Question 1

Which of the following is correct?

Accepted Answer

A) Over the business cycle consumption fluctuates more than investment. 
B) Economic fluctuations are easy to predict. 
C) During recessions sales and profits tend to fall. 
D) Because of government policy the U.S.has suffered no recessions in the last 25 years. 
A) Over the business cycle consumption fluctuates more than investment. 
B) Economic fluctuations are easy to predict. 
C) During recessions sales and profits tend to fall. 
D) Because of government policy the U.S.has suffered no recessions in the last 25 years.

Question 2

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.What happens to the expected price level and what's the result for wage bargaining?

Accepted Answer

A) The expected price level falls.Bargains are struck for higher wages. 
B) The expected price level falls.Bargains are struck for lower wages. 
C) The expected price level rises.Bargains are struck for higher wages. 
D) The expected price level rises.Bargains are struck for lower wages. 
A) The expected price level falls.Bargains are struck for higher wages. 
B) The expected price level falls.Bargains are struck for lower wages. 
C) The expected price level rises.Bargains are struck for higher wages. 
D) The expected price level rises.Bargains are struck for lower wages.

Question 3

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,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

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

Accepted Answer

A) True 
 B)False

Question 5

According to the aggregate demand and aggregate supply model,in the long run an increase in the money supply leads to

Accepted Answer

A) increases in both the price level and real GDP. 
B) an increase in real GDP but does not change the price level. 
C) an increase in the price level but does not change real GDP. 
D) no change in either the price level or real GDP. 
A) increases in both the price level and real GDP. 
B) an increase in real GDP but does not change the price level. 
C) an increase in the price level but does not change real GDP. 
D) no change in either the price level or real GDP.

Question 6

When the dollar depreciates,each dollar buys

Accepted Answer

A) more foreign currency, and so buys more foreign goods. 
B) more foreign currency, and so buys fewer foreign goods. 
C) less foreign currency, and so buys more foreign goods. 
D) less foreign currency, and so buys fewer foreign goods. 
A) more foreign currency, and so buys more foreign goods. 
B) more foreign currency, and so buys fewer foreign goods. 
C) less foreign currency, and so buys more foreign goods. 
D) less foreign currency, and so buys fewer foreign goods.

Question 7

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

Accepted Answer

A) an increase in the minimum wage 
B) an increase in immigration from abroad 
C) an increase in the price of oil 
D) an increase in the actual price level 
A) an increase in the minimum wage 
B) an increase in immigration from abroad 
C) an increase in the price of oil 
D) an increase in the actual price level

Question 8

Other things the same,a decrease in the price level causes the interest rate to

Accepted Answer

A) increase, the dollar to appreciate, and net exports to increase. 
B) increase, the dollar to depreciate, and net exports to decrease. 
C) decrease, the dollar to depreciate, and net exports to increase. 
D) decrease, the dollar to appreciate, and net exports to decrease. 
A) increase, the dollar to appreciate, and net exports to increase. 
B) increase, the dollar to depreciate, and net exports to decrease. 
C) decrease, the dollar to depreciate, and net exports to increase. 
D) decrease, the dollar to appreciate, and net exports to decrease.

Question 9

Which of the following typically rises during a recession?

Accepted Answer

A) garbage collection 
B) unemployment 
C) corporate profits 
D) automobile sales 
A) garbage collection 
B) unemployment 
C) corporate profits 
D) automobile sales

Question 10

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Accepted Answer

A) in the price level and real GDP. 
B) in the price level, but not real GDP. 
C) in real GDP, but not the price level. 
D) in neither the price level nor real GDP. 
A) in the price level and real GDP. 
B) in the price level, but not real GDP. 
C) in real GDP, but not the price level. 
D) in neither the price level nor real GDP.

Question 11

Aggregate demand shifts right if

Accepted Answer

A) taxes rise or stock prices rise. 
B) taxes rise or stock prices fall. 
C) taxes fall or stock prices rise. 
D) taxes fall or stock prices fall. 
A) taxes rise or stock prices rise. 
B) taxes rise or stock prices fall. 
C) taxes fall or stock prices rise. 
D) taxes fall or stock prices fall.

Question 12

Which of the following is not included in aggregate demand?

Accepted Answer

A) purchases of stock and bonds 
B) purchases of services such as visits to the doctor 
C) purchases of capital goods such as equipment in a factory 
D) purchases by foreigners of consumer goods produced in the United States 
A) purchases of stock and bonds 
B) purchases of services such as visits to the doctor 
C) purchases of capital goods such as equipment in a factory 
D) purchases by foreigners of consumer goods produced in the United States

Question 13

Of the following theories,which is consistent with a vertical long-run aggregate supply curve?

Accepted Answer

A) the sticky-wage theory 
B) misperceptions theory 
C) both the sticky-wage and misperceptions theories. 
D) neither the sticky-wage nor the misperceptions theory. 
A) the sticky-wage theory 
B) misperceptions theory 
C) both the sticky-wage and misperceptions theories. 
D) neither the sticky-wage nor the misperceptions theory.

Question 14

In the short-run an increase in the costs of production makes

Accepted Answer

A) output and prices rise. 
B) output rise and prices fall. 
C) output fall and prices rise. 
D) output and prices fall. 
A) output and prices rise. 
B) output rise and prices fall. 
C) output fall and prices rise. 
D) output and prices fall.

Question 15

Keynes explained that recessions and depressions occur because of

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.

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.How is the new long-run equilibrium different from the original one?

Accepted Answer

A) both price and real GDP are higher 
B) both price and real GDP are lower. 
C) the price level is the same and GDP is higher. 
D) the price level is higher and real GDP is the same. 
A) both price and real GDP are higher 
B) both price and real GDP are lower. 
C) the price level is the same and GDP is higher. 
D) the price level is higher and real GDP is the same.

Question 17

In the last half of 1999,the U.S.unemployment rate was about 4 percent.Historical experience suggests that this is

Accepted Answer

A) above the natural rate, so that real GDP growth was likely low. 
B) above the natural rate, so that real GDP growth was likely high. 
C) below the natural rate, so that real GDP growth was likely low. 
D) below the natural rate, so that real GDP growth was likely high. 
A) above the natural rate, so that real GDP growth was likely low. 
B) above the natural rate, so that real GDP growth was likely high. 
C) below the natural rate, so that real GDP growth was likely low. 
D) below the natural rate, so that real GDP growth was likely high.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

If the dollar appreciates because of speculation or government policy

Accepted Answer

A) or if other countries experience recessions, aggregate demand shifts right in the United States. 
B) or if other countries experience recessions, aggregate demand shifts left in the United States. 
C) aggregate demand shifts right in the United States.If other countries experience recessions aggregate demand shifts left in the United States. 
D) aggregate demand shifts left in the United States.If other countries experience recessions aggregate demand shifts right in the United States. 
A) or if other countries experience recessions, aggregate demand shifts right in the United States. 
B) or if other countries experience recessions, aggregate demand shifts left in the United States. 
C) aggregate demand shifts right in the United States.If other countries experience recessions aggregate demand shifts left in the United States. 
D) aggregate demand shifts left in the United States.If other countries experience recessions aggregate demand shifts right in the United States.

Question 20

During the last half of 1980,the U.S.unemployment rate was about 7.5 percent.Historical experience suggests that this is

Accepted Answer

A) above the natural rate, so that real GDP growth was likely low. 
B) above the natural rate, so that real GDP growth was likely high. 
C) below the natural rate, so that real GDP growth was likely low. 
D) below the natural rate, so that real GDP growth was likely high. 
A) above the natural rate, so that real GDP growth was likely low. 
B) above the natural rate, so that real GDP growth was likely high. 
C) below the natural rate, so that real GDP growth was likely low. 
D) below the natural rate, so that real GDP growth was likely high.

Exam 33: Aggregate Demand and Aggregate Supply

Which of the following is correct?

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,we would expect

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

According to the aggregate demand and aggregate supply model,in the long run an increase in the money supply leads to

When the dollar depreciates,each dollar buys

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

Other things the same,a decrease in the price level causes the interest rate to

Which of the following typically rises during a recession?

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Aggregate demand shifts right if

Which of the following is not included in aggregate demand?

Of the following theories,which is consistent with a vertical long-run aggregate supply curve?

In the short-run an increase in the costs of production makes

Keynes explained that recessions and depressions occur because of

In the last half of 1999,the U.S.unemployment rate was about 4 percent.Historical experience suggests that this is

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

If the dollar appreciates because of speculation or government policy

During the last half of 1980,the U.S.unemployment rate was about 7.5 percent.Historical experience suggests that this is

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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