Question 1

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

Accepted Answer

A) True 
 B)False

Question 2

An economic contraction caused by a shift in aggregate demand remedies itself over time as the expected price level

Accepted Answer

A) rises, shifting aggregate demand right. 
B) rises, shifting aggregate demand left. 
C) falls, shifting aggregate supply right. 
D) falls, shifting aggregate supply left. 
A) rises, shifting aggregate demand right. 
B) rises, shifting aggregate demand left. 
C) falls, shifting aggregate supply right. 
D) falls, shifting aggregate supply left.

Question 3

If wages are sticky, then a greater than expected increase in the price level

Accepted Answer

A) raises the real costs of production, so the short-run aggregate supply curve shifts left. 
B) raises the real costs of production, so the aggregate quantity of goods and services declines. 
C) reduces the real costs of production, so the short-run aggregate supply curve shifts right. 
D) reduces the real costs of production, so the aggregate quantity of good and services rises. 
A) raises the real costs of production, so the short-run aggregate supply curve shifts left. 
B) raises the real costs of production, so the aggregate quantity of goods and services declines. 
C) reduces the real costs of production, so the short-run aggregate supply curve shifts right. 
D) reduces the real costs of production, so the aggregate quantity of good and services rises.

Question 4

Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

Accepted Answer

A) decrease consumption, shown as a movement to the left along a given aggregate-demand curve. 
B) increase consumption, shown as a movement to the right along a given aggregate-demand curve. 
C) decrease consumption, shown by shifting the aggregate-demand curve to the left. 
D) increase consumption, shown by shifting the aggregate-demand curve to the right. 
A) decrease consumption, shown as a movement to the left along a given aggregate-demand curve. 
B) increase consumption, shown as a movement to the right along a given aggregate-demand curve. 
C) decrease consumption, shown by shifting the aggregate-demand curve to the left. 
D) increase consumption, shown by shifting the aggregate-demand curve to the right.

Question 5

Other things the same, continued technological progress and continued increases in the money supply would unambiguously lead to

Accepted Answer

A) rising prices only. 
B) rising real GDP only. 
C) rising prices and rising real GDP. 
D) neither rising prices nor rising real GDP. 
A) rising prices only. 
B) rising real GDP only. 
C) rising prices and rising real GDP. 
D) neither rising prices nor rising real GDP.

Question 6

Which of the following would increase the price level?

Accepted Answer

A) an increase in the money supply. 
B) an increase in taxes. 
C) a decrease in the expected price level. 
D) a decrease in the natural rate of unemployment. 
A) an increase in the money supply. 
B) an increase in taxes. 
C) a decrease in the expected price level. 
D) a decrease in the natural rate of unemployment.

Question 7

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

Question 8

Other things the same, if the price level rises, then domestic interest rates

Accepted Answer

A) rise, so domestic residents will want to hold more foreign bonds. 
B) rise, so domestic residents will want to hold fewer foreign bonds. 
C) fall, so domestic residents will want to hold more foreign bonds. 
D) fall, so domestic residents will want to hold fewer foreign bonds. 
A) rise, so domestic residents will want to hold more foreign bonds. 
B) rise, so domestic residents will want to hold fewer foreign bonds. 
C) fall, so domestic residents will want to hold more foreign bonds. 
D) fall, so domestic residents will want to hold fewer foreign bonds.

Question 9

When the price level falls

Accepted Answer

A) households want to lend less. 
B) the interest rate rises. 
C) firms want to spend less on investment goods. 
D) None of the above are correct. 
A) households want to lend less. 
B) the interest rate rises. 
C) firms want to spend less on investment goods. 
D) None of the above are correct.

Question 10

Most economists believe that in the long run, changes in the money supply

Accepted Answer

A) affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory. 
B) affect nominal but not real variables. This view that money is ultimately neutral is inconsistent with classical theory. 
C) affect real but not nominal variables. This view that money is ultimately neutral is consistent with classical theory. 
D) affect real but not nominal variables. This view that money is ultimately neutral is inconsistent with classical theory. 
A) affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory. 
B) affect nominal but not real variables. This view that money is ultimately neutral is inconsistent with classical theory. 
C) affect real but not nominal variables. This view that money is ultimately neutral is consistent with classical theory. 
D) affect real but not nominal variables. This view that money is ultimately neutral is inconsistent with classical theory.

Question 11

Which of the following shifts aggregate demand right?

Accepted Answer

A) both a decrease in the price level and the implementation of an investment tax credit 
B) a decrease in the price level but not the implementation of an investment tax credit 
C) the implementation of an investment tax credit but not a decrease in the price level 
D) neither a decrease in the price level nor the implementation of an investment tax credit 
A) both a decrease in the price level and the implementation of an investment tax credit 
B) a decrease in the price level but not the implementation of an investment tax credit 
C) the implementation of an investment tax credit but not a decrease in the price level 
D) neither a decrease in the price level nor the implementation of an investment tax credit

Question 12

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Accepted Answer

A) the relationship between output and unemployment is erratic and difficult to characterize. 
B) when one macroeconomic variable that measures income or spending is falling, other macroeconomic variables that measure income or spending are likely to be rising. 
C) recessions do not occur at regular intervals. 
D) All of the above are correct. 
A) the relationship between output and unemployment is erratic and difficult to characterize. 
B) when one macroeconomic variable that measures income or spending is falling, other macroeconomic variables that measure income or spending are likely to be rising. 
C) recessions do not occur at regular intervals. 
D) All of the above are correct.

Question 13

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. 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 14

When taxes increase, consumption

Accepted Answer

A) increases, so aggregate demand shifts right. 
B) increases, so aggregate supply shifts right. 
C) decreases, so aggregate demand shifts left. 
D) decreases, so aggregate supply shifts left. 
A) increases, so aggregate demand shifts right. 
B) increases, so aggregate supply shifts right. 
C) decreases, so aggregate demand shifts left. 
D) decreases, so aggregate supply shifts left.

Question 15

Which of the following lists includes only changes that shift aggregate demand to the right?

Accepted Answer

A) repeal of an investment tax credit, an increase in the money supply 
B) repeal of an investment tax credit, a decrease in the money supply 
C) passing of an investment tax credit, an increase in the money supply 
D) passing of an investment tax credit, a decrease in the money supply 
A) repeal of an investment tax credit, an increase in the money supply 
B) repeal of an investment tax credit, a decrease in the money supply 
C) passing of an investment tax credit, an increase in the money supply 
D) passing of an investment tax credit, a decrease in the money supply

Question 16

Other things the same, if the capital stock increases, then in the long run

Accepted Answer

A) both output and prices are higher. 
B) output is higher and prices are lower. 
C) output is lower and prices are higher. 
D) both output and prices are lower. 
A) both output and prices are higher. 
B) output is higher and prices are lower. 
C) output is lower and prices are higher. 
D) both output and prices are lower.

Question 17

Which of the following has been suggested as a cause of the Great Depression?

Accepted Answer

A) a decline in the money supply 
B) a decrease in stock prices 
C) the collapse of the banking system 
D) All of the above are correct. 
A) a decline in the money supply 
B) a decrease in stock prices 
C) the collapse of the banking system 
D) All of the above are correct.

Question 18

Which of the following effects helps to explain the slope of the aggregate-demand curve?

Accepted Answer

A) the exchange-rate effect 
B) the wealth effect 
C) the interest-rate effect 
D) All of the above are correct. 
A) the exchange-rate effect 
B) the wealth effect 
C) the interest-rate effect 
D) All of the above are correct.

Question 19

Consider the exhibit below for the following questions.Figure 20-1  
-Refer to Figure 20-1. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from

Accepted Answer

A) A to B. 
B) C to D. 
C) B to A. 
D) D to C. 
A) A to B. 
B) C to D. 
C) B to A. 
D) D to C.

Question 20

Which of the following shifts aggregate demand to the right?

Accepted Answer

A) Congress reduces purchases of new weapons systems. 
B) The Fed buys bonds in the open market. 
C) The price level falls. 
D) Net exports fall. 
A) Congress reduces purchases of new weapons systems. 
B) The Fed buys bonds in the open market. 
C) The price level falls. 
D) Net exports fall.

Exam 20: Aggregate Demand and Aggregate Supply

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

An economic contraction caused by a shift in aggregate demand remedies itself over time as the expected price level

If wages are sticky, then a greater than expected increase in the price level

Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

Other things the same, continued technological progress and continued increases in the money supply would unambiguously lead to

Which of the following would increase the price level?

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

Other things the same, if the price level rises, then domestic interest rates

When the price level falls

Most economists believe that in the long run, changes in the money supply

Which of the following shifts aggregate demand right?

When we say that economic fluctuations are "irregular and unpredictable," we mean that

When taxes increase, consumption

Which of the following lists includes only changes that shift aggregate demand to the right?

Other things the same, if the capital stock increases, then in the long run

Which of the following has been suggested as a cause of the Great Depression?

Which of the following effects helps to explain the slope of the aggregate-demand curve?

Consider the exhibit below for the following questions.Figure 20-1 -Refer to Figure 20-1. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from

Which of the following shifts aggregate demand to the right?

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

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