Question 1

Which of the following happens during recessions?

Accepted Answer

A)  Firms produce less but invest more. 
B)  Firms have to increase production because of falling prices. 
C)  Incomes increase because workers have to work overtime. 
D)  Unemployment rates increase. 
A)  Firms produce less but invest more. 
B)  Firms have to increase production because of falling prices. 
C)  Incomes increase because workers have to work overtime. 
D)  Unemployment rates increase.

Question 2

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

Accepted Answer

Variables that fall along with real GDP

Question 3

Suppose a fall in stock prices makes people feel less wealthy. What are the effects of this decrease in wealth?

Accepted Answer

A)  decreased consumption, shown as a movement to the left along a given aggregate-demand curve 
B)  increased consumption, shown as a movement to the right along a given aggregate-demand curve 
C)  decreased consumption, which shifts the aggregate-demand curve to the left 
D)  increased in consumption, which shifts the aggregate-demand curve to the right 
A)  decreased consumption, shown as a movement to the left along a given aggregate-demand curve 
B)  increased consumption, shown as a movement to the right along a given aggregate-demand curve 
C)  decreased consumption, which shifts the aggregate-demand curve to the left 
D)  increased in consumption, which shifts the aggregate-demand curve to the right

Question 4

What typically rises during a recession?

Accepted Answer

A)  the price level 
B)  unemployment 
C)  stock market indices 
D)  house sales 
A)  the price level 
B)  unemployment 
C)  stock market indices 
D)  house sales

Question 5

What happens when the price level rises?

Accepted Answer

A)  The value of money rises, and exchange rates and interest rates also rise. 
B)  The value of money rises, while exchange rates and interest rates fall. 
C)  The value of money falls while exchange rates and interest rates rise. 
D)  The value of money falls, and exchange rates and interest rates also fall. 
A)  The value of money rises, and exchange rates and interest rates also rise. 
B)  The value of money rises, while exchange rates and interest rates fall. 
C)  The value of money falls while exchange rates and interest rates rise. 
D)  The value of money falls, and exchange rates and interest rates also fall.

Question 6

Which of the following shifts the short-run aggregate supply to the right?

Accepted Answer

A)  an increase in the minimum wage 
B)  an increase in immigration from abroad 
C)  an increase in the price of oil 
D)  an increase in the actual price level 
A)  an increase in the minimum wage 
B)  an increase in immigration from abroad 
C)  an increase in the price of oil 
D)  an increase in the actual price level

Question 7

Which statement best describes the effects of an increase in the price level?

Accepted Answer

A)  Real exchange rates and interest rates rise. 
B)  Real exchange rates and interest rates fall. 
C)  Real exchange rates fall, and interest rates rise. 
D)  Real exchange rates rise, and interest rates fall. 
A)  Real exchange rates and interest rates rise. 
B)  Real exchange rates and interest rates fall. 
C)  Real exchange rates fall, and interest rates rise. 
D)  Real exchange rates rise, and interest rates fall.

Question 8

An increase in which of the following (assuming the increase was not due to a price level change) shifts aggregate demand to the right?

Accepted Answer

A)  interest rates 
B)  immigration 
C)  government surplus 
D)  net exports 
A)  interest rates 
B)  immigration 
C)  government surplus 
D)  net exports

Question 9

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  the federal government reduces purchases of military equipment 
B)  a decrease in the money supply 
C)  the price level rises 
D)  net exports increase 
A)  the federal government reduces purchases of military equipment 
B)  a decrease in the money supply 
C)  the price level rises 
D)  net exports increase

Question 10

Which of the following would cause stagflation?

Accepted Answer

A)  aggregate demand shifts right 
B)  aggregate demand shifts left 
C)  aggregate supply shifts right 
D)  aggregate supply shifts left 
A)  aggregate demand shifts right 
B)  aggregate demand shifts left 
C)  aggregate supply shifts right 
D)  aggregate supply shifts left

Question 11

How are the effects of an increase in the price level that is less than expected shown in the aggregate demand and aggregate supply model?

Accepted Answer

A)  by shifting the short-run aggregate-supply curve right 
B)  by shifting the short-run aggregate-supply curve left 
C)  by moving to the right along a given aggregate-supply curve 
D)  by moving to the left along a given aggregate-supply curve 
A)  by shifting the short-run aggregate-supply curve right 
B)  by shifting the short-run aggregate-supply curve left 
C)  by moving to the right along a given aggregate-supply curve 
D)  by moving to the left along a given aggregate-supply curve

Question 12

Make a list of expenditures whose sum equals GDP.

Accepted Answer

consumption, investm

Question 13

In 1991, Canada was in a recession. What would you expect NOT to have happened?

Accepted Answer

A)  layoffs and firings 
B)  a higher rate of foreclosures 
C)  increased claims for unemployment insurance 
D)  increased investment spending 
A)  layoffs and firings 
B)  a higher rate of foreclosures 
C)  increased claims for unemployment insurance 
D)  increased investment spending

Question 14

We know the theories that explain why the short-run aggregate-supply is upward sloping. But what determines how steep is the short-run aggregate-supply curve, and why is this important?

Accepted Answer

I will only refer to one of the short-ru

Question 15

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, what would we expect to happen?

Accepted Answer

A)  The price level and real GDP will both rise. 
B)  The price level and real GDP will both fall. 
C)  The price level and real GDP will both stay the same. 
D)  The price level will increase, and the real GDP will fall. 
A)  The price level and real GDP will both rise. 
B)  The price level and real GDP will both fall. 
C)  The price level and real GDP will both stay the same. 
D)  The price level will increase, and the real GDP will fall.

Question 16

What is the effect of a temporary decrease in the availability of raw materials?

Accepted Answer

A)  Aggregate supply shifts right. 
B)  Output falls in the short run. 
C)  Prices fall in the short run. 
D)  Long-run aggregate supply shifts to the left. 
A)  Aggregate supply shifts right. 
B)  Output falls in the short run. 
C)  Prices fall in the short run. 
D)  Long-run aggregate supply shifts to the left.

Question 17

How does the aggregate demand and aggregate supply model reflect a rise in wage rates?

Accepted Answer

A)  The short-run aggregate-supply curve shifts to the right. 
B)  The short-run aggregate-supply curve shifts to the left. 
C)  The aggregate-demand curve shifts to the right. 
D)  The aggregate-demand curve shifts to the left. 
A)  The short-run aggregate-supply curve shifts to the right. 
B)  The short-run aggregate-supply curve shifts to the left. 
C)  The aggregate-demand curve shifts to the right. 
D)  The aggregate-demand curve shifts to the left.

Question 18

Scenario 14-2
The economy is in long-run equilibrium. Suddenly, due to corporate scandals, a recession experienced by a major trading partner, and the loss of confidence among policymakers, citizens become pessimistic concerning the future. They maintain this level of pessimism for a long time.
-Refer to the Scenario 14-2. In the short-run, which statement is consistent with the aggregate demand and aggregate supply theory?

Accepted Answer

A)  The price level and real GDP both increase. 
B)  The price level and real GDP both decrease. 
C)  The price level rises, and real GDP falls 
D)  The price level falls, and real GDP rises. 
A)  The price level and real GDP both increase. 
B)  The price level and real GDP both decrease. 
C)  The price level rises, and real GDP falls 
D)  The price level falls, and real GDP rises.

Question 19

What happens to aggregate demand if people want to save more for retirement and the government raises taxes?

Accepted Answer

A)  Aggregate demand shifts right. 
B)  Aggregate demand shifts left. 
C)  If people save more, aggregate demand shifts right; if the government raises taxes, aggregate demand shifts left. 
D)  If people save more, aggregate demand shifts left; if the government raises taxes, aggregate demand shifts right. 
A)  Aggregate demand shifts right. 
B)  Aggregate demand shifts left. 
C)  If people save more, aggregate demand shifts right; if the government raises taxes, aggregate demand shifts left. 
D)  If people save more, aggregate demand shifts left; if the government raises taxes, aggregate demand shifts right.

Question 20

Suppose the economy is in long-run equilibrium. If there is a tax cut at the same time that major new sources of oil are discovered in the country, what would we expect will happen 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. 
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.

Which of the following happens during recessions?

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

Suppose a fall in stock prices makes people feel less wealthy. What are the effects of this decrease in wealth?

What typically rises during a recession?

What happens when the price level rises?

Which of the following shifts the short-run aggregate supply to the right?

Which statement best describes the effects of an increase in the price level?

An increase in which of the following (assuming the increase was not due to a price level change) shifts aggregate demand to the right?

Which of the following shifts aggregate demand to the right?

Which of the following would cause stagflation?

How are the effects of an increase in the price level that is less than expected shown in the aggregate demand and aggregate supply model?

Make a list of expenditures whose sum equals GDP.

In 1991, Canada was in a recession. What would you expect NOT to have happened?

We know the theories that explain why the short-run aggregate-supply is upward sloping. But what determines how steep is the short-run aggregate-supply curve, and why is this important?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, what would we expect to happen?

What is the effect of a temporary decrease in the availability of raw materials?

How does the aggregate demand and aggregate supply model reflect a rise in wage rates?

What happens to aggregate demand if people want to save more for retirement and the government raises taxes?

Suppose the economy is in long-run equilibrium. If there is a tax cut at the same time that major new sources of oil are discovered in the country, what would we expect will happen in the short run?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 14: Aggregate Demand and Aggregate Supply

Which of the following happens during recessions?

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

Suppose a fall in stock prices makes people feel less wealthy. What are the effects of this decrease in wealth?

What typically rises during a recession?

What happens when the price level rises?

Which of the following shifts the short-run aggregate supply to the right?

Which statement best describes the effects of an increase in the price level?

An increase in which of the following (assuming the increase was not due to a price level change) shifts aggregate demand to the right?

Which of the following shifts aggregate demand to the right?

Which of the following would cause stagflation?

How are the effects of an increase in the price level that is less than expected shown in the aggregate demand and aggregate supply model?

Make a list of expenditures whose sum equals GDP.

In 1991, Canada was in a recession. What would you expect NOT to have happened?

We know the theories that explain why the short-run aggregate-supply is upward sloping. But what determines how steep is the short-run aggregate-supply curve, and why is this important?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, what would we expect to happen?

What is the effect of a temporary decrease in the availability of raw materials?

How does the aggregate demand and aggregate supply model reflect a rise in wage rates?

What happens to aggregate demand if people want to save more for retirement and the government raises taxes?

Suppose the economy is in long-run equilibrium. If there is a tax cut at the same time that major new sources of oil are discovered in the country, what would we expect will happen in the short run?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters