Question 1

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

Accepted Answer

A) an increase in the actual price level 
B) an increase in the expected price level 
C) an increase in the capital stock 
D) an increase in money supply 
A) an increase in the actual price level 
B) an increase in the expected price level 
C) an increase in the capital stock 
D) an increase in money supply

Question 2

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, what would we expect to happen?

Accepted Answer

A) In the short run, 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) In the short run, 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) In the short run, 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) In the short run, 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) In the short run, 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) In the short run, 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) In the short run, 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) In the short run, 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 3

According to the misperceptions theory of the short-run aggregate supply curve, if the price level increases more than people expect, how do firms change their behaviour?

Accepted Answer

A) They believe that the relative price has decreased, so they increase production. 
B) They believe that the relative price has decreased, so they decrease production. 
C) They believe that the relative price has increased, so they increase production. 
D) They believe that the relative price has increased, so they decrease production. 
A) They believe that the relative price has decreased, so they increase production. 
B) They believe that the relative price has decreased, so they decrease production. 
C) They believe that the relative price has increased, so they increase production. 
D) They believe that the relative price has increased, so they decrease production.

Question 4

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 5

Pessimism about the future leads to falling prices and rising unemployment.

Accepted Answer

A) True 
 B)False

Question 6

An increase in the price level makes consumers feel less wealthy. How is this situation represented?

Accepted Answer

A) Aggregate demand shifts right. 
B) Aggregate demand shifts left. 
C) There is a movement to right along a given aggregate demand curve. 
D) There is a movement to the left along a given aggregate demand curve. 
A) Aggregate demand shifts right. 
B) Aggregate demand shifts left. 
C) There is a movement to right along a given aggregate demand curve. 
D) There is a movement to the left along a given aggregate demand curve.

Question 7

Consider the exhibit below for the following questions.
Figure 14-1  
-Refer to Figure 14-1. How would an increase in the money supply move the economy in the short and long run?

Accepted Answer

A) From C to B in the short run and the long run. 
B) From C to D in the short run and the long run. 
C) From C to B in the short run and to A in the long run. 
D) From C to D in the short run and to C in the long run. 
A) From C to B in the short run and the long run. 
B) From C to D in the short run and the long run. 
C) From C to B in the short run and to A in the long run. 
D) From C to D in the short run and to C in the long run.

Question 8

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

Accepted Answer

A) in both Canada and Europe 
B) in Canada, but not in Europe 
C) in Europe, but not in Canada 
D) in neither Canada nor Europe 
A) in both Canada and Europe 
B) in Canada, but not in Europe 
C) in Europe, but not in Canada 
D) in neither Canada nor Europe

Question 9

Which of the following would cause prices and real GDP to rise in the short run?

Accepted Answer

A) Short-run aggregate supply shifts right. 
B) Short-run aggregate supply shifts left. 
C) Aggregate demand shifts right. 
D) Aggregate demand shifts left. 
A) Short-run aggregate supply shifts right. 
B) Short-run aggregate supply shifts left. 
C) Aggregate demand shifts right. 
D) Aggregate demand shifts left.

Question 10

Consider the exhibit below for the following questions.
Figure 14-1  
-Refer to Figure 14-1. Which of the following paths indicates how the economy would move to long run equilibrium?

Accepted Answer

A) from A to B 
B) from C to B 
C) from D to C 
D) From C to A 
A) from A to B 
B) from C to B 
C) from D to C 
D) From C to A

Question 11

How does real GDP change over time?

Accepted Answer

A) It moves in the same direction as unemployment 
B) It moves in the same direction as inflation. 
C) It has a long-term upward trend. 
D) It is approximately constant because it is measured in constant dollars. 
A) It moves in the same direction as unemployment 
B) It moves in the same direction as inflation. 
C) It has a long-term upward trend. 
D) It is approximately constant because it is measured in constant dollars.

Question 12

According to classical economic theory, which of the following do changes in the money supply affect?

Accepted Answer

A) real GDP 
B) real interest rates 
C) the price level 
D) unemployment 
A) real GDP 
B) real interest rates 
C) the price level 
D) unemployment

Question 13

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs. Which of the following pairs of GDP growth rates and unemployment rates is most realistic?

Accepted Answer

A) 6 percent, 0 percent 
B) 3 percent, 20 percent 
C) -1 percent, 6 percent 
D) -3 percent, 2 percent 
A) 6 percent, 0 percent 
B) 3 percent, 20 percent 
C) -1 percent, 6 percent 
D) -3 percent, 2 percent

Question 14

Which of the following best describes the effects of a fall in the price level?

Accepted Answer

A) The real exchange rate and interest rates rise. 
B) The real exchange rate and interest rates fall. 
C) The real exchange rate falls, and interest rates rise. 
D) The real exchange rate rises, and interest rates fall. 
A) The real exchange rate and interest rates rise. 
B) The real exchange rate and interest rates fall. 
C) The real exchange rate falls, and interest rates rise. 
D) The real exchange rate rises, and interest rates fall.

Question 15

When output rises, unemployment falls.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following shifts the short-run, but not the long-run, aggregate supply right?

Accepted Answer

A) a decrease in the price level 
B) a decrease in the expected price level 
C) a decrease in the capital stock 
D) an increase in the money supply 
A) a decrease in the price level 
B) a decrease in the expected price level 
C) a decrease in the capital stock 
D) an increase in the money supply

Question 17

Consider the exhibit below for the following questions.
Figure 14-1  
-Refer to Figure 14-1. If the economy is at A and there is a fall in aggregate demand, what happens to the economy in the short run?

Accepted Answer

A) It stays at A. 
B) It moves to B. 
C) It moves to C. 
D) It moves to D. 
A) It stays at A. 
B) It moves to B. 
C) It moves to C. 
D) It moves to D.

Question 18

Keynes thought that the behaviour of the economy in the short run was influenced by what he called "animal spirits." By this he meant that businesspeople sometimes felt good about the economy, and carried out lots of investment, and at other times felt bad about the economy, and so cut back on their investment spending. Explain how such fluctuations in investment would lead to fluctuations in GDP and prices.

Accepted Answer

Fluctuations in investment cause the agg

Question 19

Which of the following happened during World War II?

Accepted Answer

A) Government purchases of goods and services increased. 
B) The real GDP per person decreased by 60 percent. 
C) The unemployment rate increased to 15 percent. 
D) The long-run aggregate supply shifted to the right. 
A) Government purchases of goods and services increased. 
B) The real GDP per person decreased by 60 percent. 
C) The unemployment rate increased to 15 percent. 
D) The long-run aggregate supply shifted to the right.

Question 20

Which of the following situations would induce a shift of the aggregate demand to the right?

Accepted Answer

A) The price level and government expenditures decreased. 
B) The price level decreased, and the government instituted an investment tax credit. 
C) Government expenditures and the money supply increased. 
D) The bank rate increased, and the dollar appreciated. 
A) The price level and government expenditures decreased. 
B) The price level decreased, and the government instituted an investment tax credit. 
C) Government expenditures and the money supply increased. 
D) The bank rate increased, and the dollar appreciated.

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

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, what would we expect to happen?

According to the misperceptions theory of the short-run aggregate supply curve, if the price level increases more than people expect, how do firms change their behaviour?

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Pessimism about the future leads to falling prices and rising unemployment.

An increase in the price level makes consumers feel less wealthy. How is this situation represented?

Consider the exhibit below for the following questions. Figure 14-1 -Refer to Figure 14-1. How would an increase in the money supply move the economy in the short and long run?

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

Which of the following would cause prices and real GDP to rise in the short run?

Consider the exhibit below for the following questions. Figure 14-1 -Refer to Figure 14-1. Which of the following paths indicates how the economy would move to long run equilibrium?

How does real GDP change over time?

According to classical economic theory, which of the following do changes in the money supply affect?

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs. Which of the following pairs of GDP growth rates and unemployment rates is most realistic?

Which of the following best describes the effects of a fall in the price level?

When output rises, unemployment falls.

Which of the following shifts the short-run, but not the long-run, aggregate supply right?

Consider the exhibit below for the following questions. Figure 14-1 -Refer to Figure 14-1. If the economy is at A and there is a fall in aggregate demand, what happens to the economy in the short run?

Which of the following happened during World War II?

Which of the following situations would induce a shift of the aggregate demand to the right?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 14: Aggregate Demand and Aggregate Supply

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

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, what would we expect to happen?

According to the misperceptions theory of the short-run aggregate supply curve, if the price level increases more than people expect, how do firms change their behaviour?

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Pessimism about the future leads to falling prices and rising unemployment.

An increase in the price level makes consumers feel less wealthy. How is this situation represented?

Consider the exhibit below for the following questions. Figure 14-1 -Refer to Figure 14-1. How would an increase in the money supply move the economy in the short and long run?

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

Which of the following would cause prices and real GDP to rise in the short run?

Consider the exhibit below for the following questions. Figure 14-1 -Refer to Figure 14-1. Which of the following paths indicates how the economy would move to long run equilibrium?

How does real GDP change over time?

According to classical economic theory, which of the following do changes in the money supply affect?

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs. Which of the following pairs of GDP growth rates and unemployment rates is most realistic?

Which of the following best describes the effects of a fall in the price level?

When output rises, unemployment falls.

Which of the following shifts the short-run, but not the long-run, aggregate supply right?

Consider the exhibit below for the following questions. Figure 14-1 -Refer to Figure 14-1. If the economy is at A and there is a fall in aggregate demand, what happens to the economy in the short run?

Which of the following happened during World War II?

Which of the following situations would induce a shift of the aggregate demand to the right?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters