Question 1

Other things the same, if the money supply rises by 2% and people were expecting it to rise by 5%, then some firms have

Accepted Answer

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

Question 2

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 3

If there are floods or droughts or a decrease in the availability of raw materials

Accepted Answer

A) aggregate supply shifts right. 
B) output falls in the short run. 
C) prices fall in the short run. 
D) None of the above is correct. 
A) aggregate supply shifts right. 
B) output falls in the short run. 
C) prices fall in the short run. 
D) None of the above is correct.

Question 4

Which of the following is not included in aggregate demand?

Accepted Answer

A) purchases of stock and bonds 
B) purchases of services such as visits to the doctor 
C) purchases of capital goods such as equipment in a factory 
D) purchases by foreigners of consumer goods produced in the United States 
A) purchases of stock and bonds 
B) purchases of services such as visits to the doctor 
C) purchases of capital goods such as equipment in a factory 
D) purchases by foreigners of consumer goods produced in the United States

Question 5

When the price level increases, the real value of people's money holdings

Accepted Answer

A) falls, so they buy more. 
B) falls, so they buy less. 
C) rises, so they buy more. 
D) rises, so they buy less. 
A) falls, so they buy more. 
B) falls, so they buy less. 
C) rises, so they buy more. 
D) rises, so they buy less.

Question 6

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Accepted Answer

A) employment and production rise. 
B) employment rises and production falls. 
C) employment falls and production rises. 
D) employment and production fall. 
A) employment and production rise. 
B) employment rises and production falls. 
C) employment falls and production rises. 
D) employment and production fall.

Question 7

Over the last fifty years both real GDP and prices have trended upward in most countries. Continuing real GDP growth and inflation can be explained by

Accepted Answer

A) continuing technological progress alone. 
B) continuing increases in the money supply alone. 
C) continued technological progress and continuing increases in the money supply. 
D) None of the above can explain continuing real GDP growth and inflation. 
A) continuing technological progress alone. 
B) continuing increases in the money supply alone. 
C) continued technological progress and continuing increases in the money supply. 
D) None of the above can explain continuing real GDP growth and inflation.

Question 8

When the actual change in the price level differs from its expected change, which of the following can explain why firms might change their production?

Accepted Answer

A) both menu costs and mistaking a price level change for a change in relative prices 
B) menu costs but not mistaking a price level change for a change in relative prices 
C) mistaking a price level change for a change in relative price but not menu costs 
D) neither menu costs nor mistaking a price level change for a change in relative prices 
A) both menu costs and mistaking a price level change for a change in relative prices 
B) menu costs but not mistaking a price level change for a change in relative prices 
C) mistaking a price level change for a change in relative price but not menu costs 
D) neither menu costs nor mistaking a price level change for a change in relative prices

Question 9

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. 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 10

Other things the same, if the price level is lower than expected, then some firms believe that the relative price of what they produce has

Accepted Answer

A) decreased, so they increase production. 
B) decreased, so they decrease production. 
C) increased, so they increase production. 
D) increased, so they decrease production. 
A) decreased, so they increase production. 
B) decreased, so they decrease production. 
C) increased, so they increase production. 
D) increased, so they decrease production.

Question 11

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 12

In the last half of 1999, the U.S. unemployment rate was about 4 percent. Historical experience suggests that this is

Accepted Answer

A) above the natural rate, so real GDP growth was likely low. 
B) above the natural rate, so real GDP growth was likely high. 
C) below the natural rate, so real GDP growth was likely low. 
D) below the natural rate, so real GDP growth was likely high. 
A) above the natural rate, so real GDP growth was likely low. 
B) above the natural rate, so real GDP growth was likely high. 
C) below the natural rate, so real GDP growth was likely low. 
D) below the natural rate, so real GDP growth was likely high.

Question 13

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

Accepted Answer

A) both the money supply increase and the investment tax credit 
B) the money supply increase but not the investment tax credit 
C) the investment tax credit but not the money supply increase 
D) neither the investment tax credit nor the money supply increase 
A) both the money supply increase and the investment tax credit 
B) the money supply increase but not the investment tax credit 
C) the investment tax credit but not the money supply increase 
D) neither the investment tax credit nor the money supply increase

Question 14

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

Accepted Answer

A) the money supply increases and taxes rise 
B) the money supply increases and taxes fall 
C) the money supply decreases and taxes rise 
D) None of the above are correct. 
A) the money supply increases and taxes rise 
B) the money supply increases and taxes fall 
C) the money supply decreases and taxes rise 
D) None of the above are correct.

Question 15

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 16

During a recession the economy experiences

Accepted Answer

A) rising employment and income. 
B) rising employment and falling income. 
C) rising income and falling employment. 
D) falling employment and income. 
A) rising employment and income. 
B) rising employment and falling income. 
C) rising income and falling employment. 
D) falling employment and income.

Question 17

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 18

The average price level is measured by

Accepted Answer

A) any real variable. 
B) the rate of inflation. 
C) the level of the money supply. 
D) the CPI or the GDP deflator. 
A) any real variable. 
B) the rate of inflation. 
C) the level of the money supply. 
D) the CPI or the GDP deflator.

Question 19

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Accepted Answer

A) True 
 B)False

Question 20

When the price level falls

Accepted Answer

A) people want to hold more money. 
B) the interest rate rises. 
C) investment spending rises. 
D) All of the above are correct. 
A) people want to hold more money. 
B) the interest rate rises. 
C) investment spending rises. 
D) All of the above are correct.

Exam 20: Aggregate Demand and Aggregate Supply

Other things the same, if the money supply rises by 2% and people were expecting it to rise by 5%, then some firms have

In the long run, technological progress

If there are floods or droughts or a decrease in the availability of raw materials

Which of the following is not included in aggregate demand?

When the price level increases, the real value of people's money holdings

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Over the last fifty years both real GDP and prices have trended upward in most countries. Continuing real GDP growth and inflation can be explained by

When the actual change in the price level differs from its expected change, which of the following can explain why firms might change their production?

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. Which curve shifts and in which direction?

Other things the same, if the price level is lower than expected, then some firms believe that the relative price of what they produce has

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

In the last half of 1999, the U.S. unemployment rate was about 4 percent. Historical experience suggests that this is

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

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

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

During a recession the economy experiences

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

The average price level is measured by

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

When the price level falls

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