Question 1

Microeconomic substitution is impossible for the economy as a whole because

Accepted Answer

A)   money is a veil.
B)   real GDP measures the total quantity of goods and services produced by all firms in all markets.
C)   the prices of some goods and services adjust sluggishly in response to changing economic conditions.
D)   a lower price level increases real wealth, which stimulates spending by consumers and vice-versa.E) A) and B)
F) A) and C)

Question 2

According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had

Accepted Answer

A)   increased, so it would increase production.
B)   increased, so it would decrease production.
C)   decreased, so it would increase production.
D)   decreased, so it would decrease production.E) C) and D)
F) A) and C)

Question 3

During the 2008-2009 recession real GDP fell by about

Accepted Answer

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

Question 4

If output is above its natural rate, then according to sticky-wage theory

Accepted Answer

A)   workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve right.
B)   workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve left.
C)   workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve right.
D)   workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve left.E) B) and D)
F) None of the above

Question 5

During a recession the economy experiences

Accepted Answer

A)   rising income and unemployment.
B)   rising income and falling unemployment.
C)   falling income and rising unemployment.
D)   falling income and unemployment.E) A) and C)
F) None of the above

Question 6

Assuming that a is positive, theories of short-run aggregate supply are expressed mathematically as

Accepted Answer

A)   quantity of output supplied = natural rate of output + a(actual price level - expected price level) .
B)   quantity of output supplied = natural rate of output + a(expected price level - actual price level) .
C)   quantity of output supplied = a(actual price level -expected price level)  - natural rate of output.
D)   quantity of output supplied = a(expected price level - actual price level)  - natural rate of output.E) B) and D)
F) None of the above

Question 7

Economic variables we are most interested in are

Accepted Answer

A)   real variables, but we usually observe nominal variables.
B)   nominal variables, but we usually observe real variables.
C)   real variables, which we usually observe.
D)   nominal variables, which we usually observe.E) C) and D)
F) None of the above

Question 8

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 B)
F) C) and D)

Question 9

Refer to Stock Market Boom 2015. How is the new long-run equilibrium different from the original one?

Accepted Answer

A)   the price level and real GDP are higher
B)   the price level and real GDP are lower.
C)   the price level is higher and real GDP is the same.
D)   the price level is the same and real GDP is higher.E) A) and D)
F) B) and C)

Question 10

Figure 33-10. 
-Refer to Figure 33-10. If the economy starts at point A, a short-run fall in output would be consistent with a movement to point

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) B) and C)
F) A) and D)

Question 11

Suppose technology advances within a nation. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Accepted Answer

The short run and lo...

Question 12

Suppose the government raises taxes. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Accepted Answer

The aggreg...

Question 13

During recessions

Accepted Answer

A)   workers are laid off.
B)   factories are idle.
C)   firms may find they are unable to sell all they produce.
D)   All of the above are correct.E) B) and C)
F) C) and D)

Question 14

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Accepted Answer

A)   the price level to rise and real GDP to fall.
B)   the price level to fall and real GDP to rise.
C)   the price level and real GDP both to stay the same.
D)   All of the above are possible.E) A) and C)
F) A) and D)

Question 15

Which of the following effects helps to explain the slope of the aggregate-demand curve?

Accepted Answer

A)   the exchange-rate effect
B)   the wealth effect
C)   the interest-rate effect
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 16

A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run: 1. increase immigration from abroad 2. make trade more open between the US and other countries.

Accepted Answer

A)   1 and 2 both shift long-run aggregate supply right.
B)   1 and 2 both shift long-run aggregate supply left.
C)   1 shifts long-run aggregate supply right, 2 shifts long-run aggregate supply left.
D)   1 shifts long-run aggregate supply left, 2 shifts long-run aggregate supply right.E) B) and C)
F) A) and C)

Question 17

As the price level rises

Accepted Answer

A)   people are more willing to lend, so interest rates rise.
B)   people are more willing to lend, so interest rates fall.
C)   people are less willing to lend, so interest rates fall.
D)   people are less willing to lend, so interest rates rise.E) B) and D)
F) A) and D)

Question 18

Other things the same, as the price level falls,

Accepted Answer

A)   the money supply falls.
B)   interest rates rise.
C)   a dollar buys more domestic goods.
D)   the aggregate-demand curve shifts right.E) B) and C)
F) A) and C)

Question 19

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp rise in the stock market, an increase in government purchases, an increase in the money supply and a decline in the value of the dollar. In the short run

Accepted Answer

A)   the price level and real GDP will both rise.
B)   the price level and real GDP will both fall.
C)   neither the price leave nor real GDP will change.
D)   All of the above are possible.E) B) and C)
F) A) and B)

Question 20

Refer to Stock Market Boom 2015. 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) None of the above
F) A) and B)

Exam 33: Aggregate Demand and Aggregate Supply

Refer to Stock Market Boom 2015. Which curve shifts and in which direction?

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Assuming that a is positive, theories of short-run aggregate supply are expressed mathematically as

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Refer to Stock Market Boom 2015. How is the new long-run equilibrium different from the original one?

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During the 2008-2009 recession real GDP fell by about

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Which of the following effects helps to explain the slope of the aggregate-demand curve?

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If output is above its natural rate, then according to sticky-wage theory

Correct AnswerverifiedShow Answer

During a recession the economy experiences

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Microeconomic substitution is impossible for the economy as a whole because

Correct AnswerverifiedShow Answer

Figure 33-10. -Refer to Figure 33-10. If the economy starts at point A, a short-run fall in output would be consistent with a movement to point

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp rise in the stock market, an increase in government purchases, an increase in the money supply and a decline in the value of the dollar. In the short run

Correct AnswerverifiedShow Answer

During recessions

Correct AnswerverifiedShow Answer

Which of the following is correct?

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According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had

Correct AnswerverifiedShow Answer

As the price level rises

Correct AnswerverifiedShow Answer

Suppose technology advances within a nation. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

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

Economic variables we are most interested in are

Correct AnswerverifiedShow Answer

A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run: 1. increase immigration from abroad 2. make trade more open between the US and other countries.

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Correct AnswerverifiedShow Answer

Suppose the government raises taxes. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Correct AnswerverifiedThe aggreg...View AnswerShow Answer

Other things the same, as the price level falls,

Correct AnswerverifiedShow Answer

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The short run and lo...
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The aggreg...
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