Question 1

How are the effects of an increase in the price level that is greater than expected shown in the aggregate demand and aggregate supply model?

Accepted Answer

A)  by shifting the short-run aggregate-supply curve right 
B)  by shifting the short-run aggregate-supply curve left 
C)  by moving to the right along a given aggregate-supply curve 
D)  by moving to the left along a given aggregate-supply curve 
A)  by shifting the short-run aggregate-supply curve right 
B)  by shifting the short-run aggregate-supply curve left 
C)  by moving to the right along a given aggregate-supply curve 
D)  by moving to the left along a given aggregate-supply curve C

Question 2

In the aggregate demand and aggregate supply model, when does the aggregate quantity of goods demanded increase?

Accepted Answer

A)  when real wealth rises 
B)  when the interest rate rises 
C)  when the dollar appreciates 
D)  when the expected price level rises 
A)  when real wealth rises 
B)  when the interest rate rises 
C)  when the dollar appreciates 
D)  when the expected price level rises A

Question 3

What happened in the first few years of the Great Depression?

Accepted Answer

A)  Unemployment rose by about 10 percent, and prices rose about 27 percent. 
B)  Unemployment rose by about 19 percent, and prices rose about 12 percent. 
C)  Unemployment rose by about 20 percent, and prices fell about 12 percent. 
D)  Unemployment rose by about 21 percent, and prices fell about 19 percent. 
A)  Unemployment rose by about 10 percent, and prices rose about 27 percent. 
B)  Unemployment rose by about 19 percent, and prices rose about 12 percent. 
C)  Unemployment rose by about 20 percent, and prices fell about 12 percent. 
D)  Unemployment rose by about 21 percent, and prices fell about 19 percent. D

Question 4

If the government increased the money supply in response to a decrease in aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Accepted Answer

A) True 
 B)False

Question 5

According to the classical view in economics, which variable or policy can influence economic growth in the long run?

Accepted Answer

A)  an increase in capital stock 
B)  an increase in money supply 
C)  an increase in unemployment benefits 
D)  an increase in nominal interest rates 
A)  an increase in capital stock 
B)  an increase in money supply 
C)  an increase in unemployment benefits 
D)  an increase in nominal interest rates

Question 6

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)  an increase in exports 
B)  an increase in taxes 
C)  a decrease in imports 
D)  a decrease in interest rates 
A)  an increase in exports 
B)  an increase in taxes 
C)  a decrease in imports 
D)  a decrease in interest rates

Question 7

What were the changes in output in the early 1930s and early 1940s in Canada, respectively?

Accepted Answer

A)  a large increase and a large increase 
B)  a large increase and a large decrease 
C)  a large decrease and a large increase 
D)  a large decrease and a large decrease 
A)  a large increase and a large increase 
B)  a large increase and a large decrease 
C)  a large decrease and a large increase 
D)  a large decrease and a large decrease

Question 8

Which of the following does NOT determine the long-run level of real GDP?

Accepted Answer

A)  the price level 
B)  the supply of labour 
C)  available natural resources 
D)  available technology 
A)  the price level 
B)  the supply of labour 
C)  available natural resources 
D)  available technology

Question 9

Which statement best describes the effects of a fall in the price level?

Accepted Answer

A)  The real exchange rate and interest rates rise. 
B)  The real exchange rate and interest rates fall. 
C)  The real exchange rate falls, and interest rates rise. 
D)  The real exchange rate rises, and interest rates fall. 
A)  The real exchange rate and interest rates rise. 
B)  The real exchange rate and interest rates fall. 
C)  The real exchange rate falls, and interest rates rise. 
D)  The real exchange rate rises, and interest rates fall.

Question 10

Suppose the economy was in long-run equilibrium when a sudden decline in the stock market took place. What happens in the short run after the decline in the stock market?

Accepted Answer

A)  Both the price level and real GDP rise. 
B)  The price level falls and real GDP does not change. 
C)  The price level does not change and real GDP falls. 
D)  Both the price level and real GDP fall. 
A)  Both the price level and real GDP rise. 
B)  The price level falls and real GDP does not change. 
C)  The price level does not change and real GDP falls. 
D)  Both the price level and real GDP fall.

Question 11

What happens to prices and output when the long-run aggregate-supply curve shifts left?

Accepted Answer

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

Question 12

What happens to aggregate demand if people want to save more for retirement and the government raises taxes?

Accepted Answer

A)  Aggregate demand shifts right. 
B)  Aggregate demand shifts left. 
C)  If people save more, aggregate demand shifts right; if the government raises taxes, aggregate demand shifts left. 
D)  If people save more, aggregate demand shifts left; if the government raises taxes, aggregate demand shifts right. 
A)  Aggregate demand shifts right. 
B)  Aggregate demand shifts left. 
C)  If people save more, aggregate demand shifts right; if the government raises taxes, aggregate demand shifts left. 
D)  If people save more, aggregate demand shifts left; if the government raises taxes, aggregate demand shifts right.

Question 13

According to classical economic theory, which of the following do changes in the money supply affect?

Accepted Answer

A)  real GDP 
B)  real interest rates 
C)  the price level 
D)  unemployment 
A)  real GDP 
B)  real interest rates 
C)  the price level 
D)  unemployment

Question 14

If the economy is initially in long-run equilibrium, which statement best describes the effects of a shift in aggregate demand?

Accepted Answer

A)  Prices and output are affected in both the short and long run. 
B)  Prices and output are affected only in the short run. 
C)  Prices are affected in the long and short run, but output only in the short run. 
D)  Prices are affected in the long and short run, but output only in the long run. 
A)  Prices and output are affected in both the short and long run. 
B)  Prices and output are affected only in the short run. 
C)  Prices are affected in the long and short run, but output only in the short run. 
D)  Prices are affected in the long and short run, but output only in the long run.

Question 15

Which of the following shifts the short-run aggregate supply right?

Accepted Answer

A)  an increase in the money supply 
B)  an increase in the minimum wage 
C)  a decrease in the price of oil 
D)  a decrease in immigration from abroad 
A)  an increase in the money supply 
B)  an increase in the minimum wage 
C)  a decrease in the price of oil 
D)  a decrease in immigration from abroad

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

How does the aggregate demand and aggregate supply model reflect a rise in wage rates?

Accepted Answer

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

Question 18

Which statement is consistent with an increase in the quantity of output supplied, according to the misperceptions theory?

Accepted Answer

A)  The price level increases less than expected so that firms believe the relative price of their output has increased. 
B)  The price level increases less than expected so that firms believe the relative price of their output has decreased. 
C)  The price level increases more than expected so that firms believe the relative price of their output has increased. 
D)  The price level increases more than expected so that firms believe the relative price of their output has decreased. 
A)  The price level increases less than expected so that firms believe the relative price of their output has increased. 
B)  The price level increases less than expected so that firms believe the relative price of their output has decreased. 
C)  The price level increases more than expected so that firms believe the relative price of their output has increased. 
D)  The price level increases more than expected so that firms believe the relative price of their output has decreased.

Question 19

Because not all prices adjust instantly to changing conditions, 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 20

What did Keynes believe caused recessions and depressions?

Accepted Answer

A)  excess aggregate demand 
B)  inadequate aggregate demand 
C)  excess aggregate supply 
D)  inadequate aggregate supply 
A)  excess aggregate demand 
B)  inadequate aggregate demand 
C)  excess aggregate supply 
D)  inadequate aggregate supply

How are the effects of an increase in the price level that is greater than expected shown in the aggregate demand and aggregate supply model?

In the aggregate demand and aggregate supply model, when does the aggregate quantity of goods demanded increase?

What happened in the first few years of the Great Depression?

If the government increased the money supply in response to a decrease in aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

According to the classical view in economics, which variable or policy can influence economic growth in the long run?

Which of the following shifts aggregate demand to the left?

What were the changes in output in the early 1930s and early 1940s in Canada, respectively?

Which of the following does NOT determine the long-run level of real GDP?

Which statement best describes the effects of a fall in the price level?

Suppose the economy was in long-run equilibrium when a sudden decline in the stock market took place. What happens in the short run after the decline in the stock market?

What happens to prices and output when the long-run aggregate-supply curve shifts left?

What happens to aggregate demand if people want to save more for retirement and the government raises taxes?

According to classical economic theory, which of the following do changes in the money supply affect?

If the economy is initially in long-run equilibrium, which statement best describes the effects of a shift in aggregate demand?

Which of the following shifts the short-run aggregate supply right?

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

How does the aggregate demand and aggregate supply model reflect a rise in wage rates?

Which statement is consistent with an increase in the quantity of output supplied, according to the misperceptions theory?

Because not all prices adjust instantly to changing conditions, 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.

What did Keynes believe caused recessions and depressions?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations 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

Exam 14: Aggregate Demand and Aggregate Supply

How are the effects of an increase in the price level that is greater than expected shown in the aggregate demand and aggregate supply model?

In the aggregate demand and aggregate supply model, when does the aggregate quantity of goods demanded increase?

What happened in the first few years of the Great Depression?

If the government increased the money supply in response to a decrease in aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

According to the classical view in economics, which variable or policy can influence economic growth in the long run?

Which of the following shifts aggregate demand to the left?

What were the changes in output in the early 1930s and early 1940s in Canada, respectively?

Which of the following does NOT determine the long-run level of real GDP?

Which statement best describes the effects of a fall in the price level?

Suppose the economy was in long-run equilibrium when a sudden decline in the stock market took place. What happens in the short run after the decline in the stock market?

What happens to prices and output when the long-run aggregate-supply curve shifts left?

What happens to aggregate demand if people want to save more for retirement and the government raises taxes?

According to classical economic theory, which of the following do changes in the money supply affect?

If the economy is initially in long-run equilibrium, which statement best describes the effects of a shift in aggregate demand?

Which of the following shifts the short-run aggregate supply right?

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

How does the aggregate demand and aggregate supply model reflect a rise in wage rates?

Which statement is consistent with an increase in the quantity of output supplied, according to the misperceptions theory?

Because not all prices adjust instantly to changing conditions, 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.

What did Keynes believe caused recessions and depressions?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations 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