Question 1

Which of the following expressions is correct?

Accepted Answer

A)  AE = C + I + G - NX 
B)  AE = C + I + G + NX 
C)  AE = C + I + (G - T) + NX 
D)  AE = C + I + (G - T) - NX 
A)  AE = C + I + G - NX 
B)  AE = C + I + G + NX 
C)  AE = C + I + (G - T) + NX 
D)  AE = C + I + (G - T) - NX

Question 2

Most economists believe that changes in the price level have

Accepted Answer

A)  no effect on the quantity of output supplied in either the short run or the long run. 
B)  an effect on the quantity of output supplied in the short run, but not in the long run. 
C)  an effect on the quantity of output supplied in the long run, but not in the short run. 
D)  an effect on the quantity of output supplied in both the short run and the long run. 
A)  no effect on the quantity of output supplied in either the short run or the long run. 
B)  an effect on the quantity of output supplied in the short run, but not in the long run. 
C)  an effect on the quantity of output supplied in the long run, but not in the short run. 
D)  an effect on the quantity of output supplied in both the short run and the long run.

Question 3

A rise in the real interest rate will cause which of the components of aggregate demand to decline?

Accepted Answer

A)  only C 
B)  only C and I 
C)  only C, I, and NX 
D)  C, I, G, and NX 
A)  only C 
B)  only C and I 
C)  only C, I, and NX 
D)  C, I, G, and NX

Question 4

The new classical approach to the aggregate supply curve assumes that businesses are

Accepted Answer

A)  better informed about the general price level than they are about prices in their own markets. 
B)  better informed about prices in their own markets than they are about the general price level. 
C)  equally well informed about prices in their own markets and the general price level. 
D)  reluctant to engage in investment spending because of a lack of information concerning future prices. 
A)  better informed about the general price level than they are about prices in their own markets. 
B)  better informed about prices in their own markets than they are about the general price level. 
C)  equally well informed about prices in their own markets and the general price level. 
D)  reluctant to engage in investment spending because of a lack of information concerning future prices.

Question 5

According to the new classical approach to the aggregate supply curve,the aggregate supply curve slopes upward because

Accepted Answer

A)  increases in the price level result in lower real money balances. 
B)  higher current output results in higher desired investment. 
C)  higher prices result in higher levels of spending as consumers attempt to stay ahead of inflation. 
D)  businesses have difficulty in distinguishing relative price increases from general price increases. 
A)  increases in the price level result in lower real money balances. 
B)  higher current output results in higher desired investment. 
C)  higher prices result in higher levels of spending as consumers attempt to stay ahead of inflation. 
D)  businesses have difficulty in distinguishing relative price increases from general price increases.

Question 6

Which of the following would NOT shift the aggregate demand curve to the left?

Accepted Answer

A)  an increase in money demand 
B)  a cut in federal government spending 
C)  a reduction in federal income taxes 
D)  a decrease in consumption spending 
A)  an increase in money demand 
B)  a cut in federal government spending 
C)  a reduction in federal income taxes 
D)  a decrease in consumption spending

Question 7

Most economists believe that the short-run aggregate supply curve

Accepted Answer

A)  slopes down. 
B)  slopes up. 
C)  is a vertical line. 
D)  is a horizontal line. 
A)  slopes down. 
B)  slopes up. 
C)  is a vertical line. 
D)  is a horizontal line.

Question 8

How is a monopolistically competitive firm likely to respond to fluctuations in demand in the short run?

Accepted Answer

A)  by selling more or less at the posted price 
B)  by changing prices 
C)  by reducing menu costs 
D)  by increasing menu costs 
A)  by selling more or less at the posted price 
B)  by changing prices 
C)  by reducing menu costs 
D)  by increasing menu costs

Question 9

Everything else being constant,a lower real interest rate

Accepted Answer

A)  increases desired saving and net exports. 
B)  decreases desired saving but increases net exports. 
C)  increases desired saving and investment. 
D)  increases desired investment but decreases net exports. 
A)  increases desired saving and net exports. 
B)  decreases desired saving but increases net exports. 
C)  increases desired saving and investment. 
D)  increases desired investment but decreases net exports.

Question 10

A decrease in the price level will lead to

Accepted Answer

A)  a decrease in the real interest rate and an increase in net exports. 
B)  an increase in the real interest rate and an increase in net exports. 
C)  a decrease in the real interest rate and a decrease in net exports. 
D)  an increase in the real interest rate and a decrease in net exports. 
A)  a decrease in the real interest rate and an increase in net exports. 
B)  an increase in the real interest rate and an increase in net exports. 
C)  a decrease in the real interest rate and a decrease in net exports. 
D)  an increase in the real interest rate and a decrease in net exports.

Question 11

The result of the supply shocks of 1973-1974 was to

Accepted Answer

A)  reduce aggregate output and raise the price level. 
B)  reduce the price level and raise aggregate output. 
C)  reduce both aggregate output and the price level. 
D)  raise both aggregate output and the price level. 
A)  reduce aggregate output and raise the price level. 
B)  reduce the price level and raise aggregate output. 
C)  reduce both aggregate output and the price level. 
D)  raise both aggregate output and the price level.

Question 12

Which of the following would shift the aggregate demand curve to the left?

Accepted Answer

A)  an increase in the money supply 
B)  a cut in federal income taxes 
C)  an expected decrease in future income 
D)  an increase in the price level 
A)  an increase in the money supply 
B)  a cut in federal income taxes 
C)  an expected decrease in future income 
D)  an increase in the price level

Question 13

If the economy experiences simultaneous negative aggregate demand and aggregate supply shocks,the new equilibrium price level ________ and the new equilibrium level of aggregate output ________.

Accepted Answer

A)  will he higher; will be lower 
B)  will he lower; will be lower 
C)  may be higher, lower, or not change; will be lower 
D)  will be higher; may be higher, lower, or not change 
A)  will he higher; will be lower 
B)  will he lower; will be lower 
C)  may be higher, lower, or not change; will be lower 
D)  will be higher; may be higher, lower, or not change

Question 14

Make use of the misperceptions theory to explain why the short-run aggregate supply curve is upward sloping.

Accepted Answer

Assume that all prices in an economy ris

Question 15

The aggregate supply curve represents levels of output that producers are willing to sell at

Accepted Answer

A)  each level of the real interest rate. 
B)  each level of real GDP. 
C)  each price level. 
D)  each inflation rate. 
A)  each level of the real interest rate. 
B)  each level of real GDP. 
C)  each price level. 
D)  each inflation rate.

Question 16

What are the seven key factors that cause the aggregate demand curve to shift?

Accepted Answer

Increases and decreases in the money sup

Question 17

The opportunity cost of holding money is measured by

Accepted Answer

A)  short-term nominal interest rate. 
B)  short-term real interest rate. 
C)  long-term nominal interest rate. 
D)  long-term real interest rate. 
A)  short-term nominal interest rate. 
B)  short-term real interest rate. 
C)  long-term nominal interest rate. 
D)  long-term real interest rate.

Question 18

If the coefficient a in the new classical expression for short-run aggregate supply were equal to zero

Accepted Answer

A)  aggregate output would always be at its full-employment level. 
B)  the short-run aggregate supply curve would slope down. 
C)  the short-run aggregate supply curve would be a horizontal line. 
D)  aggregate output would only differ from its full-employment level if the actual price level did not equal the expected price level. 
A)  aggregate output would always be at its full-employment level. 
B)  the short-run aggregate supply curve would slope down. 
C)  the short-run aggregate supply curve would be a horizontal line. 
D)  aggregate output would only differ from its full-employment level if the actual price level did not equal the expected price level.

Question 19

If the economy is initially at equilibrium and an unexpected decline in aggregate demand takes place,in the short run aggregate output will

Accepted Answer

A)  fall in the new classical view, but not in the new Keynesian view. 
B)  fall in the new Keynesian view, but not in the new classical view. 
C)  fall in both the new Keynesian and new classical views. 
D)  remain at full employment in both the new classical and new Keynesian views. 
A)  fall in the new classical view, but not in the new Keynesian view. 
B)  fall in the new Keynesian view, but not in the new classical view. 
C)  fall in both the new Keynesian and new classical views. 
D)  remain at full employment in both the new classical and new Keynesian views.

Question 20

Fracking involves

Accepted Answer

A)  extracting certain forms of energy from rock formations. 
B)  deep water drilling for energy with minimal externalities. 
C)  the reduction of menu costs, thus allowing prices to adjust more freely. 
D)  breaking down the production of goods, resulting in more competitive markets. 
A)  extracting certain forms of energy from rock formations. 
B)  deep water drilling for energy with minimal externalities. 
C)  the reduction of menu costs, thus allowing prices to adjust more freely. 
D)  breaking down the production of goods, resulting in more competitive markets.

Which of the following expressions is correct?

Most economists believe that changes in the price level have

A rise in the real interest rate will cause which of the components of aggregate demand to decline?

The new classical approach to the aggregate supply curve assumes that businesses are

According to the new classical approach to the aggregate supply curve,the aggregate supply curve slopes upward because

Which of the following would NOT shift the aggregate demand curve to the left?

Most economists believe that the short-run aggregate supply curve

How is a monopolistically competitive firm likely to respond to fluctuations in demand in the short run?

Everything else being constant,a lower real interest rate

A decrease in the price level will lead to

The result of the supply shocks of 1973-1974 was to

Which of the following would shift the aggregate demand curve to the left?

If the economy experiences simultaneous negative aggregate demand and aggregate supply shocks,the new equilibrium price level and the new equilibrium level of aggregate output .

Make use of the misperceptions theory to explain why the short-run aggregate supply curve is upward sloping.

The aggregate supply curve represents levels of output that producers are willing to sell at

What are the seven key factors that cause the aggregate demand curve to shift?

The opportunity cost of holding money is measured by

If the coefficient a in the new classical expression for short-run aggregate supply were equal to zero

If the economy is initially at equilibrium and an unexpected decline in aggregate demand takes place,in the short run aggregate output will

Fracking involves

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 17: Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Which of the following expressions is correct?

Most economists believe that changes in the price level have

A rise in the real interest rate will cause which of the components of aggregate demand to decline?

The new classical approach to the aggregate supply curve assumes that businesses are

According to the new classical approach to the aggregate supply curve,the aggregate supply curve slopes upward because

Which of the following would NOT shift the aggregate demand curve to the left?

Most economists believe that the short-run aggregate supply curve

How is a monopolistically competitive firm likely to respond to fluctuations in demand in the short run?

Everything else being constant,a lower real interest rate

A decrease in the price level will lead to

The result of the supply shocks of 1973-1974 was to

Which of the following would shift the aggregate demand curve to the left?

If the economy experiences simultaneous negative aggregate demand and aggregate supply shocks,the new equilibrium price level ________ and the new equilibrium level of aggregate output ________.

Make use of the misperceptions theory to explain why the short-run aggregate supply curve is upward sloping.

The aggregate supply curve represents levels of output that producers are willing to sell at

What are the seven key factors that cause the aggregate demand curve to shift?

The opportunity cost of holding money is measured by

If the coefficient a in the new classical expression for short-run aggregate supply were equal to zero

If the economy is initially at equilibrium and an unexpected decline in aggregate demand takes place,in the short run aggregate output will

Fracking involves

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory Ii: the Is-Mp Model

Filters

If the economy experiences simultaneous negative aggregate demand and aggregate supply shocks,the new equilibrium price level and the new equilibrium level of aggregate output .