Question 1

Aggregate demand shifts right if at a given price level

Accepted Answer

A) net exports rise and shifts left if the money supply increases. 
B) net exports rise and shifts right if the money supply increases. 
C) net exports fall and shifts left if the money supply increases. 
D) net exports fall and shifts right if the money supply increases. 
A) net exports rise and shifts left if the money supply increases. 
B) net exports rise and shifts right if the money supply increases. 
C) net exports fall and shifts left if the money supply increases. 
D) net exports fall and shifts right if the money supply increases.

Question 2

During World War II,

Accepted Answer

A) government purchases of goods and services increased fivefold. 
B) the economy's production increased about 25 percent. 
C) unemployment fell to about 5%. 
D) All of the above are correct. 
A) government purchases of goods and services increased fivefold. 
B) the economy's production increased about 25 percent. 
C) unemployment fell to about 5%. 
D) All of the above are correct.

Question 3

Which of the following is most commonly used to monitor short-run changes in economic activity?

Accepted Answer

A) the inflation rate 
B) real GDP 
C) aggregate demand 
D) aggregate supply 
A) the inflation rate 
B) real GDP 
C) aggregate demand 
D) aggregate supply

Question 4

Which of the following is correct?

Accepted Answer

A) Over the business cycle consumption fluctuates more than investment. 
B) Economic fluctuations are easy to predict. 
C) During recessions sales and profits tend to fall. 
D) Because of government policy the U.S. has suffered no recessions in the last 25 years. 
A) Over the business cycle consumption fluctuates more than investment. 
B) Economic fluctuations are easy to predict. 
C) During recessions sales and profits tend to fall. 
D) Because of government policy the U.S. has suffered no recessions in the last 25 years.

Question 5

As the price level rises

Accepted Answer

A) people will want to hold more money, so the interest rate rises. 
B) people will want to hold more money, so the interest rate falls. 
C) people will want to hold less money, so the interest rate falls. 
D) people will want to hold less money, so the interest rate rises. 
A) people will want to hold more money, so the interest rate rises. 
B) people will want to hold more money, so the interest rate falls. 
C) people will want to hold less money, so the interest rate falls. 
D) people will want to hold less money, so the interest rate rises.

Question 6

Other things the same, as the price level falls, a country's exchange rate

Accepted Answer

A) and interest rates rise. 
B) and interest rates fall. 
C) falls and interest rates rise. 
D) rises and interest rates fall. 
A) and interest rates rise. 
B) and interest rates fall. 
C) falls and interest rates rise. 
D) rises and interest rates fall.

Question 7

Assuming that a is positive, theories of short-run aggregate supply are expressed mathematically as

Accepted Answer

A) quantity of output supplied = natural rate of output + a(actual price level - expected price level). 
B) quantity of output supplied = natural rate of output + a(expected price level - actual price level). 
C) quantity of output supplied = a(actual price level -expected price level) - natural rate of output. 
D) quantity of output supplied = a(expected price level - actual price level) - natural rate of output. 
A) quantity of output supplied = natural rate of output + a(actual price level - expected price level). 
B) quantity of output supplied = natural rate of output + a(expected price level - actual price level). 
C) quantity of output supplied = a(actual price level -expected price level) - natural rate of output. 
D) quantity of output supplied = a(expected price level - actual price level) - natural rate of output.

Question 8

Aggregate demand shifts left when the government

Accepted Answer

A) decreases taxes. 
B) cuts military expenditures. 
C) creates a new investment tax credit 
D) None of the above is correct. 
A) decreases taxes. 
B) cuts military expenditures. 
C) creates a new investment tax credit 
D) None of the above is correct.

Question 9

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 10

As the price level rises, the exchange rate

Accepted Answer

A) falls, so exports rise and imports fall. 
B) falls, so exports fall and imports rise. 
C) rises, so exports rise and imports fall. 
D) rises, so exports fall and imports rise. 
A) falls, so exports rise and imports fall. 
B) falls, so exports fall and imports rise. 
C) rises, so exports rise and imports fall. 
D) rises, so exports fall and imports rise.

Question 11

The quantity of aggregate goods and service demanded rises when the

Accepted Answer

A) price level rises, because the interest rate rises. 
B) price level rises, because the interest rate falls. 
C) price level falls, because the interest rate rises. 
D) price level falls, because the interest rate falls. 
A) price level rises, because the interest rate rises. 
B) price level rises, because the interest rate falls. 
C) price level falls, because the interest rate rises. 
D) price level falls, because the interest rate falls.

Question 12

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

Accepted Answer

A) increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. 
B) increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. 
C) decrease foreign bond purchases, so the supply of dollars in market for foreign-currency exchange increases. 
D) decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. 
A) increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. 
B) increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. 
C) decrease foreign bond purchases, so the supply of dollars in market for foreign-currency exchange increases. 
D) decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.

Question 13

Which of the following is correct concerning recessions?

Accepted Answer

A) They come at fairly regular and predictable intervals. 
B) They are associated with comparatively large declines in investment spending. 
C) They are any period when real GDP growth is less than average. 
D) They tend to be associated with falling unemployment rates. 
A) They come at fairly regular and predictable intervals. 
B) They are associated with comparatively large declines in investment spending. 
C) They are any period when real GDP growth is less than average. 
D) They tend to be associated with falling unemployment rates.

Question 14

Figure 20-2.  
-Refer to Figure 20-2. The appearance of the long-run aggregate-supply (LRAS) curve

Accepted Answer

A) is inconsistent with the concept of monetary neutrality. 
B) is consistent with the idea that point A represents a long-run equilibrium but not a short-run equilibrium when the relevant short-run aggregate-supply curve is AS1. 
C) indicates that Y1 is the natural rate of output. 
D) All of the above are correct. 
A) is inconsistent with the concept of monetary neutrality. 
B) is consistent with the idea that point A represents a long-run equilibrium but not a short-run equilibrium when the relevant short-run aggregate-supply curve is AS1. 
C) indicates that Y1 is the natural rate of output. 
D) All of the above are correct.

Question 15

Which of the following is a lesson concerning shifts in aggregate demand?

Accepted Answer

A) they contribute to fluctuations in output. 
B) in the long-run they change real output, but not the price level. 
C) policymakers are unable to mitigate the severity of economic fluctuations. 
D) All of the above are correct. 
A) they contribute to fluctuations in output. 
B) in the long-run they change real output, but not the price level. 
C) policymakers are unable to mitigate the severity of economic fluctuations. 
D) All of the above are correct.

Question 16

In 1936, John Maynard Keynes published a book, The General Theory, which attempted to explain

Accepted Answer

A) stagflation. 
B) the classical dichotomy. 
C) short-run economic fluctuations. 
D) how changes in the money supply had created the Great Depression. 
A) stagflation. 
B) the classical dichotomy. 
C) short-run economic fluctuations. 
D) how changes in the money supply had created the Great Depression.

Question 17

As the price level falls,

Accepted Answer

A) the exchange rate falls, so net exports fall. 
B) the exchange rate falls, so net exports rise. 
C) the exchange rate rises, so net exports fall. 
D) the exchange rate rises, so net exports rise. 
A) the exchange rate falls, so net exports fall. 
B) the exchange rate falls, so net exports rise. 
C) the exchange rate rises, so net exports fall. 
D) the exchange rate rises, so net exports rise.

Question 18

Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

Accepted Answer

A) Reducing either the minimum wage or the time and cost to open a business would have no effect on the long-run aggregate supply curve. 
B) Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right. 
C) Reducing the minimum wage would shift long-run aggregate supply to the right. Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve. 
D) Reducing the minimum wage would have no affect on the long-run aggregate supply curve. Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right. 
A) Reducing either the minimum wage or the time and cost to open a business would have no effect on the long-run aggregate supply curve. 
B) Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right. 
C) Reducing the minimum wage would shift long-run aggregate supply to the right. Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve. 
D) Reducing the minimum wage would have no affect on the long-run aggregate supply curve. Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right.

Question 19

Other things the same, as the price level falls,

Accepted Answer

A) the money supply falls. 
B) interest rates rise. 
C) a dollar buys more domestic goods. 
D) the aggregate-demand curve shifts right. 
A) the money supply falls. 
B) interest rates rise. 
C) a dollar buys more domestic goods. 
D) the aggregate-demand curve shifts right.

Question 20

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.

Exam 20: Aggregate Demand and Aggregate Supply

Aggregate demand shifts right if at a given price level

During World War II,

Which of the following is most commonly used to monitor short-run changes in economic activity?

Which of the following is correct?

As the price level rises

Other things the same, as the price level falls, a country's exchange rate

Assuming that a is positive, theories of short-run aggregate supply are expressed mathematically as

Aggregate demand shifts left when the government

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

As the price level rises, the exchange rate

The quantity of aggregate goods and service demanded rises when the

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

Which of the following is correct concerning recessions?

Figure 20-2. -Refer to Figure 20-2. The appearance of the long-run aggregate-supply (LRAS) curve

Which of the following is a lesson concerning shifts in aggregate demand?

In 1936, John Maynard Keynes published a book, The General Theory, which attempted to explain

As the price level falls,

Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

Other things the same, as the price level falls,

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

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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