Question 1

The wealth effect helps explain what feature in the aggregate demand and aggregate supply model?

Accepted Answer

why the ag

Question 2

In 2008, the United States was in recession. Which of the following things would you not expect to have happened?

Accepted Answer

A) Increased layoffs and firings 
B) A higher rate of bankruptcy 
C) Increased claims for unemployment insurance 
D) Increased real GDP 
A) Increased layoffs and firings 
B) A higher rate of bankruptcy 
C) Increased claims for unemployment insurance 
D) Increased real GDP

Question 3

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

Accepted Answer

A) True 
 B)False

Question 4

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 5

The classical dichotomy and monetary neutrality are represented graphically by

Accepted Answer

A) an upward-sloping long-run aggregate-supply curve. 
B) a vertical long-run aggregate-supply curve. 
C) an upward-sloping short-run aggregate-curve. 
D) a downward-sloping aggregate-demand curve. 
A) an upward-sloping long-run aggregate-supply curve. 
B) a vertical long-run aggregate-supply curve. 
C) an upward-sloping short-run aggregate-curve. 
D) a downward-sloping aggregate-demand curve.

Question 6

Figure 33-2   ​
-Refer to Figure 33-2. If the economy starts at S and moves to V in the short run, the economy

Accepted Answer

A) moves to S in the long run. 
B) moves to T in the long run. 
C) moves to U in the long run. 
D) stays at V in the long run. 
A) moves to S in the long run. 
B) moves to T in the long run. 
C) moves to U in the long run. 
D) stays at V in the long run.

Question 7

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

Accepted Answer

Variables that fall along with real GDP

Question 8

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Accepted Answer

A) True 
 B)False

Question 9

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

Accepted Answer

A) True 
 B)False

Question 10

In which case can we be sure aggregate demand shifts left overall?

Accepted Answer

A) People want to save more for retirement and the Fed increases the money supply. 
B) People want to save more for retirement and the Fed decreases the money supply. 
C) People want to save less for retirement and the Fed increases the money supply. 
D) People want to save less for retirement and the Fed decreases the money supply. 
A) People want to save more for retirement and the Fed increases the money supply. 
B) People want to save more for retirement and the Fed decreases the money supply. 
C) People want to save less for retirement and the Fed increases the money supply. 
D) People want to save less for retirement and the Fed decreases the money supply.

Question 11

Figure 33-2   ​
-Refer to Figure 33-2. If the economy is at S and there is a reduction in aggregate demand, in the short run the economy

Accepted Answer

A) stays at S. 
B) moves to T. 
C) moves to U. 
D) moves to V. 
A) stays at S. 
B) moves to T. 
C) moves to U. 
D) moves to V.

Question 12

Figure 33-2   ​
-Refer to Figure 33-2. A decrease in taxes would move the economy from U to

Accepted Answer

A) T in the short run and the long run. 
B) V in the short run and the long run. 
C) T in the short run and S in the long run. 
D) V in the short run and U in the long run. 
A) T in the short run and the long run. 
B) V in the short run and the long run. 
C) T in the short run and S in the long run. 
D) V in the short run and U in the long run.

Question 13

Suppose a boom in stock market prices helps make people feel wealthier. Using the model of aggregate demand and aggregate supply, identify the curves that are affected, and which way these curves would shift.

Accepted Answer

The aggregate demand

Question 14

Which of the following would shift the long-run aggregate supply curve right?

Accepted Answer

A) Both an increase in the capital stock and an increase in the price level 
B) An increase in the capital stock, but not an increase in the price level 
C) An increase in the money supply, but not an increase in the capital stock 
D) Neither an increase in the money supply nor an increase in the capital stock 
A) Both an increase in the capital stock and an increase in the price level 
B) An increase in the capital stock, but not an increase in the price level 
C) An increase in the money supply, but not an increase in the capital stock 
D) Neither an increase in the money supply nor an increase in the capital stock

Question 15

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

Accepted Answer

A) True 
 B)False

Question 16

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 17

List the three alternative explanations for the upward slope of the short run aggregate supply curve.

Accepted Answer

Sticky wages, sticky

Question 18

Figure 33-12
​   ​
-Refer to Figure 33-12. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Accepted Answer

Question 19

Figure 33-5   ​
-Refer to Figure 33-5. Suppose the economy starts at Point Y. If there is a reduction in aggregate demand, then in the long run the economy moves to

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 20

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

Accepted Answer

A) True 
 B)False

Exam 33: Aggregate Demand and Aggregate Supply

The wealth effect helps explain what feature in the aggregate demand and aggregate supply model?

In 2008, the United States was in recession. Which of the following things would you not expect to have happened?

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

The classical dichotomy and monetary neutrality are represented graphically by

Figure 33-2 ​ -Refer to Figure 33-2. If the economy starts at S and moves to V in the short run, the economy

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

In which case can we be sure aggregate demand shifts left overall?

Figure 33-2 ​ -Refer to Figure 33-2. If the economy is at S and there is a reduction in aggregate demand, in the short run the economy

Figure 33-2 ​ -Refer to Figure 33-2. A decrease in taxes would move the economy from U to

Suppose a boom in stock market prices helps make people feel wealthier. Using the model of aggregate demand and aggregate supply, identify the curves that are affected, and which way these curves would shift.

Which of the following would shift the long-run aggregate supply curve right?

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

List the three alternative explanations for the upward slope of the short run aggregate supply curve.

Figure 33-12 ​ ​ -Refer to Figure 33-12. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Figure 33-5 ​ -Refer to Figure 33-5. Suppose the economy starts at Point Y. If there is a reduction in aggregate demand, then in the long run the economy moves to

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

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 33-2 -Refer to Figure 33-2. If the economy starts at S and moves to V in the short run, the economy

Figure 33-2 -Refer to Figure 33-2. If the economy is at S and there is a reduction in aggregate demand, in the short run the economy

Figure 33-2 -Refer to Figure 33-2. A decrease in taxes would move the economy from U to

Figure 33-12 -Refer to Figure 33-12. Suppose the economy starts at P₃ and Y₂. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Figure 33-5 -Refer to Figure 33-5. Suppose the economy starts at Point Y. If there is a reduction in aggregate demand, then in the long run the economy moves to