Question 1

During the last half of 1980, the U.S. unemployment rate was about 7.5 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 2

Suppose that the economy is at long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then 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 3

When the dollar depreciates, each dollar buys

Accepted Answer

A) more foreign currency, and so buys more foreign goods. 
B) more foreign currency, and so buys fewer foreign goods. 
C) less foreign currency, and so buys more foreign goods. 
D) less foreign currency, and so buys fewer foreign goods. 
A) more foreign currency, and so buys more foreign goods. 
B) more foreign currency, and so buys fewer foreign goods. 
C) less foreign currency, and so buys more foreign goods. 
D) less foreign currency, and so buys fewer foreign goods.

Question 4

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

Accepted Answer

A) an increase in the price level 
B) an increase in the minimum wage 
C) a decrease in the price of oil 
D) more people migrate abroad than immigrate from abroad 
A) an increase in the price level 
B) an increase in the minimum wage 
C) a decrease in the price of oil 
D) more people migrate abroad than immigrate from abroad

Question 5

During recessions declines in investment account for about

Accepted Answer

A) 1/6 of the decline in real GDP. 
B) 1/3 of the decline in real GDP. 
C) 1/2 of the decline in real GDP. 
D) 2/3 of the decline in real GDP. 
A) 1/6 of the decline in real GDP. 
B) 1/3 of the decline in real GDP. 
C) 1/2 of the decline in real GDP. 
D) 2/3 of the decline in real GDP.

Question 6

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

Accepted Answer

A) the price level and real GDP both to rise. 
B) the price level and real GDP both to fall. 
C) the price level and real GDP both to stay the same. 
D) All of the above are possible. 
A) the price level and real GDP both to rise. 
B) the price level and real GDP both to fall. 
C) the price level and real GDP both to stay the same. 
D) All of the above are possible.

Question 7

Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time.
-Refer to Optimism. 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 8

The recessions of the 1970s are often attributed to

Accepted Answer

A) declining inflation expectations. 
B) an increase in oil prices. 
C) declines in the price of stock. 
D) decreases in the money supply. 
A) declining inflation expectations. 
B) an increase in oil prices. 
C) declines in the price of stock. 
D) decreases in the money supply.

Question 9

When taxes decrease, consumption

Accepted Answer

A) decreases as shown by a movement to the left along a given aggregate-demand curve. 
B) decreases as shown by a shift of the aggregate demand curve to the left. 
C) increases as shown by a movement to the right along a given aggregate-demand curve. 
D) increases as shown by a shift of the aggregate demand curve to the right. 
A) decreases as shown by a movement to the left along a given aggregate-demand curve. 
B) decreases as shown by a shift of the aggregate demand curve to the left. 
C) increases as shown by a movement to the right along a given aggregate-demand curve. 
D) increases as shown by a shift of the aggregate demand curve to the right.

Question 10

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have

Accepted Answer

A) higher than desired prices which leads to an increase in the aggregate quantity of goods and services supplied. 
B) higher than desired prices which leads to a decrease in the aggregate quantity of goods and service supplied. 
C) lower than desired prices which leads to an increase in the aggregate quantity of goods and services supplied. 
D) lower than desired prices which leads to a decrease in the aggregate quantity of goods and services supplied 
A) higher than desired prices which leads to an increase in the aggregate quantity of goods and services supplied. 
B) higher than desired prices which leads to a decrease in the aggregate quantity of goods and service supplied. 
C) lower than desired prices which leads to an increase in the aggregate quantity of goods and services supplied. 
D) lower than desired prices which leads to a decrease in the aggregate quantity of goods and services supplied

Question 11

Which of the following would not be included in aggregate demand?

Accepted Answer

A) additions of newly produced goods to inventory 
B) purchases of U.S. services by foreigners 
C) the purchase of newly produced capital goods 
D) government transfer payments such as Social Security payments 
A) additions of newly produced goods to inventory 
B) purchases of U.S. services by foreigners 
C) the purchase of newly produced capital goods 
D) government transfer payments such as Social Security payments

Question 12

The aggregate-demand curve shows that a decrease in the price level

Accepted Answer

A) decreases the dollar value of goods and services demanded in the economy. 
B) decreases the real value of goods and services demanded in the economy. 
C) increases the dollar value of goods and services demanded in the economy. 
D) increases the real value of goods and services demanded in the economy. 
A) decreases the dollar value of goods and services demanded in the economy. 
B) decreases the real value of goods and services demanded in the economy. 
C) increases the dollar value of goods and services demanded in the economy. 
D) increases the real value of goods and services demanded in the economy.

Question 13

A change in the money supply changes only nominal variables in the long run.

Accepted Answer

A) True 
 B)False

Question 14

Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run,

Accepted Answer

A) real GDP will rise and the price level might rise, fall, or stay the same. In the long-run, real GDP will rise and the price level might rise, fall, or stay the same. 
B) the price level will fall, and real GDP might rise, fall, or stay the same. In the long-run, real GDP and the price level will be unaffected. 
C) the price level will rise, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall. 
D) the price level will fall, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall. 
A) real GDP will rise and the price level might rise, fall, or stay the same. In the long-run, real GDP will rise and the price level might rise, fall, or stay the same. 
B) the price level will fall, and real GDP might rise, fall, or stay the same. In the long-run, real GDP and the price level will be unaffected. 
C) the price level will rise, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall. 
D) the price level will fall, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.

Question 15

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

Accepted Answer

A) U.S. goods become more expensive relative to foreign goods so aggregate demand shifts right. 
B) U.S. goods become less expensive relative to foreign goods so aggregate demand shifts right. 
C) U.S. goods become more expensive relative to foreign goods so aggregate demand shifts left. 
D) U.S. goods become less expensive relative to foreign goods so aggregate demand shifts left. 
A) U.S. goods become more expensive relative to foreign goods so aggregate demand shifts right. 
B) U.S. goods become less expensive relative to foreign goods so aggregate demand shifts right. 
C) U.S. goods become more expensive relative to foreign goods so aggregate demand shifts left. 
D) U.S. goods become less expensive relative to foreign goods so aggregate demand shifts left.

Question 16

Other things the same, continued increases in technology lead to

Accepted Answer

A) continued increases in the price level and real GDP. 
B) continued increases in the price level but not continued increases in real GDP. 
C) continued increases in real GDP but not continued increases in the price level. 
D) None of the above are correct. 
A) continued increases in the price level and real GDP. 
B) continued increases in the price level but not continued increases in real GDP. 
C) continued increases in real GDP but not continued increases in the price level. 
D) None of the above are correct.

Question 17

Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, 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 18

If output is above its natural rate, then according to sticky-wage theory

Accepted Answer

A) workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce less at any given price level. 
B) workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce more at any given price level. 
C) will strike bargains for higher wages. In response to the higher wages firms will produce less at any given price level. 
D) workers and firms will strike bargains for higher wages. In response to the higher wages firms will produce more at any given price level. 
A) workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce less at any given price level. 
B) workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce more at any given price level. 
C) will strike bargains for higher wages. In response to the higher wages firms will produce less at any given price level. 
D) workers and firms will strike bargains for higher wages. In response to the higher wages firms will produce more at any given price level.

Question 19

Other things the same, if the price level 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 20

In which case can we be sure aggregate demand shifts left overall?

Accepted Answer

A) people want to save more for retirement and the government raises taxes 
B) people want to save more for retirement and the government cuts taxes 
C) people want to save less for retirement and the government raises taxes 
D) people want to save less for retirement and the government cuts taxes 
A) people want to save more for retirement and the government raises taxes 
B) people want to save more for retirement and the government cuts taxes 
C) people want to save less for retirement and the government raises taxes 
D) people want to save less for retirement and the government cuts taxes

Exam 20: Aggregate Demand and Aggregate Supply

During the last half of 1980, the U.S. unemployment rate was about 7.5 percent. Historical experience suggests that this is

Suppose that the economy is at long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run

When the dollar depreciates, each dollar buys

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

During recessions declines in investment account for about

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

The recessions of the 1970s are often attributed to

When taxes decrease, consumption

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have

Which of the following would not be included in aggregate demand?

The aggregate-demand curve shows that a decrease in the price level

A change in the money supply changes only nominal variables in the long run.

Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run,

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

Other things the same, continued increases in technology lead to

Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, then

If output is above its natural rate, then according to sticky-wage theory

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

In which case can we be sure aggregate demand shifts left overall?

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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