Question 1

Other things the same,an unexpected fall in the price level results in some firms having

Accepted Answer

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

Question 2

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.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 lower. 
D) the price level is lower 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 lower. 
D) the price level is lower and real GDP is the same.

Question 3

An increase in the price level and a decrease in real GDP in the short run could be created by

Accepted Answer

A) an increase in the money supply. 
B) an increase in government expenditures. 
C) a fall in stock prices. 
D) bad weather in farm states. 
A) an increase in the money supply. 
B) an increase in government expenditures. 
C) a fall in stock prices. 
D) bad weather in farm states.

Question 4

Other things the same,the aggregate quantity of goods demanded decreases if

Accepted Answer

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

Question 5

A decrease in U.S.interest rates leads to

Accepted Answer

A) a depreciation of the dollar that leads to greater net exports. 
B) a depreciation of the dollar that leads to smaller net exports. 
C) an appreciation of the dollar that leads to greater net exports. 
D) an appreciation of the dollar that leads to smaller net exports. 
A) a depreciation of the dollar that leads to greater net exports. 
B) a depreciation of the dollar that leads to smaller net exports. 
C) an appreciation of the dollar that leads to greater net exports. 
D) an appreciation of the dollar that leads to smaller net exports.

Question 6

If speculators lost confidence in foreign economies and so wanted to buy more U.S.bonds

Accepted Answer

A) the dollar would appreciate which would cause aggregate demand to shift right. 
B) the dollar would appreciate which would cause aggregate demand to shift left. 
C) the dollar would depreciate which would cause aggregate demand to shift right. 
D) the dollar would depreciate which would cause aggregate demand to shift left. 
A) the dollar would appreciate which would cause aggregate demand to shift right. 
B) the dollar would appreciate which would cause aggregate demand to shift left. 
C) the dollar would depreciate which would cause aggregate demand to shift right. 
D) the dollar would depreciate which would cause aggregate demand to shift left.

Question 7

During recessions investment

Accepted Answer

A) falls by a larger percentage than GDP. 
B) falls by about the same percentage as GDP. 
C) falls by a smaller percentage than GDP. 
D) falls but the percentage change is sometimes much larger and sometimes much smaller. 
A) falls by a larger percentage than GDP. 
B) falls by about the same percentage as GDP. 
C) falls by a smaller percentage than GDP. 
D) falls but the percentage change is sometimes much larger and sometimes much smaller.

Question 8

We could explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

Accepted Answer

A) True 
 B)False

Question 9

People will spend more if real wealth

Accepted Answer

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

Question 10

According to classical macroeconomic theory,changes in the money supply affect

Accepted Answer

A) nominal variables and real variables. 
B) nominal variables, but not real variables. 
C) real variables, but not nominal variables. 
D) neither nominal nor real variables. 
A) nominal variables and real variables. 
B) nominal variables, but not real variables. 
C) real variables, but not nominal variables. 
D) neither nominal nor real variables.

Question 11

In the long run,technological progress

Accepted Answer

A) and increases in the money supply both make the price level rise. 
B) and increases in the money supply both make the price level fall. 
C) makes the price level rise, while increases in the money supply make prices fall. 
D) makes the price level fall, while increases in the money supply make prices rise. 
A) and increases in the money supply both make the price level rise. 
B) and increases in the money supply both make the price level fall. 
C) makes the price level rise, while increases in the money supply make prices fall. 
D) makes the price level fall, while increases in the money supply make prices rise.

Question 12

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 long run,the change in price expectations created by the stock market boom shifts

Accepted Answer

A) long-run aggregate supply right. 
B) long-run aggregate supply left. 
C) short-run aggregate supply right. 
D) short-run aggregate supply left. 
A) long-run aggregate supply right. 
B) long-run aggregate supply left. 
C) short-run aggregate supply right. 
D) short-run aggregate supply left.

Question 13

Which of the sentences concerning the aggregate demand and aggregate supply model is correct?

Accepted Answer

A) The aggregate demand and supply model is nothing more than a large version of the model of market demand and supply. 
B) The price level and quantity of output adjust to bring aggregate demand and supply into balance. 
C) The aggregate supply curve shows the quantity of goods and services that households, firms, and the government want to buy at each price. 
D) All of the above are correct. 
A) The aggregate demand and supply model is nothing more than a large version of the model of market demand and supply. 
B) The price level and quantity of output adjust to bring aggregate demand and supply into balance. 
C) The aggregate supply curve shows the quantity of goods and services that households, firms, and the government want to buy at each price. 
D) All of the above are correct.

Question 14

Suppose the economy is initially in long-run equilibrium and aggregate demand rises.In the long run prices

Accepted Answer

A) and output are higher than in the original long-run equilibrium. 
B) and output are lower than in the original long-run equilibrium. 
C) are higher and output is the same as the original long-run equilibrium. 
D) are the same and output is lower than in the original long-run equilibrium. 
A) and output are higher than in the original long-run equilibrium. 
B) and output are lower than in the original long-run equilibrium. 
C) are higher and output is the same as the original long-run equilibrium. 
D) are the same and output is lower than in the original long-run equilibrium.

Question 15

The initial impact of the repeal of an investment tax credit is to 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 16

Most economists believe that after a few years,changes in the money supply change

Accepted Answer

A) only nominal variables, but not real variables. 
B) only real variables, but not nominal variables. 
C) neither nominal nor real variables. 
D) both nominal and real variables. 
A) only nominal variables, but not real variables. 
B) only real variables, but not nominal variables. 
C) neither nominal nor real variables. 
D) both nominal and real variables.

Question 17

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 long run,the change in price expectations created by optimism shifts

Accepted Answer

A) long-run aggregate supply right. 
B) long-run aggregate supply left. 
C) short-run aggregate supply right. 
D) short-run aggregate supply left. 
A) long-run aggregate supply right. 
B) long-run aggregate supply left. 
C) short-run aggregate supply right. 
D) short-run aggregate supply left.

Question 18

If speculators bid up the value of the dollar in the market for foreign-currency exchange,U.S.aggregate demand would shift to the left.

Accepted Answer

A) True 
 B)False

Question 19

Keynes thought that the behavior of the economy in the short run was influenced by what he called "animal spirits." By this he meant that business people sometimes felt good about the economy,and carried out lots of investment,and at other times felt bad about the economy,and so cut back on their investment spending.Explain how such fluctuations in investment would lead to fluctuations in real GDP and prices.

Accepted Answer

Fluctuations in investment cause the agg

Question 20

Imagine that businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases.Their reaction 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.

Exam 33: Aggregate Demand and Aggregate Supply

Other things the same,an unexpected fall in the price level results in some firms having

An increase in the price level and a decrease in real GDP in the short run could be created by

Other things the same,the aggregate quantity of goods demanded decreases if

A decrease in U.S.interest rates leads to

If speculators lost confidence in foreign economies and so wanted to buy more U.S.bonds

During recessions investment

We could explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

People will spend more if real wealth

According to classical macroeconomic theory,changes in the money supply affect

In the long run,technological progress

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 long run,the change in price expectations created by the stock market boom shifts

Which of the sentences concerning the aggregate demand and aggregate supply model is correct?

Suppose the economy is initially in long-run equilibrium and aggregate demand rises.In the long run prices

The initial impact of the repeal of an investment tax credit is to shift

Most economists believe that after a few years,changes in the money supply change

If speculators bid up the value of the dollar in the market for foreign-currency exchange,U.S.aggregate demand would shift to the left.

Imagine that businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases.Their reaction would initially shift

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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