Question 1

How does the aggregate demand and supply model reflect a decrease in taxes?

Accepted Answer

A) Consumption increases, so aggregate demand shifts right. 
B) Consumption increases, so aggregate supply shifts right. 
C) Consumption decreases, so aggregate demand shifts left. 
D) Consumption decreases, so aggregate supply shifts left. 
A) Consumption increases, so aggregate demand shifts right. 
B) Consumption increases, so aggregate supply shifts right. 
C) Consumption decreases, so aggregate demand shifts left. 
D) Consumption decreases, so aggregate supply shifts left.

Question 2

Increased uncertainty and pessimism about the future of the economy decreases investment spending,shifting aggregate demand to the left.

Accepted Answer

A) True 
 B)False

Question 3

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,what would we expect to happen?

Accepted Answer

A) In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be unaffected. 
B) In the short run, real GDP will fall, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be unaffected. 
C) In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be lower. 
D) In the short run, real GDP will fall, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be lower. 
A) In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be unaffected. 
B) In the short run, real GDP will fall, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be unaffected. 
C) In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be lower. 
D) In the short run, real GDP will fall, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be lower.

Question 4

Which of the following expenditure items is responsible for the decrease in real GDP during a recession?

Accepted Answer

A) mostly investment spending 
B) mostly consumption spending 
C) mostly government spending 
D) mostly exports 
A) mostly investment spending 
B) mostly consumption spending 
C) mostly government spending 
D) mostly exports

Question 5

Which of the following parts of real GDP fluctuates most over the course of the business cycle?

Accepted Answer

A) consumption 
B) government expenditures 
C) investment 
D) net exports 
A) consumption 
B) government expenditures 
C) investment 
D) net exports

Question 6

Which of the following shifts aggregate demand to the left?

Accepted Answer

A) an increase in the price level 
B) a decrease in the money supply 
C) an increase in net exports 
D) an investment tax credit 
A) an increase in the price level 
B) a decrease in the money supply 
C) an increase in net exports 
D) an investment tax credit

Question 7

Suppose a fall in stock prices makes people feel poorer.What are the effects of this decrease in wealth?

Accepted Answer

A) a decrease in consumption, shown as a movement to the left along a given aggregate-demand curve 
B) an increase in consumption, shown as a movement to the right along a given aggregate-demand curve 
C) a decrease in consumption, which shifts the aggregate-demand curve to the left 
D) an increase in consumption, which shifts the aggregate-demand curve to the right 
A) a decrease in consumption, shown as a movement to the left along a given aggregate-demand curve 
B) an increase in consumption, shown as a movement to the right along a given aggregate-demand curve 
C) a decrease in consumption, which shifts the aggregate-demand curve to the left 
D) an increase in consumption, which shifts the aggregate-demand curve to the right

Question 8

Suppose a stock market boom makes people feel wealthier.What are the effects of this increase in wealth?

Accepted Answer

A) increased consumption, which shifts the aggregate-demand curve right 
B) increased consumption, which shifts the aggregate-demand curve left 
C) decreased consumption, which shifts the aggregate-demand curve right 
D) decreased consumption, which shifts the aggregate-demand curve left 
A) increased consumption, which shifts the aggregate-demand curve right 
B) increased consumption, which shifts the aggregate-demand curve left 
C) decreased consumption, which shifts the aggregate-demand curve right 
D) decreased consumption, which shifts the aggregate-demand curve left

Question 9

In the mid-1970s the price of oil rose dramatically.What did this event cause?

Accepted Answer

A) It shifted aggregate supply left. 
B) It caused Canadian prices to fall. 
C) The aggregate demand increased because of an increase in the demand for gasoline. 
D) Nominal GDP increased. 
A) It shifted aggregate supply left. 
B) It caused Canadian prices to fall. 
C) The aggregate demand increased because of an increase in the demand for gasoline. 
D) Nominal GDP increased.

Question 10

How do changes in the price of oil affect economies?

Accepted Answer

A) They lead to recession and deflation. 
B) They do not contribute much to output fluctuations. 
C) They change the economy principally by changing aggregate demand. 
D) They may create both inflation and recession. 
A) They lead to recession and deflation. 
B) They do not contribute much to output fluctuations. 
C) They change the economy principally by changing aggregate demand. 
D) They may create both inflation and recession.

Question 11

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

Accepted Answer

A) The expected price level rises, shifting aggregate demand right. 
B) The expected price level rises, shifting aggregate demand left. 
C) The expected price level falls, shifting aggregate supply right. 
D) The expected price level falls, shifting aggregate supply left. 
A) The expected price level rises, shifting aggregate demand right. 
B) The expected price level rises, shifting aggregate demand left. 
C) The expected price level falls, shifting aggregate supply right. 
D) The expected price level falls, shifting aggregate supply left.

Question 12

Which of the following is consistent with an increase in the price level?

Accepted Answer

A) Dollars become more valuable, and interest rates rise. 
B) Dollars become more valuable, and interest rates fall. 
C) Dollars become less valuable, and interest rates rise. 
D) Dollars become less valuable, and interest rates fall. 
A) Dollars become more valuable, and interest rates rise. 
B) Dollars become more valuable, and interest rates fall. 
C) Dollars become less valuable, and interest rates rise. 
D) Dollars become less valuable, and interest rates fall.

Question 13

Which of the following does the downward slope of the aggregate-demand curve show?

Accepted Answer

A) that an increase in the money supply causes the aggregate quantity of goods and services demanded to increase 
B) that an increase in the money supply causes the aggregate quantity of goods and services demanded to decrease 
C) that an increase in the price level causes the aggregate quantity of goods and services demanded to increase 
D) that an increase in the price level causes the aggregate quantity of goods and services demanded to decrease 
A) that an increase in the money supply causes the aggregate quantity of goods and services demanded to increase 
B) that an increase in the money supply causes the aggregate quantity of goods and services demanded to decrease 
C) that an increase in the price level causes the aggregate quantity of goods and services demanded to increase 
D) that an increase in the price level causes the aggregate quantity of goods and services demanded to decrease

Question 14

Consider the following equation,where a is a positive number: quantity of output supplied = natural rate of output + a (actual price level - expected price level).What does this equation represent?

Accepted Answer

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

Question 15

Scenario 14-1
The economy is in long-run equilibrium. Suddenly, due to improved international relations and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time.
-Refer to the Scenario 14-1.In the long-run,how does the change in price expectations created by optimism change the aggregate demand and aggregate supply diagram?

Accepted Answer

A) The long-run aggregate-supply curve shifts left. 
B) The long-run aggregate-supply curve shifts right. 
C) The short-run aggregate-supply curve shifts right. 
D) The short-run aggregate-supply curve shifts left. 
A) The long-run aggregate-supply curve shifts left. 
B) The long-run aggregate-supply curve shifts right. 
C) The short-run aggregate-supply curve shifts right. 
D) The short-run aggregate-supply curve shifts left.

Question 16

According to the sticky-price theory,which of the following is consistent with an unexpected fall in the price level?

Accepted Answer

A) Some firms' prices are lower than desired, which increases their sales. 
B) Some firms' prices are lower than desired, which depresses their sales. 
C) Some firms' prices are higher than desired, which increases their sales. 
D) Some firms' prices are higher than desired, which depresses their sales. 
A) Some firms' prices are lower than desired, which increases their sales. 
B) Some firms' prices are lower than desired, which depresses their sales. 
C) Some firms' prices are higher than desired, which increases their sales. 
D) Some firms' prices are higher than desired, which depresses their sales.

Question 17

Which of the following best defines business cycles?

Accepted Answer

A) long-term trends in economic activity 
B) regular, predictable fluctuations in GDP 
C) the rise and fall of multinational companies 
D) fluctuations in the economy 
A) long-term trends in economic activity 
B) regular, predictable fluctuations in GDP 
C) the rise and fall of multinational companies 
D) fluctuations in the economy

Question 18

Which of the following government actions will shift the aggregate demand right?

Accepted Answer

A) a rise in personal income taxes 
B) an increase in the money supply 
C) a repeal of an investment tax credit 
D) closing up a military facility to reduce costs 
A) a rise in personal income taxes 
B) an increase in the money supply 
C) a repeal of an investment tax credit 
D) closing up a military facility to reduce costs

Question 19

Suppose that a decrease in the demand for goods and services pushes the economy into recession.What happens to the price level? If the government does nothing,what ensures that the economy still eventually gets back to the natural rate of output?

Accepted Answer

A decrease in aggregate demand causes th

Question 20

Make a list of things that would shift the long-run aggregate-supply curve to the right.

Accepted Answer

Examples in the text (or variations)incl

How does the aggregate demand and supply model reflect a decrease in taxes?

Increased uncertainty and pessimism about the future of the economy decreases investment spending,shifting aggregate demand to the left.

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,what would we expect to happen?

Which of the following expenditure items is responsible for the decrease in real GDP during a recession?

Which of the following parts of real GDP fluctuates most over the course of the business cycle?

Which of the following shifts aggregate demand to the left?

Suppose a fall in stock prices makes people feel poorer.What are the effects of this decrease in wealth?

Suppose a stock market boom makes people feel wealthier.What are the effects of this increase in wealth?

In the mid-1970s the price of oil rose dramatically.What did this event cause?

How do changes in the price of oil affect economies?

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

Which of the following is consistent with an increase in the price level?

Which of the following does the downward slope of the aggregate-demand curve show?

Consider the following equation,where a is a positive number: quantity of output supplied = natural rate of output + a (actual price level - expected price level).What does this equation represent?

According to the sticky-price theory,which of the following is consistent with an unexpected fall in the price level?

Which of the following best defines business cycles?

Which of the following government actions will shift the aggregate demand right?

Suppose that a decrease in the demand for goods and services pushes the economy into recession.What happens to the price level? If the government does nothing,what ensures that the economy still eventually gets back to the natural rate of output?

Make a list of things that would shift the long-run aggregate-supply curve to the right.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains from Trade

The Market Forces of Supply and Demand (PART 1)

The Market Forces of Supply and Demand (PART 2)

Measuring a Nation's Income

Measuring the Cost of Living

Production and Growth

Saving,Investment,and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff between Inflation and Unemployment

Five Debates over Macroeconomic Policy

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Exam 14: Aggregate Demand and Aggregate Supply

How does the aggregate demand and supply model reflect a decrease in taxes?

Increased uncertainty and pessimism about the future of the economy decreases investment spending,shifting aggregate demand to the left.

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,what would we expect to happen?

Which of the following expenditure items is responsible for the decrease in real GDP during a recession?

Which of the following parts of real GDP fluctuates most over the course of the business cycle?

Which of the following shifts aggregate demand to the left?

Suppose a fall in stock prices makes people feel poorer.What are the effects of this decrease in wealth?

Suppose a stock market boom makes people feel wealthier.What are the effects of this increase in wealth?

In the mid-1970s the price of oil rose dramatically.What did this event cause?

How do changes in the price of oil affect economies?

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

Which of the following is consistent with an increase in the price level?

Which of the following does the downward slope of the aggregate-demand curve show?

Consider the following equation,where a is a positive number: quantity of output supplied = natural rate of output + a (actual price level - expected price level).What does this equation represent?

According to the sticky-price theory,which of the following is consistent with an unexpected fall in the price level?

Which of the following best defines business cycles?

Which of the following government actions will shift the aggregate demand right?

Suppose that a decrease in the demand for goods and services pushes the economy into recession.What happens to the price level? If the government does nothing,what ensures that the economy still eventually gets back to the natural rate of output?

Make a list of things that would shift the long-run aggregate-supply curve to the right.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains from Trade

The Market Forces of Supply and Demand (PART 1)

The Market Forces of Supply and Demand (PART 2)

Measuring a Nation's Income

Measuring the Cost of Living

Production and Growth

Saving,Investment,and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff between Inflation and Unemployment

Five Debates over Macroeconomic Policy

Filters