Question 1

Which of the following would cause prices and real GDP to rise in the short run?

Accepted Answer

A) an increase in the expected price level 
B) an increase in the money supply 
C) a decrease in the capital stock 
D) None of the above is correct. 
A) an increase in the expected price level 
B) an increase in the money supply 
C) a decrease in the capital stock 
D) None of the above is correct.

Question 2

Investment spending decreases when the price level

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 3

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Accepted Answer

A) the price level is higher than expected making production more profitable. 
B) the price level is higher than expected making production less profitable. 
C) the price level is lower than expected making production more profitable. 
D) the price level is higher than expected making production less profitable 
A) the price level is higher than expected making production more profitable. 
B) the price level is higher than expected making production less profitable. 
C) the price level is lower than expected making production more profitable. 
D) the price level is higher than expected making production less profitable

Question 4

The Stock Market Boom of 2010
Imagine that in 2010 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time.
-Refer to Stock Market Boom 2010.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 5

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers people become pessimistic regarding the future and retain that level of pessimism for some time.
-Refer to Pessimism.Which curve shifts and in which direction?

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 6

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected,some firms will have

Accepted Answer

A) higher than desired prices which increases their sales. 
B) higher than desired prices which depresses their sales. 
C) lower than desired prices which increases their sales. 
D) lower than desired prices which depresses their sales. 
A) higher than desired prices which increases their sales. 
B) higher than desired prices which depresses their sales. 
C) lower than desired prices which increases their sales. 
D) lower than desired prices which depresses their sales.

Question 7

As the price level rises

Accepted Answer

A) people will want to buy more bonds, so the interest rate rises. 
B) people will want to buy fewer bonds, so the interest rate falls. 
C) people will want to buy more bonds, so the interest rate falls. 
D) people will want to buy fewer bonds, so the interest rate rises. 
A) people will want to buy more bonds, so the interest rate rises. 
B) people will want to buy fewer bonds, so the interest rate falls. 
C) people will want to buy more bonds, so the interest rate falls. 
D) people will want to buy fewer bonds, so the interest rate rises.

Question 8

The change in the aggregate quantity of goods and services demanded in the U.S.is based on the logic that as the price level falls,

Accepted Answer

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

Question 9

An increase in the actual price level does not shift the short-run aggregate supply curve,but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 10

Aggregate demand shifts right if

Accepted Answer

A) net exports rise or the money supply rises. 
B) net exports rise or the price level rises. 
C) net exports fall or the money supply rises. 
D) net exports fall or the price level rises. 
A) net exports rise or the money supply rises. 
B) net exports rise or the price level rises. 
C) net exports fall or the money supply rises. 
D) net exports fall or the price level rises.

Question 11

The change in the quantity of goods and services demanded in the U.S.is based on the logic that as the price level rises,

Accepted Answer

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

Question 12

Other things the same,if prices fell when firms and workers were expecting them to rise,then

Accepted Answer

A) employment and production would rise. 
B) employment would rise and production would fall. 
C) employment would fall and production would rise. 
D) employment and production would fall. 
A) employment and production would rise. 
B) employment would rise and production would fall. 
C) employment would fall and production would rise. 
D) employment and production would fall.

Question 13

Illustrate the classical analysis of growth and inflation with aggregate demand and long-run aggregate supply curves.

Accepted Answer

See graph.
 @#IMG-DLM& Over time,technological adv

Question 14

The recession of 2001 appears to have been mostly the result of decreased

Accepted Answer

A) aggregate demand due to decreases in the money supply. 
B) aggregate demand due to falling stock prices and increased uncertainty. 
C) aggregate supply due to early retirements. 
D) aggregate supply due to changes in labor laws and decreased availability of natural resources. 
A) aggregate demand due to decreases in the money supply. 
B) aggregate demand due to falling stock prices and increased uncertainty. 
C) aggregate supply due to early retirements. 
D) aggregate supply due to changes in labor laws and decreased availability of natural resources.

Question 15

Suppose a stock market crash makes people feel poorer.This decrease in wealth would induce people to

Accepted Answer

A) decrease consumption, which shifts aggregate supply left. 
B) decrease consumption, which shifts aggregate demand left. 
C) increase consumption, which shifts aggregate supply right. 
D) increase consumption, which shifts aggregate demand right. 
A) decrease consumption, which shifts aggregate supply left. 
B) decrease consumption, which shifts aggregate demand left. 
C) increase consumption, which shifts aggregate supply right. 
D) increase consumption, which shifts aggregate demand right.

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

Keynes believed that economies experiencing high unemployment should adopt policies to

Accepted Answer

A) reduce the money supply. 
B) reduce government expenditures. 
C) increase aggregate demand. 
D) increase aggregate supply. 
A) reduce the money supply. 
B) reduce government expenditures. 
C) increase aggregate demand. 
D) increase aggregate supply.

Question 18

Other things the same,an increase in the price level induces people to hold

Accepted Answer

A) less money, so they lend less, and the interest rate rises. 
B) less money, so they lend more, and the interest rate falls. 
C) more money, so they lend more, and the interest rate falls. 
D) more money, so they lend less, and the interest rate rises. 
A) less money, so they lend less, and the interest rate rises. 
B) less money, so they lend more, and the interest rate falls. 
C) more money, so they lend more, and the interest rate falls. 
D) more money, so they lend less, and the interest rate rises.

Question 19

Political Instability Abroad
Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets.
-Refer to Political Instability Abroad.What would happen to the dollar?

Accepted Answer

A) It would appreciate in foreign exchange markets making U.S goods more expensive compared to foreign goods. 
B) It would appreciate in foreign exchange markets making U.S.goods less expensive compared to foreign goods. 
C) It would depreciate in foreign exchange markets making U.S.goods more expensive compared to foreign goods. 
D) It would depreciate in foreign exchange markets making U.S.goods less expensive compared to foreign goods. 
A) It would appreciate in foreign exchange markets making U.S goods more expensive compared to foreign goods. 
B) It would appreciate in foreign exchange markets making U.S.goods less expensive compared to foreign goods. 
C) It would depreciate in foreign exchange markets making U.S.goods more expensive compared to foreign goods. 
D) It would depreciate in foreign exchange markets making U.S.goods less expensive compared to foreign goods.

Question 20

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Accepted Answer

A) production is more profitable and employment rises. 
B) production is more profitable and employment falls. 
C) production is less profitable and employment rises. 
D) production is less profitable and employment falls. 
A) production is more profitable and employment rises. 
B) production is more profitable and employment falls. 
C) production is less profitable and employment rises. 
D) production is less profitable and employment falls.

Exam 33: Aggregate Demand and Aggregate Supply

Which of the following would cause prices and real GDP to rise in the short run?

Investment spending decreases when the price level

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

The Stock Market Boom of 2010 Imagine that in 2010 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. -Refer to Stock Market Boom 2010.In the short run what happens to the price level and real GDP?

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected,some firms will have

As the price level rises

The change in the aggregate quantity of goods and services demanded in the U.S.is based on the logic that as the price level falls,

An increase in the actual price level does not shift the short-run aggregate supply curve,but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Aggregate demand shifts right if

The change in the quantity of goods and services demanded in the U.S.is based on the logic that as the price level rises,

Other things the same,if prices fell when firms and workers were expecting them to rise,then

Illustrate the classical analysis of growth and inflation with aggregate demand and long-run aggregate supply curves.

The recession of 2001 appears to have been mostly the result of decreased

Suppose a stock market crash makes people feel poorer.This decrease in wealth would induce people to

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

Keynes believed that economies experiencing high unemployment should adopt policies to

Other things the same,an increase in the price level induces people to hold

Political Instability Abroad Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets. -Refer to Political Instability Abroad.What would happen to the dollar?

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

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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