Question 1

As the price level falls,

Accepted Answer

A)  the exchange rate falls,so net exports fall. 
B)  the exchange rate falls,so net exports rise. 
C)  the exchange rate rises,so net exports fall. 
D)  the exchange rate rises,so net exports rise. 
A)  the exchange rate falls,so net exports fall. 
B)  the exchange rate falls,so net exports rise. 
C)  the exchange rate rises,so net exports fall. 
D)  the exchange rate rises,so net exports rise.

Question 2

Which of the following fall during a recession?

Accepted Answer

A)  both retail sales and employment 
B)  retail sales but not employment 
C)  employment but not retail sales 
D)  neither employment nor retail sales 
A)  both retail sales and employment 
B)  retail sales but not employment 
C)  employment but not retail sales 
D)  neither employment nor retail sales

Question 3

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  both an investment tax credit and a decrease in income tax rates 
B)  an investment tax credit but not a decrease in income tax rates 
C)  a decrease in income tax rates but not an investment tax credit 
D)  neither an investment tax credit nor a decrease in income tax rates 
A)  both an investment tax credit and a decrease in income tax rates 
B)  an investment tax credit but not a decrease in income tax rates 
C)  a decrease in income tax rates but not an investment tax credit 
D)  neither an investment tax credit nor a decrease in income tax rates

Question 4

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production.This is inconsistent with monetary neutrality because

Accepted Answer

A)  monetary neutrality would mean that neither prices nor production should have risen. 
B)  monetary neutrality would mean that production should have risen,but prices should not have. 
C)  monetary neutrality would mean the prices should have risen,but production should not have changed. 
D)  monetary neutrality would mean that prices and production should both have fallen. 
A)  monetary neutrality would mean that neither prices nor production should have risen. 
B)  monetary neutrality would mean that production should have risen,but prices should not have. 
C)  monetary neutrality would mean the prices should have risen,but production should not have changed. 
D)  monetary neutrality would mean that prices and production should both have fallen.

Question 5

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 6

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Accepted Answer

A)  the price level is higher than expected making production more profitable . 
B)  the price level is higher than expected making production less profitable 
C)  the price level is lower than expected making production more profitable. 
D)  the price level is higher than expected making production less profitable. 
A)  the price level is higher than expected making production more profitable . 
B)  the price level is higher than expected making production less profitable 
C)  the price level is lower than expected making production more profitable. 
D)  the price level is higher than expected making production less profitable.

Question 7

When the price level falls

Accepted Answer

A)  people want to hold more money. 
B)  the interest rate rises. 
C)  investment spending rises. 
D)  All of the above are correct. 
A)  people want to hold more money. 
B)  the interest rate rises. 
C)  investment spending rises. 
D)  All of the above are correct.

Question 8

A relatively mild period of falling incomes and rising unemployment is called a(n)

Accepted Answer

A)  depression. 
B)  recession. 
C)  expansion. 
D)  business cycle. 
A)  depression. 
B)  recession. 
C)  expansion. 
D)  business cycle.

Question 9

According to classical macroeconomic theory,changes in the money supply affect

Accepted Answer

A)  real GDP and the price level. 
B)  real GDP but not the price level. 
C)  the price level,but not real GDP. 
D)  neither the price level nor real GDP. 
A)  real GDP and the price level. 
B)  real GDP but not the price level. 
C)  the price level,but not real GDP. 
D)  neither the price level nor real GDP.

Question 10

Aggregate demand shifts left when the government

Accepted Answer

A)  decreases taxes. 
B)  cuts military expenditures. 
C)  creates a new investment tax credit 
D)  None of the above is correct. 
A)  decreases taxes. 
B)  cuts military expenditures. 
C)  creates a new investment tax credit 
D)  None of the above is correct.

Question 11

Changes in what four variables will shift the long run aggregate supply curve?

Accepted Answer

Labor,capital,natura

Question 12

Which of the following did the Fed do during the recession of 2008-2009?

Accepted Answer

A)  lowered the federal funds rate and sold securities and loans 
B)  lowered the federal funds rate and purchased securities and loans 
C)  raised the federal funds rate and sold securities and loans 
D)  raised the federal funds rate and purchased securities and loans 
A)  lowered the federal funds rate and sold securities and loans 
B)  lowered the federal funds rate and purchased securities and loans 
C)  raised the federal funds rate and sold securities and loans 
D)  raised the federal funds rate and purchased securities and loans

Question 13

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 14

The aggregate-demand curve shows the

Accepted Answer

A)  quantity of labor and other inputs that firms want to buy at each price level. 
B)  quantity of labor and other inputs that firms want to buy at each inflation rate. 
C)  quantity of domestically produced goods and services that households want to buy at each price level. 
D)  quantity of domestically produced goods and services that households,firms,the government,and customers abroad want to buy at each price level. 
A)  quantity of labor and other inputs that firms want to buy at each price level. 
B)  quantity of labor and other inputs that firms want to buy at each inflation rate. 
C)  quantity of domestically produced goods and services that households want to buy at each price level. 
D)  quantity of domestically produced goods and services that households,firms,the government,and customers abroad want to buy at each price level.

Question 15

An increase in the price level and a reduction in output would result from

Accepted Answer

A)  an increase in the money supply. 
B)  an increase in government expenditures. 
C)  a fall in stock prices. 
D)  bad weather in farm states. 
A)  an increase in the money supply. 
B)  an increase in government expenditures. 
C)  a fall in stock prices. 
D)  bad weather in farm states.

Question 16

Figure 20-2.  
-Refer to Figure 20-2.Point B represents

Accepted Answer

A)  a short-run equilibrium and a long-run equilibrium. 
B)  a short-run equilibrium but not a long-run equilibrium. 
C)  a long-run equilibrium but not a short-run equilibrium. 
D)  neither a short-run equilibrium nor a long-run equilibrium. 
A)  a short-run equilibrium and a long-run equilibrium. 
B)  a short-run equilibrium but not a long-run equilibrium. 
C)  a long-run equilibrium but not a short-run equilibrium. 
D)  neither a short-run equilibrium nor a long-run equilibrium.

Question 17

A change in the expected price level is likely to cause which of the following?

Accepted Answer

A)  a shift in the short-run aggregate supply curve and long-run aggregate supply curve 
B)  a shift in the short run aggregate supply curve 
C)  a shift in the aggregate demand curve 
D)  a shift in the long-run aggregate supply curve 
A)  a shift in the short-run aggregate supply curve and long-run aggregate supply curve 
B)  a shift in the short run aggregate supply curve 
C)  a shift in the aggregate demand curve 
D)  a shift in the long-run aggregate supply curve

Question 18

Which of the following would raise the price level in both the short and long run?

Accepted Answer

A)  an increase in taxes 
B)  an increase in government expenditures 
C)  a decrease in the minimum wage 
D)  an increase in the capital stock 
A)  an increase in taxes 
B)  an increase in government expenditures 
C)  a decrease in the minimum wage 
D)  an increase in the capital stock

Question 19

At a given price level,an increase in which of the following shifts aggregate demand to the right?

Accepted Answer

A)  consumption 
B)  investment 
C)  government expenditures 
D)  All of the above are correct. 
A)  consumption 
B)  investment 
C)  government expenditures 
D)  All of the above are correct.

Question 20

Other things the same,when the price level falls,interest rates

Accepted Answer

A)  rise,so firms increase investment. 
B)  rise,so firms decrease investment. 
C)  fall,so firms increase investment. 
D)  fall,so firms decrease investment. 
A)  rise,so firms increase investment. 
B)  rise,so firms decrease investment. 
C)  fall,so firms increase investment. 
D)  fall,so firms decrease investment.

Exam 33: Aggregate Demand and Aggregate Supply

As the price level falls,

Which of the following fall during a recession?

Which of the following shifts aggregate demand to the right?

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production.This is inconsistent with monetary neutrality because

Which of the following would cause stagflation?

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

When the price level falls

A relatively mild period of falling incomes and rising unemployment is called a(n)

According to classical macroeconomic theory,changes in the money supply affect

Aggregate demand shifts left when the government

Changes in what four variables will shift the long run aggregate supply curve?

Which of the following did the Fed do during the recession of 2008-2009?

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

The aggregate-demand curve shows the

An increase in the price level and a reduction in output would result from

Figure 20-2. -Refer to Figure 20-2.Point B represents

A change in the expected price level is likely to cause which of the following?

Which of the following would raise the price level in both the short and long run?

At a given price level,an increase in which of the following shifts aggregate demand to the right?

Other things the same,when the price level falls,interest rates

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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