Question 1

Other things the same, as the price level falls, a country's exchange rate

Accepted Answer

A) and interest rates rise. 
B) and interest rates fall. 
C) falls and interest rates rise. 
D) rises and interest rates fall. 
A) and interest rates rise. 
B) and interest rates fall. 
C) falls and interest rates rise. 
D) rises and interest rates fall.

Question 2

Other things the same, a fall in an economy's overall level of prices tends to

Accepted Answer

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

Question 3

During recessions employment typically

Accepted Answer

A) falls substantially. As the recession ends, employment rises rapidly. 
B) rises substantially. As the recession ends, employment declines gradually. 
C) falls substantially. As the recession ends, employment rises gradually. 
D) rises substantially. As the recession ends, employment declines rapidly. 
A) falls substantially. As the recession ends, employment rises rapidly. 
B) rises substantially. As the recession ends, employment declines gradually. 
C) falls substantially. As the recession ends, employment rises gradually. 
D) rises substantially. As the recession ends, employment declines rapidly.

Question 4

The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following alone can explain the change in the price level and output during World War II?

Accepted Answer

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

Question 6

The long-run aggregate supply curve shifts right if

Accepted Answer

A) the price level rises. 
B) the price level falls. 
C) the capital stock increases. 
D) the capital stock decreases. 
A) the price level rises. 
B) the price level falls. 
C) the capital stock increases. 
D) the capital stock decreases.

Question 7

List the three reasons for why the aggregate-demand curve slopes downward.

Accepted Answer

The wealth effect, t

Question 8

Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

Accepted Answer

A) decrease consumption, shown as a movement to the left along a given aggregate-demand curve. 
B) increase consumption, shown as a movement to the right along a given aggregate-demand curve. 
C) decrease consumption, shown by shifting the aggregate-demand curve to the left. 
D) increase consumption, shown by shifting the aggregate-demand curve to the right. 
A) decrease consumption, shown as a movement to the left along a given aggregate-demand curve. 
B) increase consumption, shown as a movement to the right along a given aggregate-demand curve. 
C) decrease consumption, shown by shifting the aggregate-demand curve to the left. 
D) increase consumption, shown by shifting the aggregate-demand curve to the right.

Question 9

Other things the same, if prices fell when firms and workers were expecting them to rise, then

Accepted Answer

A) employment and production would rise. 
B) employment would rise and production would fall. 
C) employment would fall and production would rise. 
D) employment and production would fall. 
A) employment and production would rise. 
B) employment would rise and production would fall. 
C) employment would fall and production would rise. 
D) employment and production would fall.

Question 10

According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produce had

Accepted Answer

A) increased, so it would increase production. 
B) increased, so it would decrease production. 
C) decreased, so it would increase production. 
D) decreased, so it would decrease production. 
A) increased, so it would increase production. 
B) increased, so it would decrease production. 
C) decreased, so it would increase production. 
D) decreased, so it would decrease production.

Question 11

According to the classical model, which of the following would double if the quantity of money doubled?

Accepted Answer

A) prices but not nominal income 
B) nominal income but not prices 
C) both prices and nominal income 
D) neither prices nor nominal income 
A) prices but not nominal income 
B) nominal income but not prices 
C) both prices and nominal income 
D) neither prices nor nominal income

Question 12

Most economists believe that the classical model is the appropriate model for analysis of the economy in the

Accepted Answer

A) long run, because evidence indicates that money is not neutral in the long run. 
B) long run, because real and nominal variables are essentially determined separately in the long run. 
C) short run, because money is neutral in the short run. 
D) short run, because real and nominal variables are not highly intertwined in the short run. 
A) long run, because evidence indicates that money is not neutral in the long run. 
B) long run, because real and nominal variables are essentially determined separately in the long run. 
C) short run, because money is neutral in the short run. 
D) short run, because real and nominal variables are not highly intertwined in the short run.

Question 13

Figure 33-17.  
-Refer to Figure 33-17. Suppose the economy starts at P3 and Y2. Explain how government purchases would need to change to move the economy to P2 and Y1. What about taxes?

Accepted Answer

decrease in governme

Question 14

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Accepted Answer

A) True 
 B)False

Question 15

The aggregate-demand curve shows that a decrease in the price level

Accepted Answer

A) decreases the dollar value of goods and services demanded in the economy. 
B) decreases the real value of goods and services demanded in the economy. 
C) increases the dollar value of goods and services demanded in the economy. 
D) increases the real value of goods and services demanded in the economy. 
A) decreases the dollar value of goods and services demanded in the economy. 
B) decreases the real value of goods and services demanded in the economy. 
C) increases the dollar value of goods and services demanded in the economy. 
D) increases the real value of goods and services demanded in the economy.

Question 16

We depart from the assumptions of classical economics when we focus on the relationship between

Accepted Answer

A) the quantity of output and the price level. 
B) the quantity of output and the unemployment rate. 
C) the price level and the inflation rate. 
D) inflation and the nominal interest rate. 
A) the quantity of output and the price level. 
B) the quantity of output and the unemployment rate. 
C) the price level and the inflation rate. 
D) inflation and the nominal interest rate.

Question 17

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 18

The long-run effect of an increase in household consumption 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 19

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 20

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.

Exam 33: Aggregate Demand and Aggregate Supply

Other things the same, as the price level falls, a country's exchange rate

Other things the same, a fall in an economy's overall level of prices tends to

During recessions employment typically

The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Which of the following alone can explain the change in the price level and output during World War II?

The long-run aggregate supply curve shifts right if

List the three reasons for why the aggregate-demand curve slopes downward.

Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

Other things the same, if prices fell when firms and workers were expecting them to rise, then

According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produce had

According to the classical model, which of the following would double if the quantity of money doubled?

Most economists believe that the classical model is the appropriate model for analysis of the economy in the

Figure 33-17. -Refer to Figure 33-17. Suppose the economy starts at P3 and Y2. Explain how government purchases would need to change to move the economy to P2 and Y1. What about taxes?

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

The aggregate-demand curve shows that a decrease in the price level

We depart from the assumptions of classical economics when we focus on the relationship between

Which of the following would cause stagflation?

The long-run effect of an increase in household consumption is to raise

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

As the price level falls,

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 33-17. -Refer to Figure 33-17. Suppose the economy starts at P₃ and Y₂. Explain how government purchases would need to change to move the economy to P₂ and Y₁. What about taxes?