Question 1

Which of the following is NOT an explanation for the instability of oil prices?

Accepted Answer

A)  technological advances that have made it profitable to develop oil 
B)  fluctuations in the rate of growth in major economies 
C)  barriers to ship oil to overseas markets 
D)  environmental groups' desire to maintain current levels of carbon emissions 
A)  technological advances that have made it profitable to develop oil 
B)  fluctuations in the rate of growth in major economies 
C)  barriers to ship oil to overseas markets 
D)  environmental groups' desire to maintain current levels of carbon emissions

Question 2

What does an increase in the interest rate cause?

Accepted Answer

A)  It causes investment to rise and the exchange rate to appreciate. 
B)  It causes investment to fall and the exchange rate to depreciate. 
C)  It causes investment to rise and the exchange rate to depreciate. 
D)  It causes investment to fall and the exchange rate to appreciate. 
A)  It causes investment to rise and the exchange rate to appreciate. 
B)  It causes investment to fall and the exchange rate to depreciate. 
C)  It causes investment to rise and the exchange rate to depreciate. 
D)  It causes investment to fall and the exchange rate to appreciate.

Question 3

Which of the following would cause stagflation?

Accepted Answer

A)  aggregate demand shifts right 
B)  aggregate demand shifts left 
C)  aggregate supply shifts right 
D)  aggregate supply shifts left 
A)  aggregate demand shifts right 
B)  aggregate demand shifts left 
C)  aggregate supply shifts right 
D)  aggregate supply shifts left

Question 4

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, what would we expect to happen?

Accepted Answer

A)  The price level and real GDP will both rise. 
B)  The price level and real GDP will both fall. 
C)  The price level and real GDP will both stay the same. 
D)  The price level will increase, and the real GDP will fall. 
A)  The price level and real GDP will both rise. 
B)  The price level and real GDP will both fall. 
C)  The price level and real GDP will both stay the same. 
D)  The price level will increase, and the real GDP will fall.

Question 5

What would make the price level decrease and real GDP increase?

Accepted Answer

A)  Long-run aggregate supply shifts right. 
B)  Long-run aggregate supply shifts left. 
C)  Aggregate demand shifts right. 
D)  Aggregate demand shifts left. 
A)  Long-run aggregate supply shifts right. 
B)  Long-run aggregate supply shifts left. 
C)  Aggregate demand shifts right. 
D)  Aggregate demand shifts left.

Question 6

Which of the following would shift the AS curve to the right?

Accepted Answer

A)  certain sources of oil become profitable to develop 
B)  lower costs for those firms that use oil as an input 
C)  lower costs to consumer to heat their homes 
D)  Increased investment in developing the oil sands and offshore oil 
A)  certain sources of oil become profitable to develop 
B)  lower costs for those firms that use oil as an input 
C)  lower costs to consumer to heat their homes 
D)  Increased investment in developing the oil sands and offshore oil

Question 7

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 8

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 9

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

Accepted Answer

A)  an increase in price expectations 
B)  an increase in the price level 
C)  an increase in the money supply 
D)  a decrease in the price of oil 
A)  an increase in price expectations 
B)  an increase in the price level 
C)  an increase in the money supply 
D)  a decrease in the price of oil

Question 10

Figure 14-1

-Refer to the Figure 14-1. How would an increase in the money supply move the economy in the short and long run?

Accepted Answer

A)  from C to B in the short run and the long run 
B)  from C to D in the short run and the long run 
C)  from C to B in the short run and to A in the long run 
D)  from C to D in the short run and back to C in the long run 
A)  from C to B in the short run and the long run 
B)  from C to D in the short run and the long run 
C)  from C to B in the short run and to A in the long run 
D)  from C to D in the short run and back to C in the long run

Question 11

Scenario 14-1
The economy is in long-run equilibrium. Suddenly, due to improved international relations, a boom experienced by a major trading partner, 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. What is predicted by the aggregate demand and aggregate supply theory?

Accepted Answer

A)  The expected inflation falls. Workers bargain for higher increases in wages. 
B)  The expected inflation falls. Workers bargain for lower increases in wages. 
C)  The expected inflation rises. Workers bargain for higher increases in wages. 
D)  The expected inflation rises. Workers bargain for lower increases in wages. 
A)  The expected inflation falls. Workers bargain for higher increases in wages. 
B)  The expected inflation falls. Workers bargain for lower increases in wages. 
C)  The expected inflation rises. Workers bargain for higher increases in wages. 
D)  The expected inflation rises. Workers bargain for lower increases in wages.

Question 12

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  the federal government reduces purchases of new weapons 
B)  an increase in the money supply 
C)  the price level falls 
D)  net exports fall 
A)  the federal government reduces purchases of new weapons 
B)  an increase in the money supply 
C)  the price level falls 
D)  net exports fall

Question 13

Like real GDP, investment fluctuates, but investment fluctuates by a larger percentage.

Accepted Answer

A) True 
 B)False

Question 14

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

Accepted Answer

An AD-induced recession lowers prices an

Question 15

During World War II, output increased by a larger percentage than government expenditures.

Accepted Answer

A) True 
 B)False

Question 16

A decrease in the money supply causes the interest rate to rise so that investment rises.

Accepted Answer

A) True 
 B)False

Question 17

What did Keynes believe that economies experiencing high unemployment should do?

Accepted Answer

A)  adopt policies to reduce investment expenditures 
B)  adopt policies to reduce government expenditures 
C)  adopt policies to increase aggregate demand 
D)  adopt policies to increase aggregate supply 
A)  adopt policies to reduce investment expenditures 
B)  adopt policies to reduce government expenditures 
C)  adopt policies to increase aggregate demand 
D)  adopt policies to increase aggregate supply

Question 18

Why does a decrease in the price level induce an increase in the aggregate quantity of goods and services demanded?

Accepted Answer

A)  because as wealth falls, interest rates rise, and the dollar appreciates 
B)  because as wealth falls, interest rates rise, and the dollar depreciates 
C)  because as wealth rises, interest rates rise, and the dollar appreciates 
D)  because as wealth rises, interest rates fall, and the dollar depreciates 
A)  because as wealth falls, interest rates rise, and the dollar appreciates 
B)  because as wealth falls, interest rates rise, and the dollar depreciates 
C)  because as wealth rises, interest rates rise, and the dollar appreciates 
D)  because as wealth rises, interest rates fall, and the dollar depreciates

Question 19

In 1986, OPEC countries increased their production of oil. What was the result?

Accepted Answer

A)  The price level rose. 
B)  Aggregate supply shifted right. 
C)  Unemployment rose. 
D)  Stagflation occurred. 
A)  The price level rose. 
B)  Aggregate supply shifted right. 
C)  Unemployment rose. 
D)  Stagflation occurred.

Question 20

Which of the following explains why production rises in most years?

Accepted Answer

A)  increases in prices of goods and services 
B)  increases in stock prices 
C)  aging population 
D)  technological innovation 
A)  increases in prices of goods and services 
B)  increases in stock prices 
C)  aging population 
D)  technological innovation

Which of the following is NOT an explanation for the instability of oil prices?

What does an increase in the interest rate cause?

Which of the following would cause stagflation?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, what would we expect to happen?

What would make the price level decrease and real GDP increase?

Which of the following would shift the AS curve to the right?

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

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?

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

Figure 14-1 -Refer to the Figure 14-1. How would an increase in the money supply move the economy in the short and long run?

Which of the following shifts aggregate demand to the right?

Like real GDP, investment fluctuates, but investment fluctuates by a larger percentage.

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

During World War II, output increased by a larger percentage than government expenditures.

A decrease in the money supply causes the interest rate to rise so that investment rises.

What did Keynes believe that economies experiencing high unemployment should do?

Why does a decrease in the price level induce an increase in the aggregate quantity of goods and services demanded?

In 1986, OPEC countries increased their production of oil. What was the result?

Which of the following explains why production rises in most years?

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

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Exam 14: Aggregate Demand and Aggregate Supply

Which of the following is NOT an explanation for the instability of oil prices?

What does an increase in the interest rate cause?

Which of the following would cause stagflation?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, what would we expect to happen?

What would make the price level decrease and real GDP increase?

Which of the following would shift the AS curve to the right?

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

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?

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

Figure 14-1 -Refer to the Figure 14-1. How would an increase in the money supply move the economy in the short and long run?

Which of the following shifts aggregate demand to the right?

Like real GDP, investment fluctuates, but investment fluctuates by a larger percentage.

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

During World War II, output increased by a larger percentage than government expenditures.

A decrease in the money supply causes the interest rate to rise so that investment rises.

What did Keynes believe that economies experiencing high unemployment should do?

Why does a decrease in the price level induce an increase in the aggregate quantity of goods and services demanded?

In 1986, OPEC countries increased their production of oil. What was the result?

Which of the following explains why production rises in most years?

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