Question 1

In the long run, an increase in the stock of human capital

Accepted Answer

A) and increases in the money supply both make the price level rise. 
B) and increases in the money supply both make the price level fall. 
C) makes the price level rise, while increases in the money supply make prices fall. 
D) makes the price level fall, while increases in the money supply make prices rise. 
A) and increases in the money supply both make the price level rise. 
B) and increases in the money supply both make the price level fall. 
C) makes the price level rise, while increases in the money supply make prices fall. 
D) makes the price level fall, while increases in the money supply make prices rise.

Question 2

A decrease in U.S. interest rates leads to

Accepted Answer

A) a depreciation of the dollar that leads to greater net exports. 
B) a depreciation of the dollar that leads to smaller net exports. 
C) an appreciation of the dollar that leads to greater net exports. 
D) an appreciation of the dollar that leads to smaller net exports. 
A) a depreciation of the dollar that leads to greater net exports. 
B) a depreciation of the dollar that leads to smaller net exports. 
C) an appreciation of the dollar that leads to greater net exports. 
D) an appreciation of the dollar that leads to smaller net exports.

Question 3

Which of the following affected aggregate demand during the recession of 2008-2009?

Accepted Answer

A) a decline in residential construction and a decrease in lending 
B) a decline in residential construction but not a decrease in lending 
C) a decrease in lending but not a decline in residential construction 
D) neither a decrease in residential construction nor a decrease in lending 
A) a decline in residential construction and a decrease in lending 
B) a decline in residential construction but not a decrease in lending 
C) a decrease in lending but not a decline in residential construction 
D) neither a decrease in residential construction nor a decrease in lending

Question 4

In which case can we be sure that real GDP and the price level rise in the short run?

Accepted Answer

A) foreign economies expand and taxes increase. 
B) foreign economies expand and taxes decrease. 
C) foreign economies contract and taxes decrease. 
D) foreign economies contract and taxes increase. 
A) foreign economies expand and taxes increase. 
B) foreign economies expand and taxes decrease. 
C) foreign economies contract and taxes decrease. 
D) foreign economies contract and taxes increase.

Question 5

Changes in the price of oil

Accepted Answer

A) can only lead to recessions. 
B) have not contributed much to output fluctuations in the United States. 
C) change the economy principally by changing aggregate demand. 
D) created both inflation and recession in the United States in the 1970s. 
A) can only lead to recessions. 
B) have not contributed much to output fluctuations in the United States. 
C) change the economy principally by changing aggregate demand. 
D) created both inflation and recession in the United States in the 1970s.

Question 6

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 7

During a recession the economy experiences

Accepted Answer

A) rising employment and income. 
B) rising employment and falling income. 
C) rising income and falling employment. 
D) falling employment and income. 
A) rising employment and income. 
B) rising employment and falling income. 
C) rising income and falling employment. 
D) falling employment and income.

Question 8

When the price level rises unexpectedly, some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

Accepted Answer

A) True 
 B)False

Question 9

Keynes believed that economies experiencing high unemployment should adopt policies to

Accepted Answer

A) reduce the money supply. 
B) reduce government expenditures. 
C) increase aggregate demand. 
D) increase aggregate supply. 
A) reduce the money supply. 
B) reduce government expenditures. 
C) increase aggregate demand. 
D) increase aggregate supply.

Question 10

When the price level falls

Accepted Answer

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

Question 11

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. 
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.

Question 12

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

Accepted Answer

A) both sticky price theory and sticky wage theory 
B) sticky price theory but not sticky wage theory 
C) sticky wage theory but not sticky price theory 
D) neither sticky wage theory nor sticky price theory 
A) both sticky price theory and sticky wage theory 
B) sticky price theory but not sticky wage theory 
C) sticky wage theory but not sticky price theory 
D) neither sticky wage theory nor sticky price theory

Question 13

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants increases the number of workers it employs. What could explain this?

Accepted Answer

A) both sticky price theory and sticky wage theory 
B) sticky price theory but not sticky wage theory 
C) sticky wage theory but not sticky price theory 
D) neither sticky wage theory nor sticky price theory 
A) both sticky price theory and sticky wage theory 
B) sticky price theory but not sticky wage theory 
C) sticky wage theory but not sticky price theory 
D) neither sticky wage theory nor sticky price theory

Question 14

Which of the following shifts short-run, but not long-run aggregate supply right?

Accepted Answer

A) a decrease in the actual price level 
B) a decrease in the expected price level 
C) a decrease in the capital stock 
D) an increase in the money supply 
A) a decrease in the actual price level 
B) a decrease in the expected price level 
C) a decrease in the capital stock 
D) an increase in the money supply

Question 15

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Accepted Answer

A) True 
 B)False

Question 16

Figure 33-7.  
-Refer to Figure 33-7. Suppose the economy starts at Y. If aggregate demand increases from AD2 to AD3, then the economy moves to

Accepted Answer

A) V. 
B) W. 
C) X. 
D) Z. 
A) V. 
B) W. 
C) X. 
D) Z.

Question 17

The average price level is measured by

Accepted Answer

A) the price of oil. 
B) the rate of inflation. 
C) the nominal interest rate. 
D) the GDP deflator or the CPI. 
A) the price of oil. 
B) the rate of inflation. 
C) the nominal interest rate. 
D) the GDP deflator or the CPI.

Question 18

During recessions which type of spending falls?

Accepted Answer

A) consumption and investment 
B) investment but not consumption 
C) consumption but not investment 
D) neither consumption nor investment 
A) consumption and investment 
B) investment but not consumption 
C) consumption but not investment 
D) neither consumption nor investment

Question 19

In the long run, an economy's production of goods and services depends on its supply of​

Accepted Answer

A) ​labor, natural resources, capital, and available technology. 
B) ​labor, natural resources, and capital only. 
C) ​labor, and natural resources only. 
D) ​labor only. 
A) ​labor, natural resources, capital, and available technology. 
B) ​labor, natural resources, and capital only. 
C) ​labor, and natural resources only. 
D) ​labor only.

Question 20

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 purc

Exam 33: Aggregate Demand and Aggregate Supply

In the long run, an increase in the stock of human capital

A decrease in U.S. interest rates leads to

Which of the following affected aggregate demand during the recession of 2008-2009?

In which case can we be sure that real GDP and the price level rise in the short run?

Changes in the price of oil

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.

During a recession the economy experiences

When the price level rises unexpectedly, some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

Keynes believed that economies experiencing high unemployment should adopt policies to

When the price level falls

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

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants increases the number of workers it employs. What could explain this?

Which of the following shifts short-run, but not long-run aggregate supply right?

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Figure 33-7. -Refer to Figure 33-7. Suppose the economy starts at Y. If aggregate demand increases from AD2 to AD3, then the economy moves to

The average price level is measured by

During recessions which type of spending falls?

In the long run, an economy's production of goods and services depends on its supply of​

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?

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

Applications: 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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Figure 33-7. -Refer to Figure 33-7. Suppose the economy starts at Y. If aggregate demand increases from AD₂ to AD₃, then the economy moves to

In the long run, an economy's production of goods and services depends on its supply of