Question 1

The model of aggregate demand and aggregate supply

Accepted Answer

A) is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships. 
B) is different from the model of supply and demand for a particular market, in that we have to separate real and nominal variables in the aggregate model. 
C) is a straightforward extension of the model of supply and demand for a particular market, in which substitution of resources between markets is highlighted. 
D) is a straightforward extension of the model of supply and demand for a particular market, in which the interaction between real and nominal variables is highlighted. 
A) is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships. 
B) is different from the model of supply and demand for a particular market, in that we have to separate real and nominal variables in the aggregate model. 
C) is a straightforward extension of the model of supply and demand for a particular market, in which substitution of resources between markets is highlighted. 
D) is a straightforward extension of the model of supply and demand for a particular market, in which the interaction between real and nominal variables is highlighted.

Question 2

In which case can we be sure real GDP rises in the short run?

Accepted Answer

A) foreign economies expand and government purchases rise. 
B) foreign economies expand and government purchases fall. 
C) foreign economies contract and government purchases fall. 
D) foreign economies contract and government purchases rise. 
A) foreign economies expand and government purchases rise. 
B) foreign economies expand and government purchases fall. 
C) foreign economies contract and government purchases fall. 
D) foreign economies contract and government purchases rise.

Question 3

If aggregate demand shifts right, then eventually price level expectations rise. The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.

Accepted Answer

A) True 
 B)False

Question 4

Figure 33-8.  
-Refer to Figure 33-8. Suppose the economy starts at Z. Stagflation would be consistent with the move to

Accepted Answer

A) P1 and Y1 . 
B) P1 and Y3 . 
C) P3 and Y1 . 
D) P3 and Y3 . 
A) P1 and Y1 . 
B) P1 and Y3 . 
C) P3 and Y1 . 
D) P3 and Y3 .

Question 5

A decrease in the price level

Accepted Answer

A) increases the quantity of goods and services supplied in the short run. 
B) decreases the quantity of goods and services supplied in the long run. 
C) decreases the quantity of goods and services demanded. 
D) increases the quantity of goods and services demanded. 
A) increases the quantity of goods and services supplied in the short run. 
B) decreases the quantity of goods and services supplied in the long run. 
C) decreases the quantity of goods and services demanded. 
D) increases the quantity of goods and services demanded.

Question 6

Name two macroeconomic variables that decline when an economy goes into recession, and name one macroeconomic variable that rises.

Accepted Answer

Real GDP and investm

Question 7

Refer to U.S. Financial Crisis. U.S. net exports would

Accepted Answer

A) rise which by itself would increase aggregate demand. 
B) rise which by itself would decrease aggregate demand. 
C) fall which by itself would increase aggregate demand. 
D) fall which by itself would decrease aggregate demand. 
A) rise which by itself would increase aggregate demand. 
B) rise which by itself would decrease aggregate demand. 
C) fall which by itself would increase aggregate demand. 
D) fall which by itself would decrease aggregate demand.

Question 8

During recessions, income

Accepted Answer

A) and unemployment both rise. 
B) rises and unemployment falls. 
C) falls and unemployment rises. 
D) and unemployment both fall. 
A) and unemployment both rise. 
B) rises and unemployment falls. 
C) falls and unemployment rises. 
D) and unemployment both fall.

Question 9

Which of the following shifts both short-run and long-run aggregate supply left?

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) a decrease 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) a decrease in the money supply

Question 10

Other things the same, the aggregate quantity of output supplied will decrease if the price level

Accepted Answer

A) is lower than expected so that firms believe the relative price of their output has increased. 
B) is lower than expected so that firms believe the relative price of their output has decreased. 
C) is higher than expected so that firms believe the relative price of their output has increased. 
D) is higher than expected so that firms believe the relative price of their output has decreased. 
A) is lower than expected so that firms believe the relative price of their output has increased. 
B) is lower than expected so that firms believe the relative price of their output has decreased. 
C) is higher than expected so that firms believe the relative price of their output has increased. 
D) is higher than expected so that firms believe the relative price of their output has decreased.

Question 11

In the long-run, an increase in aggregate demand increases the price level, but not real GDP.

Accepted Answer

A) True 
 B)False

Question 12

Real GDP

Accepted Answer

A) is the current dollar value of all goods produced by the citizens of an economy within a given time. 
B) measures economic activity and income. 
C) is used primarily to measure long-run changes rather than short-run fluctuations. 
D) All of the above are correct. 
A) is the current dollar value of all goods produced by the citizens of an economy within a given time. 
B) measures economic activity and income. 
C) is used primarily to measure long-run changes rather than short-run fluctuations. 
D) All of the above are correct.

Question 13

During World War II government expenditures increased almost five-fold and output almost doubled.

Accepted Answer

A) True 
 B)False

Question 14

If output is above its natural rate, then according to sticky-wage theory

Accepted Answer

A) workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve right. 
B) workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve left. 
C) workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve right. 
D) workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve left. 
A) workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve right. 
B) workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve left. 
C) workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve right. 
D) workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve left.

Question 15

Figure 33-10.  
-Refer to Figure 33-10. If the economy starts at point A, a short-run fall in output would be consistent with a movement to point

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 16

An increase in the expected price level shifts the

Accepted Answer

A) short-run and long-run aggregate supply curves left. 
B) the short-run but not the long-run aggregate supply curve left. 
C) the long-run but not the short-run aggregate supply curve left. 
D) neither the long-run nor the short-run aggregate supply curve left. 
A) short-run and long-run aggregate supply curves left. 
B) the short-run but not the long-run aggregate supply curve left. 
C) the long-run but not the short-run aggregate supply curve left. 
D) neither the long-run nor the short-run aggregate supply curve left.

Question 17

Which of the following shifts short-run aggregate supply left?

Accepted Answer

A) an increase in price expectations 
B) an increase in the actual price level 
C) a decrease in the money supply 
D) a decrease in the price of oil 
A) an increase in price expectations 
B) an increase in the actual price level 
C) a decrease in the money supply 
D) a decrease in the price of oil

Question 18

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Accepted Answer

A) in the price level and output. 
B) in the price level, but not output. 
C) in output, but not the price level. 
D) in neither the price level nor output. 
A) in the price level and output. 
B) in the price level, but not output. 
C) in output, but not the price level. 
D) in neither the price level nor output.

Question 19

If businesses in general decide that they have overbuilt and so now have too much capital, their response to this 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 20

We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

Accepted Answer

A) True 
 B)False

Exam 33: Aggregate Demand and Aggregate Supply

The model of aggregate demand and aggregate supply

In which case can we be sure real GDP rises in the short run?

If aggregate demand shifts right, then eventually price level expectations rise. The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. Stagflation would be consistent with the move to

A decrease in the price level

Name two macroeconomic variables that decline when an economy goes into recession, and name one macroeconomic variable that rises.

Refer to U.S. Financial Crisis. U.S. net exports would

During recessions, income

Which of the following shifts both short-run and long-run aggregate supply left?

Other things the same, the aggregate quantity of output supplied will decrease if the price level

In the long-run, an increase in aggregate demand increases the price level, but not real GDP.

Real GDP

During World War II government expenditures increased almost five-fold and output almost doubled.

If output is above its natural rate, then according to sticky-wage theory

Figure 33-10. -Refer to Figure 33-10. If the economy starts at point A, a short-run fall in output would be consistent with a movement to point

An increase in the expected price level shifts the

Which of the following shifts short-run aggregate supply left?

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

If businesses in general decide that they have overbuilt and so now have too much capital, their response to this would initially shift

We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

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

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