Question 1

According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produce 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) All of the above
F) A) and C)

Question 2

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

Question 3

Refer to Optimism. 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 D)
F) C) and D)

Question 4

Real GDP

Accepted Answer

A)   moves in the opposite direction as unemployment.
B)   increases as production falls.
C)   falls when households save a smaller fraction of their income.
D)   All of the above are correct.E) B) and C)
F) All of the above

Question 5

If the price level falls, the real value of a dollar

Accepted Answer

A)   rises, so people will want to buy more.
B)   rises, so people will want to buy less.
C)   falls, so people will want to buy more.
D)   falls, so people will want to buy less.E) A) and B)
F) A) and C)

Question 6

Explain how a recession differs from a depression.

Accepted Answer

Recessions are relatively mild...

Question 7

The aggregate demand and aggregate supply model implies monetary neutrality

Accepted Answer

A)   only in the short run.
B)   only in the long run.
C)   in both the short run and the long run.
D)   in neither the short run nor long run.E) All of the above
F) B) and C)

Question 8

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 9

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) All of the above
F) None of the above

Question 10

Refer to Political Instability Abroad. What would the change in the interest rate created by foreigners wanting to buy more U.S. assets do to investment spending in the U.S.?

Accepted Answer

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

Question 11

Aggregate demand shifts to the left if the money supply increases.

Accepted Answer

A) True 
 B)False

Question 12

An increase in the money supply causes the interest rate to fall, investment spending to rise, and aggregate demand to shift right.

Accepted Answer

A) True 
 B)False

Question 13

The recessions of the 1970s are often attributed to

Accepted Answer

A)   declining inflation expectations.
B)   an increase in oil prices.
C)   declines in the price of stock.
D)   decreases in the money supply.E) B) and C)
F) C) and D)

Question 14

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

Question 15

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

Accepted Answer

A)   the supply of dollars would shift right and the exchange rate would rise.
B)   the supply of dollars would shift right and the exchange rate would fall.
C)   the supply of dollars would shift left and the exchange rate would rise.
D)   None of the above is correct.E) C) and D)
F) A) and C)

Question 16

Recessions occur at irregular intervals and are almost impossible to predict with much accuracy.

Accepted Answer

A) True 
 B)False

Question 17

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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) A) and B)
F) A) and C)

Question 20

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...

Exam 33: Aggregate Demand and Aggregate Supply

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

Correct AnswerverifiedShow Answer

Refer to Optimism. Which curve shifts and in which direction?

Correct AnswerverifiedShow Answer

If the price level falls, the real value of a dollar

Correct AnswerverifiedShow Answer

Explain how a recession differs from a depression.

Correct AnswerverifiedRecessions are relatively mild...View AnswerShow Answer

Real GDP

Correct AnswerverifiedShow Answer

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Correct AnswerverifiedShow Answer

An increase in the money supply causes the interest rate to fall, investment spending to rise, and aggregate demand to shift right.

Correct AnswerverifiedShow Answer

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

Refer to Political Instability Abroad. What would the change in the interest rate created by foreigners wanting to buy more U.S. assets do to investment spending in the U.S.?

Correct AnswerverifiedShow Answer

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

Correct AnswerverifiedShow Answer

Recessions occur at irregular intervals and are almost impossible to predict with much accuracy.

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

Aggregate demand shifts to the left if the money supply increases.

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

According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produce had

Correct AnswerverifiedShow Answer

Other things the same, as the price level rises,

Correct AnswerverifiedShow Answer

The recessions of the 1970s are often attributed to

Correct AnswerverifiedShow Answer

The aggregate demand and aggregate supply model implies monetary neutrality

Correct AnswerverifiedShow Answer

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Recessions are relatively mild...
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The price ...
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When people expect the price l...
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