Question 1

Other things the same,the aggregate quantity of output supplied will increase if the price level

Accepted Answer

A) is lower than expected so that firms believe the relative price of their output has increased. 
B) is lower than expected so that firms believe the relative price of their output has decreased. 
C) is higher than expected so that firms believe the relative price of their output has increased. 
D) is higher than expected so that firms believe the relative price of their output has decreased. 
A) is lower than expected so that firms believe the relative price of their output has increased. 
B) is lower than expected so that firms believe the relative price of their output has decreased. 
C) is higher than expected so that firms believe the relative price of their output has increased. 
D) is higher than expected so that firms believe the relative price of their output has decreased.

Question 2

Suppose the economy is in long-run equilibrium.In a short span of time,there is a large influx of skilled immigrants,a major new discovery of oil,and a major new technological advance in electricity production.In the short run,we would expect

Accepted Answer

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

Question 3

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

Accepted Answer

A) increases less than expected so that firms believe the relative price of their output has increased. 
B) increases less than expected so that firms believe the relative price of their output has decreased. 
C) increases more than expected so that firms believe the relative price of their output has increased. 
D) increases more than expected so that firms believe the relative price of their output has decreased. 
A) increases less than expected so that firms believe the relative price of their output has increased. 
B) increases less than expected so that firms believe the relative price of their output has decreased. 
C) increases more than expected so that firms believe the relative price of their output has increased. 
D) increases more than expected so that firms believe the relative price of their output has decreased.

Question 4

The model of short-run economic fluctuations focuses on the price level and

Accepted Answer

A) real GDP. 
B) economic growth. 
C) the neutrality of money. 
D) None of the above is correct. 
A) real GDP. 
B) economic growth. 
C) the neutrality of money. 
D) None of the above is correct.

Question 5

Consider the exhibit below for the following questions.
Figure 33-1
  
-Refer to Figure 33-1.If the economy is at A and there is a fall in aggregate demand,in the short run the economy

Accepted Answer

A) stays at a. 
B) moves to B. 
C) moves to C. 
D) moves to D. 
A) stays at a. 
B) moves to B. 
C) moves to C. 
D) moves to D.

Question 6

Wages tend to be sticky

Accepted Answer

A) because of contracts, social norms, and notions of fairness. 
B) because of contracts, but not social norms or notions of fairness. 
C) because of social norms and notions of fairness, but not contracts. 
D) but not because of social norms, notions of fairness or contracts. 
A) because of contracts, social norms, and notions of fairness. 
B) because of contracts, but not social norms or notions of fairness. 
C) because of social norms and notions of fairness, but not contracts. 
D) but not because of social norms, notions of fairness or contracts.

Question 7

The Central Bank of Libertina increases the money supply at the same time the Parliament of Libertina passes a new investment tax credit.Consider the effects of these policies on the Libertinian economy.The money supply increase

Accepted Answer

A) and the investment tax credit each cause aggregate demand to shift right. 
B) and the investment tax credit each cause aggregate demand to shift left. 
C) causes aggregate demand to right, while the investment tax credit causes aggregate demand to shift left. 
D) causes aggregate demand to shift left, while the investment tax credit causes the aggregate demand curve to shift right. 
A) and the investment tax credit each cause aggregate demand to shift right. 
B) and the investment tax credit each cause aggregate demand to shift left. 
C) causes aggregate demand to right, while the investment tax credit causes aggregate demand to shift left. 
D) causes aggregate demand to shift left, while the investment tax credit causes the aggregate demand curve to shift right.

Question 8

In 2001,the United States was in recession.Which of the following things would you expect not to have happened?

Accepted Answer

A) increased layoffs and firings 
B) a higher rate of bankruptcy 
C) increased claims for unemployment insurance 
D) increased investment spending 
A) increased layoffs and firings 
B) a higher rate of bankruptcy 
C) increased claims for unemployment insurance 
D) increased investment spending

Question 9

Aggregate demand shifts to the left if the money supply decreases.

Accepted Answer

A) True 
 B)False

Question 10

An increase in which of the following,other things the same,shifts aggregate demand to the right?

Accepted Answer

A) consumption 
B) investment 
C) government expenditures 
D) All of the above are correct. 
A) consumption 
B) investment 
C) government expenditures 
D) All of the above are correct.

Question 11

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production.This is inconsistent with monetary neutrality because

Accepted Answer

A) monetary neutrality would mean that neither prices nor production should have risen. 
B) monetary neutrality would mean that production should have risen, but prices should not have. 
C) monetary neutrality would mean the prices should have risen, but production should not have changed. 
D) monetary neutrality would mean that prices and production should both have fallen. 
A) monetary neutrality would mean that neither prices nor production should have risen. 
B) monetary neutrality would mean that production should have risen, but prices should not have. 
C) monetary neutrality would mean the prices should have risen, but production should not have changed. 
D) monetary neutrality would mean that prices and production should both have fallen.

Question 12

Imagine the U.S.economy is in long-run equilibrium.Then suppose the value of the U.S.dollar increases.At the same time,people in the U.S.revise their expectations so that the expected price level falls.We would expect that in the short-run

Accepted Answer

A) real GDP will rise and the price level might rise, fall, or stay the same. 
B) real GDP will fall and the price level might rise, fall, or stay the same. 
C) the price level will rise, and real GDP might rise, fall, or stay the same. 
D) the price level will fall, and real GDP might rise, fall, or stay the same. 
A) real GDP will rise and the price level might rise, fall, or stay the same. 
B) real GDP will fall and the price level might rise, fall, or stay the same. 
C) the price level will rise, and real GDP might rise, fall, or stay the same. 
D) the price level will fall, and real GDP might rise, fall, or stay the same.

Question 13

A candidate for political office announces the following policies which,he says,economics clearly demonstrates will lead to higher output in the long run.1.reduce immigration from abroad 2.make trade more open between the US and other countries.

Accepted Answer

A) 1 and 2 both shift long-run aggregate supply right. 
B) 1 and 2 both shift long-run aggregate supply left. 
C) 1 shifts long-run aggregate supply right, 2 shifts long-run aggregate supply left. 
D) 1 shifts long-run aggregate supply left, 2 shifts long-run aggregate supply right. 
A) 1 and 2 both shift long-run aggregate supply right. 
B) 1 and 2 both shift long-run aggregate supply left. 
C) 1 shifts long-run aggregate supply right, 2 shifts long-run aggregate supply left. 
D) 1 shifts long-run aggregate supply left, 2 shifts long-run aggregate supply right.

Question 14

Investment is a

Accepted Answer

A) small part of real GDP, so it accounts for a small share of the fluctuation in real GDP. 
B) small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. 
C) large part of real GDP, so it accounts for a large share of the fluctuation in real GDP. 
D) large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP. 
A) small part of real GDP, so it accounts for a small share of the fluctuation in real GDP. 
B) small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. 
C) large part of real GDP, so it accounts for a large share of the fluctuation in real GDP. 
D) large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.

Question 15

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

Accepted Answer

A) consumer wealth rises 
B) borrowing rises 
C) each dollar is worth more domestic goods 
D) the dollar appreciates relative to other currencies 
A) consumer wealth rises 
B) borrowing rises 
C) each dollar is worth more domestic goods 
D) the dollar appreciates relative to other currencies

Question 16

A change in the money supply changes only nominal variables in the long run.

Accepted Answer

A) True 
 B)False

Question 17

When output rises,unemployment falls.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following did not happen during the onset of the Great Depression?

Accepted Answer

A) The money supply fell as households took money out of bank deposits. 
B) The Fed conducted expansionary monetary policy. 
C) Stock prices fell about 90 percent. 
D) Disruption of the banking system made it difficult for some firms to obtain funds for investment. 
A) The money supply fell as households took money out of bank deposits. 
B) The Fed conducted expansionary monetary policy. 
C) Stock prices fell about 90 percent. 
D) Disruption of the banking system made it difficult for some firms to obtain funds for investment.

Question 19

In the early 1930s in the United States,there was a

Accepted Answer

A) large increase in output.In the early 1940s there was also a large increase in output. 
B) large increase in output.In the early 1940s there was a large decrease in output. 
C) large decrease in output.In the early 1940s there was a large increase in output. 
D) large decrease in output.In the early 1940s there was also a large decrease in output. 
A) large increase in output.In the early 1940s there was also a large increase in output. 
B) large increase in output.In the early 1940s there was a large decrease in output. 
C) large decrease in output.In the early 1940s there was a large increase in output. 
D) large decrease in output.In the early 1940s there was also a large decrease in output.

Question 20

Stagflation exists when prices

Accepted Answer

A) and output rise. 
B) rise and output falls. 
C) fall and output rises. 
D) and output fall. 
A) and output rise. 
B) rise and output falls. 
C) fall and output rises. 
D) and output fall.

Exam 33: Aggregate Demand and Aggregate Supply

Other things the same,the aggregate quantity of output supplied will increase if the price level

Suppose the economy is in long-run equilibrium.In a short span of time,there is a large influx of skilled immigrants,a major new discovery of oil,and a major new technological advance in electricity production.In the short run,we would expect

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

The model of short-run economic fluctuations focuses on the price level and

Consider the exhibit below for the following questions. Figure 33-1 -Refer to Figure 33-1.If the economy is at A and there is a fall in aggregate demand,in the short run the economy

Wages tend to be sticky

The Central Bank of Libertina increases the money supply at the same time the Parliament of Libertina passes a new investment tax credit.Consider the effects of these policies on the Libertinian economy.The money supply increase

In 2001,the United States was in recession.Which of the following things would you expect not to have happened?

Aggregate demand shifts to the left if the money supply decreases.

An increase in which of the following,other things the same,shifts aggregate demand to the right?

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production.This is inconsistent with monetary neutrality because

Imagine the U.S.economy is in long-run equilibrium.Then suppose the value of the U.S.dollar increases.At the same time,people in the U.S.revise their expectations so that the expected price level falls.We would expect that in the short-run

A candidate for political office announces the following policies which,he says,economics clearly demonstrates will lead to higher output in the long run.1.reduce immigration from abroad 2.make trade more open between the US and other countries.

Investment is a

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

A change in the money supply changes only nominal variables in the long run.

When output rises,unemployment falls.

Which of the following did not happen during the onset of the Great Depression?

In the early 1930s in the United States,there was a

Stagflation exists when prices

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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