Question 1

In which situation does investment spending decrease?

Accepted Answer

A)  when the price level rises, causing interest rates to rise 
B)  when the price level rises, causing interest rates to fall 
C)  when the price level falls, causing interest rates to rise 
D)  when the price level falls, causing interest rates to fall 
A)  when the price level rises, causing interest rates to rise 
B)  when the price level rises, causing interest rates to fall 
C)  when the price level falls, causing interest rates to rise 
D)  when the price level falls, causing interest rates to fall

Question 2

What has been suggested as a cause of the Great Depression?

Accepted Answer

A)  a decline in output 
B)  a decrease in prices 
C)  strong bank regulations 
D)  a decrease in the money supply 
A)  a decline in output 
B)  a decrease in prices 
C)  strong bank regulations 
D)  a decrease in the money supply

Question 3

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, there is a sharp decline in the stock market. What would we expect to 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.

Question 4

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

Accepted Answer

An AD-induced recession lowers prices an

Question 5

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

Accepted Answer

A)  short-run fluctuations in the economy 
B)  the effects of macroeconomic policy on the prices of individual goods 
C)  the long-run effects of international trade policies 
D)  productivity and economic growth 
A)  short-run fluctuations in the economy 
B)  the effects of macroeconomic policy on the prices of individual goods 
C)  the long-run effects of international trade policies 
D)  productivity and economic growth

Question 6

According to the aggregate demand and aggregate supply model, in the long run what is the impact of an increase in the money supply?

Accepted Answer

A)  It lowers both the price level and real GDP. 
B)  It increases GDP, but it does not change the price level. 
C)  It increases the price level, but it does not change real GDP. 
D)  It increases both the price level and real GDP. 
A)  It lowers both the price level and real GDP. 
B)  It increases GDP, but it does not change the price level. 
C)  It increases the price level, but it does not change real GDP. 
D)  It increases both the price level and real GDP.

Question 7

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)  a decrease in exports 
B)  a decrease in taxes 
C)  a decrease in imports 
D)  a decrease in interest rates 
A)  a decrease in exports 
B)  a decrease in taxes 
C)  a decrease in imports 
D)  a decrease in interest rates

Question 8

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to happen?

Accepted Answer

A)  In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be unaffected. 
B)  In the short run, real GDP will fall, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be unaffected. 
C)  In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be lower. 
D)  In the short run, real GDP will fall, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be lower. 
A)  In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be unaffected. 
B)  In the short run, real GDP will fall, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be unaffected. 
C)  In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be lower. 
D)  In the short run, real GDP will fall, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be lower.

Question 9

Economists mostly agree that the Great Depression was the result of a very large adverse supply shock.

Accepted Answer

A) True 
 B)False

Question 10

What impact do changes in the price of oil have on producers who use oil inputs today as compared to producers who used oil inputs during the OPEC price shock in 1973?

Accepted Answer

A)  greater impact 
B)  smaller impact 
C)  no impact 
D)  similar impact 
A)  greater impact 
B)  smaller impact 
C)  no impact 
D)  similar impact

Question 11

Scenario 14-1
The economy is in long-run equilibrium. Suddenly, due to improved international relations, a boom experienced by a major trading partner, and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time.
-Refer to the Scenario 14-1. How does the new long-run equilibrium differ from the original one?

Accepted Answer

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

Question 12

When all prices rise together, there is no change in the overall quantity of goods and services supplied.

Accepted Answer

A) True 
 B)False

Question 13

A decrease in the price level makes consumers feel more wealthy. How is this situation represented?

Accepted Answer

A)  Aggregate demand shifts right. 
B)  Aggregate demand shifts left. 
C)  There is a movement to the right along a given aggregate-demand curve. 
D)  There is a movement to the left along a given aggregate-demand curve. 
A)  Aggregate demand shifts right. 
B)  Aggregate demand shifts left. 
C)  There is a movement to the right along a given aggregate-demand curve. 
D)  There is a movement to the left along a given aggregate-demand curve.

Question 14

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  an increase in the money supply 
B)  a decrease in net exports at every exchange rate 
C)  a decrease in prices 
D)  an increase in imports 
A)  an increase in the money supply 
B)  a decrease in net exports at every exchange rate 
C)  a decrease in prices 
D)  an increase in imports

Question 16

Which of the following measures the overall price level?

Accepted Answer

A)  the price of some particular commodity or service 
B)  the rate of inflation 
C)  the consumer price index 
D)  the nominal GDP 
A)  the price of some particular commodity or service 
B)  the rate of inflation 
C)  the consumer price index 
D)  the nominal GDP

Question 17

A change in the money supply changes only nominal variables in the long run.

Accepted Answer

A) True 
 B)False

Question 18

The explanations for the downward slope of the aggregate demand curve say that as the price level rises, consumption, investment, and net exports all fall.

Accepted Answer

A) True 
 B)False

Question 19

Most economists believe that classical theory explains the world in the short run, but not the long run.

Accepted Answer

A) True 
 B)False

Question 20

What does a rise in the economy's overall level of prices tend to do?

Accepted Answer

A)  It tends to raise both the quantity demanded and supplied of goods and services. 
B)  It tends to raise the quantity demanded of goods and services but lower the quantity supplied. 
C)  It tends to lower the quantity demanded of goods and services but raise the quantity supplied. 
D)  It tends to lower both the quantity demanded and the quantity supplied of goods and services. 
A)  It tends to raise both the quantity demanded and supplied of goods and services. 
B)  It tends to raise the quantity demanded of goods and services but lower the quantity supplied. 
C)  It tends to lower the quantity demanded of goods and services but raise the quantity supplied. 
D)  It tends to lower both the quantity demanded and the quantity supplied of goods and services.

In which situation does investment spending decrease?

What has been suggested as a cause of the Great Depression?

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, there is a sharp decline in the stock market. What would we expect to happen in the short run?

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

According to the aggregate demand and aggregate supply model, in the long run what is the impact of an increase in the money supply?

Which of the following shifts aggregate demand to the left?

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to happen?

Economists mostly agree that the Great Depression was the result of a very large adverse supply shock.

What impact do changes in the price of oil have on producers who use oil inputs today as compared to producers who used oil inputs during the OPEC price shock in 1973?

When all prices rise together, there is no change in the overall quantity of goods and services supplied.

A decrease in the price level makes consumers feel more wealthy. How is this situation represented?

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in aggregate supply.

Which of the following shifts aggregate demand to the right?

Which of the following measures the overall price level?

A change in the money supply changes only nominal variables in the long run.

The explanations for the downward slope of the aggregate demand curve say that as the price level rises, consumption, investment, and net exports all fall.

Most economists believe that classical theory explains the world in the short run, but not the long run.

What does a rise in the economy's overall level of prices tend to do?

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

Exam 14: Aggregate Demand and Aggregate Supply

In which situation does investment spending decrease?

What has been suggested as a cause of the Great Depression?

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, there is a sharp decline in the stock market. What would we expect to happen in the short run?

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

According to the aggregate demand and aggregate supply model, in the long run what is the impact of an increase in the money supply?

Which of the following shifts aggregate demand to the left?

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to happen?

Economists mostly agree that the Great Depression was the result of a very large adverse supply shock.

What impact do changes in the price of oil have on producers who use oil inputs today as compared to producers who used oil inputs during the OPEC price shock in 1973?

When all prices rise together, there is no change in the overall quantity of goods and services supplied.

A decrease in the price level makes consumers feel more wealthy. How is this situation represented?

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in aggregate supply.

Which of the following shifts aggregate demand to the right?

Which of the following measures the overall price level?

A change in the money supply changes only nominal variables in the long run.

The explanations for the downward slope of the aggregate demand curve say that as the price level rises, consumption, investment, and net exports all fall.

Most economists believe that classical theory explains the world in the short run, but not the long run.

What does a rise in the economy's overall level of prices tend to do?

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