Question 1

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 2

During periods of stagflation, what happens to output and prices in the economy?

Accepted Answer

Output fal

Question 3

When the actual change in the price level differs from its expected change, which of the following can explain why firms might change their production?

Accepted Answer

A) both menu costs and mistaking a price level change for a change in relative prices 
B) menu costs but not mistaking a price level change for a change in relative prices 
C) mistaking a price level change for a change in relative price but not menu costs 
D) neither menu costs nor mistaking a price level change for a change in relative prices 
A) both menu costs and mistaking a price level change for a change in relative prices 
B) menu costs but not mistaking a price level change for a change in relative prices 
C) mistaking a price level change for a change in relative price but not menu costs 
D) neither menu costs nor mistaking a price level change for a change in relative prices

Question 4

Historically, as recessions have ended the unemployment rate declined

Accepted Answer

A) gradually to near zero. 
B) rapidly to near zero. 
C) gradually to a rate of about 5%-6%. 
D) rapidly to a rate of about 5%-6%. 
A) gradually to near zero. 
B) rapidly to near zero. 
C) gradually to a rate of about 5%-6%. 
D) rapidly to a rate of about 5%-6%.

Question 5

Which of the following shifts aggregate demand to the left?

Accepted Answer

A) an increase in the price level. 
B) households decide to save a larger fraction of their income. 
C) an increase in net exports. 
D) Congress passes a new investment tax credit. 
A) an increase in the price level. 
B) households decide to save a larger fraction of their income. 
C) an increase in net exports. 
D) Congress passes a new investment tax credit.

Question 6

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, taxes fall. 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 7

According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces 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 8

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Accepted Answer

A) long-run aggregate supply shifts right 
B) long-run aggregate supply shifts left 
C) aggregate demand shifts right 
D) aggregate demand shifts left 
A) long-run aggregate supply shifts right 
B) long-run aggregate supply shifts left 
C) aggregate demand shifts right 
D) aggregate demand shifts left

Question 9

Refer to Stock Market Boom 2015. In the short run what happens to the price level and real GDP?

Accepted Answer

A) both the price level and real GDP rise. 
B) both the price level and real GDP fall. 
C) the price level rises and real GDP falls. 
D) the price level falls and real GDP rises. 
A) both the price level and real GDP rise. 
B) both the price level and real GDP fall. 
C) the price level rises and real GDP falls. 
D) the price level falls and real GDP rises.

Question 10

Other things the same, if the long-run aggregate supply curve shifts right, prices

Accepted Answer

A) and output both increase. 
B) and output both decrease. 
C) increase and output decreases. 
D) decrease and output increases. 
A) and output both increase. 
B) and output both decrease. 
C) increase and output decreases. 
D) decrease and output increases.

Question 11

"Money is a veil" best describes the

Accepted Answer

A) new-Keynesian view. 
B) Keynesian view. 
C) classical view. 
D) economy in the short run but not the long run. 
A) new-Keynesian view. 
B) Keynesian view. 
C) classical view. 
D) economy in the short run but not the long run.

Question 12

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

Accepted Answer

A) It would have to have shifted left by less than aggregate supply. 
B) It would have to have shifted left by more than aggregate supply. 
C) It would have to have shifted right by less than aggregate supply. 
D) It would have to have shifted right by more than aggregate supply. 
A) It would have to have shifted left by less than aggregate supply. 
B) It would have to have shifted left by more than aggregate supply. 
C) It would have to have shifted right by less than aggregate supply. 
D) It would have to have shifted right by more than aggregate supply.

Question 13

During recessions declines in investment account for about

Accepted Answer

A) 1/6 of the decline in real GDP. 
B) 1/7 of the decline in real GDP. 
C) 1/3 of the decline in real GDP. 
D) 2/3 of the decline in real GDP. 
A) 1/6 of the decline in real GDP. 
B) 1/7 of the decline in real GDP. 
C) 1/3 of the decline in real GDP. 
D) 2/3 of the decline in real GDP.

Question 14

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 15

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the supply of labor, a major new discovery of oil, and new environmental regulations that raise the cost of electricity production. In the short run

Accepted Answer

A) the price level will rise and real GDP will fall. 
B) the price level will fall and real GDP will rise. 
C) the price level and real GDP will both stay the same. 
D) All of the above are possible. 
A) the price level will rise and real GDP will fall. 
B) the price level will fall and real GDP will rise. 
C) the price level and real GDP will both stay the same. 
D) All of the above are possible.

Question 16

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this

Accepted Answer

A) it is only necessary that long-run aggregate supply shifts right over time. 
B) it is only necessary that aggregate demand shifts right over time. 
C) both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther. 
D) None of the above cases would produce rising prices and growing real GDP over time. 
A) it is only necessary that long-run aggregate supply shifts right over time. 
B) it is only necessary that aggregate demand shifts right over time. 
C) both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther. 
D) None of the above cases would produce rising prices and growing real GDP over time.

Question 17

When the dollar depreciates, U.S.

Accepted Answer

A) net exports rise, which increases the aggregate quantity of goods and services demanded. 
B) net exports rise, which decreases the aggregate quantity of goods and services demanded. 
C) net exports fall, which increases the aggregate quantity of goods and services demanded. 
D) net exports fall, which decreases the aggregate quantity of goods and services demanded. 
A) net exports rise, which increases the aggregate quantity of goods and services demanded. 
B) net exports rise, which decreases the aggregate quantity of goods and services demanded. 
C) net exports fall, which increases the aggregate quantity of goods and services demanded. 
D) net exports fall, which decreases the aggregate quantity of goods and services demanded.

Question 18

Which of the following would cause prices and real GDP to rise in the short run?

Accepted Answer

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

Question 19

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Accepted Answer

A) True 
 B)False

Question 20

As the price level falls

Accepted Answer

A) people will want to hold more money, so the interest rate rises. 
B) people will want to hold more money, so the interest rate falls. 
C) people will want to hold less money, so the interest rate falls. 
D) people will want to hold less money, so the interest rate rises. 
A) people will want to hold more money, so the interest rate rises. 
B) people will want to hold more money, so the interest rate falls. 
C) people will want to hold less money, so the interest rate falls. 
D) people will want to hold less money, so the interest rate rises.

Exam 33: Aggregate Demand and Aggregate Supply

An increase in the money supply shifts the long-run aggregate supply curve to the right.

During periods of stagflation, what happens to output and prices in the economy?

When the actual change in the price level differs from its expected change, which of the following can explain why firms might change their production?

Historically, as recessions have ended the unemployment rate declined

Which of the following shifts aggregate demand to the left?

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, taxes fall. In the short-run

According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Refer to Stock Market Boom 2015. In the short run what happens to the price level and real GDP?

Other things the same, if the long-run aggregate supply curve shifts right, prices

"Money is a veil" best describes the

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

During recessions declines in investment account for about

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

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the supply of labor, a major new discovery of oil, and new environmental regulations that raise the cost of electricity production. In the short run

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this

When the dollar depreciates, U.S.

Which of the following would cause prices and real GDP to rise in the short run?

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

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

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