Question 1

Other things the same, if the U.S. price level rises, then

Accepted Answer

A) the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises. 
B) the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls. 
C) the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises. 
D) the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls. 
A) the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises. 
B) the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls. 
C) the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises. 
D) the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.

Question 2

Which of the following fall during a recession?

Accepted Answer

A) both retail sales and employment 
B) retail sales but not employment 
C) employment but not retail sales 
D) neither employment nor retail sales 
A) both retail sales and employment 
B) retail sales but not employment 
C) employment but not retail sales 
D) neither employment nor retail sales

Question 3

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

Accepted Answer

There are occasional short-lived periods

Question 4

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level

Accepted Answer

A) and output are higher than in the original long-run equilibrium. 
B) and output are lower than in the original long-run equilibrium. 
C) is lower and output is the same as the original long-run equilibrium. 
D) is the same and output is lower than in the original long-run equilibrium. 
A) and output are higher than in the original long-run equilibrium. 
B) and output are lower than in the original long-run equilibrium. 
C) is lower and output is the same as the original long-run equilibrium. 
D) is the same and output is lower than in the original long-run equilibrium.

Question 5

Other things the same, when the price level rises more than expected, some firms will 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 6

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, the value of the dollar falls. 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.

Question 7

Stagflation exists when prices

Accepted Answer

A) and output rise. 
B) rise and output falls. 
C) fall and output rises. 
D) and output fall. 
A) and output rise. 
B) rise and output falls. 
C) fall and output rises. 
D) and output fall.

Question 8

Other things the same, as the price level falls,

Accepted Answer

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

Question 9

When output rises, unemployment falls.

Accepted Answer

A) True 
 B)False

Question 10

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. In the long run, if the Fed does not respond, the change in price expectations created by the crisis shifts

Accepted Answer

A) aggregate demand right. 
B) aggregate demand left. 
C) short-run aggregate supply right. 
D) short-run aggregate supply left. 
A) aggregate demand right. 
B) aggregate demand left. 
C) short-run aggregate supply right. 
D) short-run aggregate supply left.

Question 11

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Accepted Answer

A) prices and output both increased immediately. 
B) prices increased immediately while output remained unchanged. 
C) it took time for prices to rise; in the meantime output was lower. 
D) it took time for prices to rise; in the meantime output was higher. 
A) prices and output both increased immediately. 
B) prices increased immediately while output remained unchanged. 
C) it took time for prices to rise; in the meantime output was lower. 
D) it took time for prices to rise; in the meantime output was higher.

Question 12

Which of the following would shift long-run aggregate supply to the right?

Accepted Answer

A) increased immigration from abroad 
B) a decrease in the price of an imported natural resource 
C) opening the economy to international trade 
D) All of the above are correct. 
A) increased immigration from abroad 
B) a decrease in the price of an imported natural resource 
C) opening the economy to international trade 
D) All of the above are correct.

Question 13

Technological progress shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 14

The long-run aggregate supply curve shifts right if

Accepted Answer

A) immigration from abroad increases. 
B) the capital stock increases. 
C) technology advances. 
D) All of the above are correct. 
A) immigration from abroad increases. 
B) the capital stock increases. 
C) technology advances. 
D) All of the above are correct.

Question 15

If banks and speculators in the U.S. decided to exchange U.S. dollars for the foreign currencies of other countries, but foreigners do not desire to increase their holdings of U.S. dollars, then U.S. net exports would

Accepted Answer

A) rise and aggregate demand would shift left. 
B) rise and aggregate demand would shift right. 
C) fall and aggregate demand would shift left. 
D) fall and aggregate demand would shift right. 
A) rise and aggregate demand would shift left. 
B) rise and aggregate demand would shift right. 
C) fall and aggregate demand would shift left. 
D) fall and aggregate demand would shift right.

Question 16

Other things the same, an increase in the price level makes consumers feel

Accepted Answer

A) less wealthy, so the quantity of goods and services demanded falls. 
B) less wealthy, so the quantity of goods and services demanded rises. 
C) more wealthy, so the quantity of goods and services demanded rises. 
D) more wealthy, so the quantity of goods and services demanded falls. 
A) less wealthy, so the quantity of goods and services demanded falls. 
B) less wealthy, so the quantity of goods and services demanded rises. 
C) more wealthy, so the quantity of goods and services demanded rises. 
D) more wealthy, so the quantity of goods and services demanded falls.

Question 17

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp decline in the stock market, a tax cut, an increase in the money supply and a decline in the value of the dollar. In the short run

Accepted Answer

A) the price level and real GDP will both rise. 
B) the price level and real GDP will both fall. 
C) neither the price leave nor real GDP will change. 
D) All of the above are possible. 
A) the price level and real GDP will both rise. 
B) the price level and real GDP will both fall. 
C) neither the price leave nor real GDP will change. 
D) All of the above are possible.

Question 18

Which of the following shifts aggregate demand to the right?

Accepted Answer

A) a decrease in the money supply 
B) increases in the profitability of capital due perhaps to technological progress. 
C) the repeal of an investment tax credit 
D) a decrease in the price level 
A) a decrease in the money supply 
B) increases in the profitability of capital due perhaps to technological progress. 
C) the repeal of an investment tax credit 
D) a decrease in the price level

Question 19

Stagflation results from continued decreases in aggregate demand.

Accepted Answer

A) True 
 B)False

Question 20

The effects of a higher than expected price level are shown by

Accepted Answer

A) shifting the short-run aggregate supply curve right. 
B) shifting the short-run aggregate supply curve left. 
C) moving to the right along a given aggregate supply curve. 
D) moving to the left along a given aggregate supply curve. 
A) shifting the short-run aggregate supply curve right. 
B) shifting the short-run aggregate supply curve left. 
C) moving to the right along a given aggregate supply curve. 
D) moving to the left along a given aggregate supply curve.

Exam 20: Aggregate Demand and Aggregate Supply

Other things the same, if the U.S. price level rises, then

Which of the following fall during a recession?

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level

Other things the same, when the price level rises more than expected, some firms will have

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, the value of the dollar falls. In the short-run

Stagflation exists when prices

Other things the same, as the price level falls,

When output rises, unemployment falls.

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Which of the following would shift long-run aggregate supply to the right?

Technological progress shifts the long-run aggregate supply curve to the right.

The long-run aggregate supply curve shifts right if

If banks and speculators in the U.S. decided to exchange U.S. dollars for the foreign currencies of other countries, but foreigners do not desire to increase their holdings of U.S. dollars, then U.S. net exports would

Other things the same, an increase in the price level makes consumers feel

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp decline in the stock market, a tax cut, an increase in the money supply and a decline in the value of the dollar. In the short run

Which of the following shifts aggregate demand to the right?

Stagflation results from continued decreases in aggregate demand.

The effects of a higher than expected price level are shown by

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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