   an appreciation of the dollar that leads to smaller net exports.E) C) and D)
F) B) and C)

Question 13

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

Accepted Answer

A)   an increase in the expected price level.
B)   an increase in the capital stock.
C)   an increase in the money supply.
D)   an increase in taxes.E) A) and D)
F) B) and C)

Question 14

Suppose a country experiences an increase in its capital stock. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Accepted Answer

The short-run and lo...

Question 15

When the price level falls

Accepted Answer

A)   The interest rate falls because people will want to hold more money and so sell bonds.
B)   Firms will want to spend more on new business buildings and business equipment and households will want to spend more building new homes.
C)   Both A and B are correct.
D)   None of the above are correct.E) C) and D)
F) A) and D)

Question 16

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

Accepted Answer

A)   It would have to have shifted left by less than aggregate supply.
B)   It would have to have shifted left by more than aggregate supply.
C)   It would have to have shifted right by less than aggregate supply.
D)   It would have to have shifted right by more than aggregate supply.E) C) and D)
F) A) and B)

Question 17

Suppose the economy is in long-run equilibrium. If there is an increase in government purchases at the same time there is a large increase in the price of oil, then in the short-run

Accepted Answer

A)   real GDP will rise and the price level might rise, fall, or stay the same.
B)   real GDP will fall and the price level might rise, fall, or stay the same.
C)   the price level will rise, and real GDP might rise, fall, or stay the same.
D)   the price level will fall, and real GDP might rise, fall, or stay the same.E) A) and B)
F) A) and C)

Question 18

Which of the following is correct?

Accepted Answer

A)   Short run fluctuations in economic activity happen only in developing countries.
B)   During economic contractions most firms experience rising profits.
C)   Recessions come at irregular intervals and are easy to predict.
D)   When real GDP falls, the rate of unemployment rises.E) C) and D)
F) None of the above

Question 19

Other things the same, if the long-run aggregate supply curve shifts left, prices

Accepted Answer

A)   and output both increase.
B)   and output both decrease.
C)   increase and output decreases.
D)   decrease and output increases.E) A) and C)
F) B) and D)

Question 20

When looking at a graph of aggregate demand, which of the following is correct?

Accepted Answer

A)   There are nominal variables on both the vertical and the horizontal axes.
B)   There are real variables on both the vertical and horizontal axes.
C)   The variable on the vertical axis is nominal; the variable on the horizontal axis is real
D)   The variable on the vertical axis is real; the variable on the horizontal axis is nominalE) A) and D)
F) All of the above

Exam 15: Aggregate Demand and Aggregate Supply

Refer to Political Instability Abroad. What would happen to the dollar?

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Which of the following by itself is consistent with the directions that the price level and real GDP changed at the onset of the Great Depression?

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When the price level falls

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Other things the same, what happens in the short run to the price level and quantity of output when the aggregate demand curve shifts to the left?

Correct AnswerverifiedThe price ...View AnswerShow Answer

During the 2008-2009 unemployment rose from about 4.4% to about

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

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Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P3 and Y3 , then it must be the case that

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. If there is an increase in government purchases at the same time there is a large increase in the price of oil, then in the short-run

Correct AnswerverifiedShow Answer

During the 2008-2009 recession real GDP fell by about

Correct AnswerverifiedShow Answer

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

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Which of the following is correct?

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Wages tend to be sticky

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Other things the same, a decrease in the price level makes consumers feel

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Aggregate demand shifts right when the Federal Reserve

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As the price level rises

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A decrease in U.S. interest rates leads to

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When looking at a graph of aggregate demand, which of the following is correct?

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Which of the following would shift long-run aggregate supply to the right?

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Other things the same, if the long-run aggregate supply curve shifts left, prices

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Suppose a country experiences an increase in its capital stock. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Correct AnswerverifiedThe short-run and lo...View AnswerShow Answer

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The price ...
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The short-run and lo...
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