Question 1

Other things the same,if the capital stock increases,then in the long run

Accepted Answer

A)  both output and prices are higher. 
B)  output is higher and prices are lower. 
C)  output is lower and prices are higher. 
D)  both output and prices are lower. 
A)  both output and prices are higher. 
B)  output is higher and prices are lower. 
C)  output is lower and prices are higher. 
D)  both output and prices are lower. B

Question 2

Most economists use the aggregate demand and aggregate supply model primarily to analyze

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. A

Question 3

If wages are sticky,then a greater than expected increase in the price level

Accepted Answer

A)  raises the real costs of production,so the short-run aggregate supply curve shifts left. 
B)  raises the real costs of production,so the aggregate quantity of goods and services declines. 
C)  reduces the real costs of production,so the short-run aggregate supply curve shifts right. 
D)  reduces the real costs of production,so the aggregate quantity of good and services rises. 
A)  raises the real costs of production,so the short-run aggregate supply curve shifts left. 
B)  raises the real costs of production,so the aggregate quantity of goods and services declines. 
C)  reduces the real costs of production,so the short-run aggregate supply curve shifts right. 
D)  reduces the real costs of production,so the aggregate quantity of good and services rises. D

Question 4

Most macroeconomic variables that measure some type of income,spending,or production fluctuate closely together.

Accepted Answer

A) True 
 B)False

Question 5

Investment is a

Accepted Answer

A)  small part of real GDP,so it accounts for a small share of the fluctuation in real GDP. 
B)  small part of real GDP,yet it accounts for a large share of the fluctuation in real GDP. 
C)  large part of real GDP,so it accounts for a large share of the fluctuation in real GDP. 
D)  large part of real GDP,yet it accounts for a small share of the fluctuation in real GDP. 
A)  small part of real GDP,so it accounts for a small share of the fluctuation in real GDP. 
B)  small part of real GDP,yet it accounts for a large share of the fluctuation in real GDP. 
C)  large part of real GDP,so it accounts for a large share of the fluctuation in real GDP. 
D)  large part of real GDP,yet it accounts for a small share of the fluctuation in real GDP.

Question 6

Which of the following is not correct?

Accepted Answer

A)  The model of aggregate demand and aggregate supply is used by most economists to analyze short-run fluctuations. 
B)  During a recession firms cut back production and workers are laid off. 
C)  A recession is a period of declining real incomes and declining unemployment. 
D)  A depression is a severe recession. 
A)  The model of aggregate demand and aggregate supply is used by most economists to analyze short-run fluctuations. 
B)  During a recession firms cut back production and workers are laid off. 
C)  A recession is a period of declining real incomes and declining unemployment. 
D)  A depression is a severe recession.

Question 7

Because the price level does not affect the long-run determinants of real GDP,the long-run aggregate-supply is vertical.

Accepted Answer

A) True 
 B)False

Question 8

Explain how an increase in the price level changes interest rates.How does this change in interest rates lead to changes in investment and net exports?

Accepted Answer

When the price level increases,the purch

Question 9

Most economists believe that money neutrality holds

Accepted Answer

A)  in the short run but not the long run. 
B)  in the long run but not the short run. 
C)  in both the short run and the long run. 
D)  in neither the short run nor the long run. 
A)  in the short run but not the long run. 
B)  in the long run but not the short run. 
C)  in both the short run and the long run. 
D)  in neither the short run nor the long run.

Question 10

Technological progress shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 11

Figure 20-1  
-Refer to Figure 20-1.If the economy starts at C,an increase in the money supply moves the economy

Accepted Answer

A)  to A in the long run. 
B)  to B in the long run. 
C)  back to C in the long run. 
D)  to D in the long run. 
A)  to A in the long run. 
B)  to B in the long run. 
C)  back to C in the long run. 
D)  to D in the long run.

Question 12

The long-run aggregate supply curve shifts right if

Accepted Answer

A)  either immigration from abroad increases or technology improves. 
B)  immigration from abroad increases,but not if technology improves. 
C)  technology improves,but not if immigration from abroad increases. 
D)  None of the above are correct. 
A)  either immigration from abroad increases or technology improves. 
B)  immigration from abroad increases,but not if technology improves. 
C)  technology improves,but not if immigration from abroad increases. 
D)  None of the above are correct.

Question 13

An increase in the expected price level shifts short-run aggregate supply to the

Accepted Answer

A)  right,and an increase in the actual price level shifts short-run aggregate supply to the right. 
B)  right,and an increase in the actual price level does not shift short-run aggregate supply. 
C)  left,and an increase in the actual price level shifts short-run aggregate supply to the left. 
D)  left,and an increase in the actual price level does not shift short-run aggregate supply. 
A)  right,and an increase in the actual price level shifts short-run aggregate supply to the right. 
B)  right,and an increase in the actual price level does not shift short-run aggregate supply. 
C)  left,and an increase in the actual price level shifts short-run aggregate supply to the left. 
D)  left,and an increase in the actual price level does not shift short-run aggregate supply.

Question 14

Suppose that the economy is at long-run equilibrium.If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers,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. 
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 15

The long-run effect of an increase in government spending is to raise

Accepted Answer

A)  both real output and the price level. 
B)  real output and lower the price level. 
C)  real output and leave the price level unchanged. 
D)  the price level and leave real output unchanged. 
A)  both real output and the price level. 
B)  real output and lower the price level. 
C)  real output and leave the price level unchanged. 
D)  the price level and leave real output unchanged.

Question 16

When taxes increase,consumption

Accepted Answer

A)  decreases as shown by a movement to the left along a given aggregate-demand curve. 
B)  decreases as shown by a shift of the aggregate demand curve to the left. 
C)  increases as shown by a movement to the right along a given aggregate-demand curve. 
D)  increases as shown by a shift of the aggregate demand curve to the right. 
A)  decreases as shown by a movement to the left along a given aggregate-demand curve. 
B)  decreases as shown by a shift of the aggregate demand curve to the left. 
C)  increases as shown by a movement to the right along a given aggregate-demand curve. 
D)  increases as shown by a shift of the aggregate demand curve to the right.

Question 17

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases.Their reaction would initially shift

Accepted Answer

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

Question 18

If the price level is higher than expected,firms might raise their production in the short run if

Accepted Answer

A)  the nominal wage they pay their employees was set based on the expected price level. 
B)  prices are costly to adjust and they have set their price at some time in the past but are not ready to change it. 
C)  they believe that the price of their product has risen relative to the price of other products,when in fact the rise in the price of their product reflects an increase in the general price level. 
D)  All of the above are correct. 
A)  the nominal wage they pay their employees was set based on the expected price level. 
B)  prices are costly to adjust and they have set their price at some time in the past but are not ready to change it. 
C)  they believe that the price of their product has risen relative to the price of other products,when in fact the rise in the price of their product reflects an increase in the general price level. 
D)  All of the above are correct.

Question 19

Other things the same,as the price level decreases it induces greater spending on

Accepted Answer

A)  both net exports and investment. 
B)  net exports but not investment. 
C)  investment but not net exports. 
D)  neither net exports nor investment. 
A)  both net exports and investment. 
B)  net exports but not investment. 
C)  investment but not net exports. 
D)  neither net exports nor investment.

Question 20

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Accepted Answer

A)  nominal wages are slow to adjust to changing economic conditions 
B)  as the price level falls,the exchange rate falls 
C)  an increase in the money supply lowers the interest rate 
D)  an increase in the interest rate increases investment spending 
A)  nominal wages are slow to adjust to changing economic conditions 
B)  as the price level falls,the exchange rate falls 
C)  an increase in the money supply lowers the interest rate 
D)  an increase in the interest rate increases investment spending

Exam 33: Aggregate Demand and Aggregate Supply

Other things the same,if the capital stock increases,then in the long run

Most economists use the aggregate demand and aggregate supply model primarily to analyze

If wages are sticky,then a greater than expected increase in the price level

Most macroeconomic variables that measure some type of income,spending,or production fluctuate closely together.

Investment is a

Which of the following is not correct?

Because the price level does not affect the long-run determinants of real GDP,the long-run aggregate-supply is vertical.

Explain how an increase in the price level changes interest rates.How does this change in interest rates lead to changes in investment and net exports?

Most economists believe that money neutrality holds

Technological progress shifts the long-run aggregate supply curve to the right.

Figure 20-1 -Refer to Figure 20-1.If the economy starts at C,an increase in the money supply moves the economy

The long-run aggregate supply curve shifts right if

An increase in the expected price level shifts short-run aggregate supply to the

Suppose that the economy is at long-run equilibrium.If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers,then in the short run

The long-run effect of an increase in government spending is to raise

When taxes increase,consumption

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases.Their reaction would initially shift

If the price level is higher than expected,firms might raise their production in the short run if

Other things the same,as the price level decreases it induces greater spending on

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply,demand,and Government Policies

Consumers,producers,and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Market for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving,investment,and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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