Question 1

Discuss what economists believe is different about the long and short run.

Accepted Answer

Most economists believe that in the long

Question 2

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Accepted Answer

When people expect the price l

Question 3

Suppose the economy is in long-run equilibrium.In a short span of time,there is a sharp decline in the stock market,a tax cut,an increase in the money supply and a decline in the value of the dollar.In the short run,we would expect

Accepted Answer

A) the price level and real GDP both to rise. 
B) the price level and real GDP both to fall. 
C) the price level and real GDP both to stay the same. 
D) All of the above are possible. 
A) the price level and real GDP both to rise. 
B) the price level and real GDP both to fall. 
C) the price level and real GDP both to stay the same. 
D) All of the above are possible.

Question 4

The effect of an increase in the price level on aggregate demand is represented by a

Accepted Answer

A) shift to the right of the aggregate demand curve. 
B) shift to the left of the aggregate demand curve. 
C) movement to the left along a given aggregate demand curve. 
D) movement to the right along a given aggregate demand curve. 
A) shift to the right of the aggregate demand curve. 
B) shift to the left of the aggregate demand curve. 
C) movement to the left along a given aggregate demand curve. 
D) movement to the right along a given aggregate demand curve.

Question 5

Which of the following shifts aggregate demand to the right?

Accepted Answer

A) a decrease in the money supply 
B) increases in the profitability of capital due perhaps to technological progress. 
C) the repeal of an investment tax credit 
D) a decrease in the price level 
A) a decrease in the money supply 
B) increases in the profitability of capital due perhaps to technological progress. 
C) the repeal of an investment tax credit 
D) a decrease in the price level

Question 6

The aggregate supply curve is upward sloping rather than vertical in

Accepted Answer

A) the short and long run. 
B) neither the short nor the long run. 
C) the long run, but not the short run. 
D) the short run, but not the long run. 
A) the short and long run. 
B) neither the short nor the long run. 
C) the long run, but not the short run. 
D) the short run, but not the long run.

Question 7

Suppose a stock market boom makes people feel wealthier.The increase in wealth would cause people to desire

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 8

Other things the same,an increase in the amount of capital firms wish to purchase would initially shift

Accepted Answer

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

Question 9

The recessions of the 1970s are often attributed to

Accepted Answer

A) declining inflation expectations. 
B) an increase in oil prices. 
C) declines in the price of stock. 
D) decreases in the money supply. 
A) declining inflation expectations. 
B) an increase in oil prices. 
C) declines in the price of stock. 
D) decreases in the money supply.

Question 10

In response to a decrease in output the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 11

What,if anything,did policymakers do in response to the recession of 2001?

Accepted Answer

A) tax cuts and expansionary monetary policy 
B) only tax cuts 
C) only expansionary monetary policy 
D) neither tax cuts nor expansionary monetary policy 
A) tax cuts and expansionary monetary policy 
B) only tax cuts 
C) only expansionary monetary policy 
D) neither tax cuts nor expansionary monetary policy

Question 12

Which of the following is correct?

Accepted Answer

A) Economic fluctuations are easily predicted by competent economists. 
B) Recessions have never occurred very close together. 
C) Other measures of spending, income, and production do not fluctuate closely with real GDP. 
D) None of the above is correct. 
A) Economic fluctuations are easily predicted by competent economists. 
B) Recessions have never occurred very close together. 
C) Other measures of spending, income, and production do not fluctuate closely with real GDP. 
D) None of the above is correct.

Question 13

Other things the same,a decrease in the price level causes real wealth to

Accepted Answer

A) fall, interest rates to fall, and the dollar to appreciate. 
B) fall, interest rates to rise, and the dollar to depreciate. 
C) rise, interest rates to rise, and the dollar to appreciate. 
D) rise, interest rates to fall, and the dollar to depreciate. 
A) fall, interest rates to fall, and the dollar to appreciate. 
B) fall, interest rates to rise, and the dollar to depreciate. 
C) rise, interest rates to rise, and the dollar to appreciate. 
D) rise, interest rates to fall, and the dollar to depreciate.

Question 14

Stagflation would result from the aggregate supply curve shifting left.

Accepted Answer

A) True 
 B)False

Question 15

Other things the same,as the price level rises,the real value of a dollar

Accepted Answer

A) rises, and interest rates rise. 
B) rises, and interest rates fall. 
C) falls, and interest rates rise. 
D) falls, and interest rates fall. 
A) rises, and interest rates rise. 
B) rises, and interest rates fall. 
C) falls, and interest rates rise. 
D) falls, and interest rates fall.

Question 16

Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time.
-Refer to Optimism.In the short run what happens to the price level and real GDP?

Accepted Answer

A) both the price level and real GDP rise. 
B) both the price level and real GDP fall. 
C) the price level rises and real GDP falls. 
D) the price level falls and real GDP rises. 
A) both the price level and real GDP rise. 
B) both the price level and real GDP fall. 
C) the price level rises and real GDP falls. 
D) the price level falls and real GDP rises.

Question 17

Which of the following is a lesson concerning shifts in aggregate demand?

Accepted Answer

A) they contribute to fluctuations in output. 
B) in the long-run they change real output, but not the price level. 
C) policymakers are unable to mitigate the severity of economic fluctuations. 
D) All of the above are correct. 
A) they contribute to fluctuations in output. 
B) in the long-run they change real output, but not the price level. 
C) policymakers are unable to mitigate the severity of economic fluctuations. 
D) All of the above are correct.

Question 18

Real GDP

Accepted Answer

A) moves in the same direction as unemployment. 
B) is not adjusted for inflation. 
C) also measures real income. 
D) All of the above are correct. 
A) moves in the same direction as unemployment. 
B) is not adjusted for inflation. 
C) also measures real income. 
D) All of the above are correct.

Question 19

Which of the following is correct?

Accepted Answer

A) The short-run, but not the long-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
B) The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
C) The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables. 
D) Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables. 
A) The short-run, but not the long-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
B) The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
C) The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables. 
D) Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables.

Question 20

Other things the same,the aggregate quantity of goods demanded in the U.S.increases if

Accepted Answer

A) real wealth rises. 
B) the interest rate rises. 
C) the dollar appreciates. 
D) All of the above are correct. 
A) real wealth rises. 
B) the interest rate rises. 
C) the dollar appreciates. 
D) All of the above are correct.

Exam 33: Aggregate Demand and Aggregate Supply

Discuss what economists believe is different about the long and short run.

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Suppose the economy is in long-run equilibrium.In a short span of time,there is a sharp decline in the stock market,a tax cut,an increase in the money supply and a decline in the value of the dollar.In the short run,we would expect

The effect of an increase in the price level on aggregate demand is represented by a

Which of the following shifts aggregate demand to the right?

The aggregate supply curve is upward sloping rather than vertical in

Suppose a stock market boom makes people feel wealthier.The increase in wealth would cause people to desire

Other things the same,an increase in the amount of capital firms wish to purchase would initially shift

The recessions of the 1970s are often attributed to

In response to a decrease in output the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in aggregate supply.

What,if anything,did policymakers do in response to the recession of 2001?

Which of the following is correct?

Other things the same,a decrease in the price level causes real wealth to

Stagflation would result from the aggregate supply curve shifting left.

Other things the same,as the price level rises,the real value of a dollar

Which of the following is a lesson concerning shifts in aggregate demand?

Real GDP

Which of the following is correct?

Other things the same,the aggregate quantity of goods demanded in the U.S.increases if

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: 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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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