Question 1

When the dollar appreciates, U.S.

Accepted Answer

A) exports decrease, while imports increase. 
B) exports and imports decrease. 
C) exports and imports increase. 
D) exports increase, while imports decrease. 
A) exports decrease, while imports increase. 
B) exports and imports decrease. 
C) exports and imports increase. 
D) exports increase, while imports decrease.

Question 2

An economic contraction caused by a shift in aggregate demand causes prices to

Accepted Answer

A) rise in the short run, and rise even more in the long run. 
B) rise in the short run, and fall back to their original level in the long run. 
C) fall in the short run, and fall even more in the long run. 
D) fall in the short run, and rise back to their original level in the long run. 
A) rise in the short run, and rise even more in the long run. 
B) rise in the short run, and fall back to their original level in the long run. 
C) fall in the short run, and fall even more in the long run. 
D) fall in the short run, and rise back to their original level in the long run.

Question 3

Other things the same, if the long-run aggregate supply curve shifts right, prices

Accepted Answer

A) and output both increase. 
B) and output both decrease. 
C) increase and output decreases. 
D) decrease and output increases. 
A) and output both increase. 
B) and output both decrease. 
C) increase and output decreases. 
D) decrease and output increases.

Question 4

As the price level falls

Accepted Answer

A) people are more willing to lend, so interest rates rise. 
B) people are more willing to lend, so interest rates fall. 
C) people are less willing to lend, so interest rates fall. 
D) people are less willing to lend, so interest rates rise. 
A) people are more willing to lend, so interest rates rise. 
B) people are more willing to lend, so interest rates fall. 
C) people are less willing to lend, so interest rates fall. 
D) people are less willing to lend, so interest rates rise.

Question 5

Aggregate demand shifts right 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 6

Other things the same, as the price level rises,

Accepted Answer

A) the dollar depreciates. 
B) the interest rate falls. 
C) people feel less wealthy. 
D) All of the above are correct. 
A) the dollar depreciates. 
B) the interest rate falls. 
C) people feel less wealthy. 
D) All of the above are correct.

Question 7

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes. We would expect that the rebuilding increased aggregate demand in

Accepted Answer

A) both the United States and Europe. 
B) the United States but not Europe. 
C) Europe, but not the United States. 
D) neither the United States, nor Europe. 
A) both the United States and Europe. 
B) the United States but not Europe. 
C) Europe, but not the United States. 
D) neither the United States, nor Europe.

Question 8

In which case can we be sure that real GDP rises in the short run?

Accepted Answer

A) foreign economies expand and the money supply increases 
B) foreign economies expand and the money supply decreases 
C) foreign economies contract and the money supply decreases 
D) None of the above are correct. 
A) foreign economies expand and the money supply increases 
B) foreign economies expand and the money supply decreases 
C) foreign economies contract and the money supply decreases 
D) None of the above are correct.

Question 9

Other things the same, a decrease in the price level causes real wealth to

Accepted Answer

A) fall, interest rates to fall, and the dollar to appreciate. 
B) fall, interest rates to rise, and the dollar to depreciate. 
C) rise, interest rates to rise, and the dollar to appreciate. 
D) rise, interest rates to fall, and the dollar to depreciate. 
A) fall, interest rates to fall, and the dollar to appreciate. 
B) fall, interest rates to rise, and the dollar to depreciate. 
C) rise, interest rates to rise, and the dollar to appreciate. 
D) rise, interest rates to fall, and the dollar to depreciate.

Question 10

Which of the following shifts aggregate demand to the right?

Accepted Answer

A) both an investment tax credit and a decrease in income tax rates 
B) an investment tax credit but not a decrease in income tax rates 
C) a decrease in income tax rates but not an investment tax credit 
D) neither an investment tax credit nor a decrease in income tax rates 
A) both an investment tax credit and a decrease in income tax rates 
B) an investment tax credit but not a decrease in income tax rates 
C) a decrease in income tax rates but not an investment tax credit 
D) neither an investment tax credit nor a decrease in income tax rates

Question 11

Which of the following adjust to bring aggregate supply and demand into balance?

Accepted Answer

A) the price level and real output 
B) the real rate of interest and the money supply 
C) government expenditures and taxes 
D) the saving rate and net exports 
A) the price level and real output 
B) the real rate of interest and the money supply 
C) government expenditures and taxes 
D) the saving rate and net exports

Question 12

Other things the same, technological progress raises the price level.

Accepted Answer

A) True 
 B)False

Question 13

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

Accepted Answer

A) production is more profitable and employment rises. 
B) production is more profitable and employment falls. 
C) production is less profitable and employment rises. 
D) production is less profitable and employment falls. 
A) production is more profitable and employment rises. 
B) production is more profitable and employment falls. 
C) production is less profitable and employment rises. 
D) production is less profitable and employment falls.

Question 14

Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time.
-Refer to Financial Crisis. If nominal wages are sticky, which of the following helps explains the change in output?

Accepted Answer

A) real wages fall, so firms choose to produce less 
B) real wages fall, so firms choose to produce more 
C) real wages rise, so firms choose to produce less 
D) real wages rise, so firms choose to produce more 
A) real wages fall, so firms choose to produce less 
B) real wages fall, so firms choose to produce more 
C) real wages rise, so firms choose to produce less 
D) real wages rise, so firms choose to produce more

Question 15

During recessions

Accepted Answer

A) workers are laid off. 
B) factories are idle. 
C) firms may find they are unable to sell all they produce. 
D) All of the above are correct. 
A) workers are laid off. 
B) factories are idle. 
C) firms may find they are unable to sell all they produce. 
D) All of the above are correct.

Question 16

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. Which curve shifts and in which direction?

Accepted Answer

A) aggregate demand shifts right 
B) aggregate demand shifts left 
C) aggregate supply shifts right. 
D) aggregate supply shifts left. 
A) aggregate demand shifts right 
B) aggregate demand shifts left 
C) aggregate supply shifts right. 
D) aggregate supply shifts left.

Question 17

In 2009 Congress passed legislation providing states with funds to build roads and bridges. It also instituted tax cuts. Which of these shifts aggregate demand right?

Accepted Answer

A) only the increased funding for states 
B) only the tax cuts 
C) both the increased funding for states and the tax cuts 
D) neither the increased funding for states nor the tax cuts 
A) only the increased funding for states 
B) only the tax cuts 
C) both the increased funding for states and the tax cuts 
D) neither the increased funding for states nor the tax cuts

Question 18

The initial impact of an increase in 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 19

Other things the same, the aggregate quantity of goods demanded in the U.S. increases if

Accepted Answer

A) real wealth falls. 
B) the interest rate rises. 
C) the dollar depreciates. 
D) None of the above is correct. 
A) real wealth falls. 
B) the interest rate rises. 
C) the dollar depreciates. 
D) None of the above is correct.

Question 20

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

Accepted Answer

A) a decrease in the actual price level 
B) an increase in the actual price level 
C) a decrease in the expected price level 
D) an increase in the expected price level 
A) a decrease in the actual price level 
B) an increase in the actual price level 
C) a decrease in the expected price level 
D) an increase in the expected price level

Exam 20: Aggregate Demand and Aggregate Supply

When the dollar appreciates, U.S.

An economic contraction caused by a shift in aggregate demand causes prices to

Other things the same, if the long-run aggregate supply curve shifts right, prices

As the price level falls

Aggregate demand shifts right if

Other things the same, as the price level rises,

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes. We would expect that the rebuilding increased aggregate demand in

In which case can we be sure that real GDP rises in the short run?

Other things the same, a decrease in the price level causes real wealth to

Which of the following shifts aggregate demand to the right?

Which of the following adjust to bring aggregate supply and demand into balance?

Other things the same, technological progress raises the price level.

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

During recessions

In 2009 Congress passed legislation providing states with funds to build roads and bridges. It also instituted tax cuts. Which of these shifts aggregate demand right?

The initial impact of an increase in an investment tax credit is to shift

Other things the same, the aggregate quantity of goods demanded in the U.S. increases if

Which of the following shifts the short-run aggregate supply curve 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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