Question 1

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 2

When the money supply increases

Accepted Answer

A) interest rates fall and so aggregate demand shifts right. 
B) interest rates fall and so aggregate demand shifts left. 
C) interest rates rise and so aggregate demand shifts right. 
D) interest rates rise and so aggregate demand shifts left. 
A) interest rates fall and so aggregate demand shifts right. 
B) interest rates fall and so aggregate demand shifts left. 
C) interest rates rise and so aggregate demand shifts right. 
D) interest rates rise and so aggregate demand shifts left.

Question 3

An increase in the interest rate causes investment to

Accepted Answer

A) rise and the exchange rate to appreciate. 
B) fall and the exchange rate to depreciate. 
C) rise and the exchange rate to depreciate. 
D) fall and the exchange rate to appreciate. 
A) rise and the exchange rate to appreciate. 
B) fall and the exchange rate to depreciate. 
C) rise and the exchange rate to depreciate. 
D) fall and the exchange rate to appreciate.

Question 4

Consider the exhibit below for the following questions.Figure 20-1  
-Refer to Figure 20-1. If the economy starts at A and there is a fall in aggregate demand, the economy moves

Accepted Answer

A) back to A in the long run. 
B) to B in the long run. 
C) to C in the long run. 
D) to D in the long run. 
A) back to A in the long run. 
B) to B in the long run. 
C) to C in the long run. 
D) to D in the long run.

Question 5

Which of the following would raise the price level in both the short and long run?

Accepted Answer

A) an increase in taxes 
B) an increase in government expenditures 
C) a decrease in the minimum wage 
D) an increase in the capital stock 
A) an increase in taxes 
B) an increase in government expenditures 
C) a decrease in the minimum wage 
D) an increase in the capital stock

Question 6

Which of the following shifts short-run, but not long-run aggregate supply right?

Accepted Answer

A) a decrease in the actual price level 
B) a decrease in the expected price level 
C) a decrease in the capital stock 
D) an increase in the money supply 
A) a decrease in the actual price level 
B) a decrease in the expected price level 
C) a decrease in the capital stock 
D) an increase in the money supply

Question 7

When the price level falls

Accepted Answer

A) households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. 
B) households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. 
C) households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. 
D) None of the above are correct. 
A) households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. 
B) households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. 
C) households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. 
D) None of the above are correct.

Question 8

Aggregate demand shifts left if

Accepted Answer

A) taxes rise and shifts left if stock prices rise. 
B) taxes rise and shifts left if stock prices fall. 
C) taxes fall and shifts left if stock prices rise. 
D) taxes fall and shifts left is stock prices fall. 
A) taxes rise and shifts left if stock prices rise. 
B) taxes rise and shifts left if stock prices fall. 
C) taxes fall and shifts left if stock prices rise. 
D) taxes fall and shifts left is stock prices fall.

Question 9

Real GDP

Accepted Answer

A) is the current dollar value of all goods produced by the citizens of an economy within a given time. 
B) measures economic activity and income. 
C) is used primarily to measure long-run changes rather than short-run fluctuations. 
D) All of the above are correct. 
A) is the current dollar value of all goods produced by the citizens of an economy within a given time. 
B) measures economic activity and income. 
C) is used primarily to measure long-run changes rather than short-run fluctuations. 
D) All of the above are correct.

Question 10

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained

Accepted Answer

A) only by technological progress. 
B) only by money supply growth. 
C) by technological progress and money supply growth. 
D) None of the above is correct. 
A) only by technological progress. 
B) only by money supply growth. 
C) by technological progress and money supply growth. 
D) None of the above is correct.

Question 11

Other things the same, if the price level falls, people

Accepted Answer

A) increase foreign bond purchases, so the dollar appreciates. 
B) increase foreign bond purchases, so the dollar depreciates. 
C) increase domestic bond purchases, so the dollar appreciates. 
D) increase domestic bond purchases, so the dollar depreciates. 
A) increase foreign bond purchases, so the dollar appreciates. 
B) increase foreign bond purchases, so the dollar depreciates. 
C) increase domestic bond purchases, so the dollar appreciates. 
D) increase domestic bond purchases, so the dollar depreciates.

Question 12

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 13

The long-run aggregate supply curve shifts left if

Accepted Answer

A) the capital stock increases. 
B) there is a natural disaster. 
C) the government removes some environmental regulations that limit production methods. 
D) None of the above is correct. 
A) the capital stock increases. 
B) there is a natural disaster. 
C) the government removes some environmental regulations that limit production methods. 
D) None of the above is correct.

Question 14

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 15

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

Accepted Answer

A) real GDP and the price level are lower in country B. 
B) real GDP, but not the price level, is lower in country B. 
C) the price level, but not real GDP is lower in country B. 
D) neither the price level or real GDP is lower in country B. 
A) real GDP and the price level are lower in country B. 
B) real GDP, but not the price level, is lower in country B. 
C) the price level, but not real GDP is lower in country B. 
D) neither the price level or real GDP is lower in country B.

Question 16

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

Accepted Answer

A) It would have to have shifted left by less than aggregate supply. 
B) It would have to have shifted left by more than aggregate supply. 
C) It would have to have shifted right by less than aggregate supply. 
D) It would have to have shifted right by more than aggregate supply. 
A) It would have to have shifted left by less than aggregate supply. 
B) It would have to have shifted left by more than aggregate supply. 
C) It would have to have shifted right by less than aggregate supply. 
D) It would have to have shifted right by more than aggregate supply.

Question 17

When the price level falls

Accepted Answer

A) the interest rate rises, so the quantity of goods and services demand rises. 
B) the interest rate rises, so the quantity of goods and services demand falls. 
C) the interest rate falls, so the quantity of goods and services demand rises. 
D) the interest rate falls, so the quantity of goods and services demand falls. 
A) the interest rate rises, so the quantity of goods and services demand rises. 
B) the interest rate rises, so the quantity of goods and services demand falls. 
C) the interest rate falls, so the quantity of goods and services demand rises. 
D) the interest rate falls, so the quantity of goods and services demand falls.

Question 18

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 19

The Stock Market Boom of 2015
Imagine that in 2015 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 2015. 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 20

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.

Exam 20: Aggregate Demand and Aggregate Supply

Keynes believed that economies experiencing high unemployment should adopt policies to

When the money supply increases

An increase in the interest rate causes investment to

Consider the exhibit below for the following questions.Figure 20-1 -Refer to Figure 20-1. If the economy starts at A and there is a fall in aggregate demand, the economy moves

Which of the following would raise the price level in both the short and long run?

Which of the following shifts short-run, but not long-run aggregate supply right?

When the price level falls

Aggregate demand shifts left if

Real GDP

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained

Other things the same, if the price level falls, people

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:

The long-run aggregate supply curve shifts left if

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

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

When the price level falls

During recessions investment

The Stock Market Boom of 2015 Imagine that in 2015 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 2015. In the short run what happens to the price level and real GDP?

As the price level rises

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

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 Macroeconomic Models

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

Six Debates Over Macroeconomic Policy

Filters