Question 1

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

Accepted Answer

A) the slope of short-run aggregate supply. 
B) the slope of long-run aggregate supply. 
C) the slope of the aggregate-demand curve. 
D) shifts in the aggregate-demand curve. 
A) the slope of short-run aggregate supply. 
B) the slope of long-run aggregate supply. 
C) the slope of the aggregate-demand curve. 
D) shifts in the aggregate-demand curve. C

Question 2

Suppose people anticipate an increase in the expected price level. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift?

Accepted Answer

The short-run aggregate-supply curve would shift to the left.

Question 3

What do most economists believe concerning the relation between the price level and real output?

Accepted Answer

Most economists believe that in the long run, real variables are not affected by nominal variables. So, for example, changes in the money supply do not change real variables in the long run. However, most economists believe that nominal variables do change real variables in the short run. In the short-run prices and wages may be fixed based on the expected price level. If the actual price level differs from the expected price level, real variables are affected.

Question 4

From 2001 to 2005 there was a dramatic rise in the value of houses. If this rise made homeowners feel wealthier, then it would have shifted aggregate

Accepted Answer

A) demand right. 
B) demand left. 
C) supply right. 
D) supply left. 
A) demand right. 
B) demand left. 
C) supply right. 
D) supply left.

Question 5

Figure 33-1  
-Refer to Figure 33-1. The natural level of output occurs at

Accepted Answer

A) Y1. 
B) Y2. 
C) Y3. 
D) both Y1 and Y3. 
A) Y1. 
B) Y2. 
C) Y3. 
D) both Y1 and Y3.

Question 6

Figure 33-5   ​
-Refer to Figure 33-5. If the economy starts at Point Y, then a recession occurs at

Accepted Answer

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

Question 7

Other things the same, technological progress raises the price level.

Accepted Answer

A) True 
 B)False

Question 8

Figure 33-4  
-Refer to Figure 33-4. The short-run equilibrium is defined by the given AD and SRAS curves. Which of the long-run aggregate-supply curves is consistent with a short-run economic a recession?

Accepted Answer

A) LRAS3 
B) LRAS2 
C) LRAS1 
D) Both LRAS3 and LRAS1 
A) LRAS3 
B) LRAS2 
C) LRAS1 
D) Both LRAS3 and LRAS1

Question 9

"Money is a veil" best describes

Accepted Answer

A) the general view of the economy. 
B) the historical view of the economy. 
C) classical view of the economy. 
D) economy in the short run but not the long run. 
A) the general view of the economy. 
B) the historical view of the economy. 
C) classical view of the economy. 
D) economy in the short run but not the long run.

Question 10

Briefly state the three key facts about economic fluctuations.

Accepted Answer

(1) Economic fluctuations are

Question 11

Scenario 33-2
Imagine that in the current year the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time.
-Refer to Scenario 33-2. In the long run, what happens to the expected price level and what impact does this have on wage bargaining?

Accepted Answer

A) The expected price level falls.New wage contracts are negotiated at higher wages. 
B) The expected price level falls.New wage contracts are negotiated at lower wages. 
C) The expected price level rises.New wage contracts are negotiated at higher wages. 
D) The expected price level rises.New wage contracts are negotiated at lower wages. 
A) The expected price level falls.New wage contracts are negotiated at higher wages. 
B) The expected price level falls.New wage contracts are negotiated at lower wages. 
C) The expected price level rises.New wage contracts are negotiated at higher wages. 
D) The expected price level rises.New wage contracts are negotiated at lower wages.

Question 12

Figure 33-3  
-Refer to Figure 33-3. The shift of the short-run aggregate-supply curve from SRAS2 to SRAS1

Accepted Answer

A) could be caused by a decrease in the expected price level. 
B) could be caused by an outbreak of war in the Middle East. 
C) causes the economy to experience a decrease in the unemployment rate. 
D) causes the economy to experience a drop in the price level. 
A) could be caused by a decrease in the expected price level. 
B) could be caused by an outbreak of war in the Middle East. 
C) causes the economy to experience a decrease in the unemployment rate. 
D) causes the economy to experience a drop in the price level.

Question 13

What curve shows the quantity of goods and services that firms choose to produce and sell at each price level?

Accepted Answer

The aggreg

Question 14

Figure 33-6   ​
-Refer to Figure 33-6. Suppose the economy starts at A. 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 15

A recession with inflation is know by what term?

Accepted Answer

The answer of A recession with inflation is know by...

Question 16

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage. They may infer that the reward to working is temporarily

Accepted Answer

A) low and so supply a smaller quantity of labor. 
B) low and so supply a larger quantity of labor. 
C) high and so supply a smaller quantity of labor. 
D) high and so supply a larger quantity of labor. 
A) low and so supply a smaller quantity of labor. 
B) low and so supply a larger quantity of labor. 
C) high and so supply a smaller quantity of labor. 
D) high and so supply a larger quantity of labor.

Question 17

If aggregate demand and aggregate supply both shift right, we can be sure that the price level is higher in the short run.

Accepted Answer

A) True 
 B)False

Question 18

All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the expected price level.

Accepted Answer

A) True 
 B)False

Question 19

Figure 33-11
​   ​
-Refer to Figure 33-11. Suppose the economy begins at point A. Decreases in what four variables could result in a movement to point D?

Accepted Answer

consumption, investm

Question 20

An increase in the actual price level does not shift the short-run aggregate supply curve, but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Accepted Answer

A) True 
 B)False

Exam 33: Aggregate Demand and Aggregate Supply

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

Suppose people anticipate an increase in the expected price level. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift?

What do most economists believe concerning the relation between the price level and real output?

From 2001 to 2005 there was a dramatic rise in the value of houses. If this rise made homeowners feel wealthier, then it would have shifted aggregate

Figure 33-1 -Refer to Figure 33-1. The natural level of output occurs at

Figure 33-5 ​ -Refer to Figure 33-5. If the economy starts at Point Y, then a recession occurs at

Other things the same, technological progress raises the price level.

Figure 33-4 -Refer to Figure 33-4. The short-run equilibrium is defined by the given AD and SRAS curves. Which of the long-run aggregate-supply curves is consistent with a short-run economic a recession?

"Money is a veil" best describes

Briefly state the three key facts about economic fluctuations.

Scenario 33-2 Imagine that in the current year the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. -Refer to Scenario 33-2. In the long run, what happens to the expected price level and what impact does this have on wage bargaining?

Figure 33-3 -Refer to Figure 33-3. The shift of the short-run aggregate-supply curve from SRAS2 to SRAS1

What curve shows the quantity of goods and services that firms choose to produce and sell at each price level?

Figure 33-6 ​ -Refer to Figure 33-6. Suppose the economy starts at A. Stagflation would be consistent with the move to

A recession with inflation is know by what term?

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage. They may infer that the reward to working is temporarily

If aggregate demand and aggregate supply both shift right, we can be sure that the price level is higher in the short run.

All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the expected price level.

Figure 33-11 ​ ​ -Refer to Figure 33-11. Suppose the economy begins at point A. Decreases in what four variables could result in a movement to point D?

An increase in the actual price level does not shift the short-run aggregate supply curve, but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

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 Nations 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 33-5 -Refer to Figure 33-5. If the economy starts at Point Y, then a recession occurs at

Figure 33-3 -Refer to Figure 33-3. The shift of the short-run aggregate-supply curve from SRAS₂ to SRAS₁

Figure 33-6 -Refer to Figure 33-6. Suppose the economy starts at A. Stagflation would be consistent with the move to

Figure 33-11 -Refer to Figure 33-11. Suppose the economy begins at point A. Decreases in what four variables could result in a movement to point D?