Question 1

Most economists believe that classical economic theory is a good description of the world over which of the following time periods?

Accepted Answer

A) in neither the short nor long run 
B) in the short run and in the long run 
C) in the short run, but not in the long run 
D) in the long run, but not in the short run 
A) in neither the short nor long run 
B) in the short run and in the long run 
C) in the short run, but not in the long run 
D) in the long run, but not in the short run

Question 2

An increase in the money supply raises output in the long run.

Accepted Answer

A) True 
 B)False

Question 3

Suppose a stock market crash makes people feel poorer. What are the effects of this decrease in wealth?

Accepted Answer

A) a decrease in consumption, which shifts aggregate supply left 
B) a decrease in consumption, which shifts aggregate demand left 
C) a increase in consumption, which shifts aggregate supply right 
D) a increase in consumption, which shifts aggregate demand right 
A) a decrease in consumption, which shifts aggregate supply left 
B) a decrease in consumption, which shifts aggregate demand left 
C) a increase in consumption, which shifts aggregate supply right 
D) a increase in consumption, which shifts aggregate demand right

Question 4

Suppose a fall in stock prices makes people feel poorer. What are the effects of this decrease in wealth?

Accepted Answer

A) a decrease in consumption, shown as a movement to the left along a given aggregate demand curve 
B) an increase in consumption, shown as a movement to the right along a given aggregate demand curve 
C) a decrease in consumption, which shifts the aggregate demand curve to the left 
D) an increase in consumption, which shifts the aggregate demand curve to the right 
A) a decrease in consumption, shown as a movement to the left along a given aggregate demand curve 
B) an increase in consumption, shown as a movement to the right along a given aggregate demand curve 
C) a decrease in consumption, which shifts the aggregate demand curve to the left 
D) an increase in consumption, which shifts the aggregate demand curve to the right

Question 5

According to the sticky wage theory, which of the following is consistent with a more-than-expected increase in the price level?

Accepted Answer

A) Real wages rise, so firms will hire more workers. 
B) Real wages rise, so firms will hire fewer workers. 
C) Real wages fall, so firms will hire more workers. 
D) Real wages fall, so firms will hire fewer workers. 
A) Real wages rise, so firms will hire more workers. 
B) Real wages rise, so firms will hire fewer workers. 
C) Real wages fall, so firms will hire more workers. 
D) Real wages fall, so firms will hire fewer workers.

Question 6

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 long run?

Accepted Answer

A) from C to A 
B) from C to B 
C) from C to A to C again 
D) from C to D 
A) from C to A 
B) from C to B 
C) from C to A to C again 
D) from C to D

Question 7

How do changes in the price of oil affect economies?

Accepted Answer

A) They lead to recession and deflation 
B) They do not contribute much to output fluctuations. 
C) They change the economy principally by changing aggregate demand. 
D) They may create both inflation and recession. 
A) They lead to recession and deflation 
B) They do not contribute much to output fluctuations. 
C) They change the economy principally by changing aggregate demand. 
D) They may create both inflation and recession.

Question 8

Why does an increase in the price level cause a decrease in the aggregate quantity of goods and services demanded?

Accepted Answer

A) because as wealth rises, interest rates rise, and the dollar appreciates 
B) because as wealth rises, interest rates fall, and the dollar depreciates 
C) because as wealth falls, interest rates rise, and the dollar appreciates 
D) because as wealth falls, interest rates fall, and the dollar depreciates 
A) because as wealth rises, interest rates rise, and the dollar appreciates 
B) because as wealth rises, interest rates fall, and the dollar depreciates 
C) because as wealth falls, interest rates rise, and the dollar appreciates 
D) because as wealth falls, interest rates fall, and the dollar depreciates

Question 9

Scenario 14-2. The economy is in long-run equilibrium. Suddenly, due to corporate scandals, international tensions, and the loss of confidence among policymakers, citizens become pessimistic concerning the future. They maintain this level of pessimism for a long time.
-Refer to Scenario 14-2. In the long-run, the change in price expectations caused by pessimism leads to which of the following shifts?

Accepted Answer

A) Long-run AS shifts left. 
B) Long-run AS shifts right. 
C) Short-run AS shifts right. 
D) Short-run AS shifts left. 
A) Long-run AS shifts left. 
B) Long-run AS shifts right. 
C) Short-run AS shifts right. 
D) Short-run AS shifts left.

Question 10

Use the sticky wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Accepted Answer

When people expect the price l

Question 11

What is the effect of technological progress and increases in the money supply on prices in the long run?

Accepted Answer

A) Both make the price level rise. 
B) Both make the price level fall. 
C) Technological progress makes the price level rise, while increases in the money supply make prices fall. 
D) Technological progress makes the price level fall, while increases in the money supply make prices rise. 
A) Both make the price level rise. 
B) Both make the price level fall. 
C) Technological progress makes the price level rise, while increases in the money supply make prices fall. 
D) Technological progress makes the price level fall, while increases in the money supply make prices rise.

Question 12

Because not all prices adjust instantly to changing conditions, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 13

In the aggregate demand and aggregate supply model, when does the aggregate quantity of goods demanded increase?

Accepted Answer

A) when real wealth rises 
B) when the interest rate rises 
C) when the dollar appreciates 
D) when the expected price level rises 
A) when real wealth rises 
B) when the interest rate rises 
C) when the dollar appreciates 
D) when the expected price level rises

Question 14

What did Keynes believe caused recessions and depressions?

Accepted Answer

A) excess aggregate demand 
B) inadequate aggregate demand 
C) excess aggregate supply 
D) inadequate aggregate supply 
A) excess aggregate demand 
B) inadequate aggregate demand 
C) excess aggregate supply 
D) inadequate aggregate supply

Question 15

Which of the following does NOT determine the long-run level of real GDP?

Accepted Answer

A) the price level 
B) the supply of labour 
C) available natural resources 
D) available technology 
A) the price level 
B) the supply of labour 
C) available natural resources 
D) available technology

Question 16

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 Canada 
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 Canada

Question 17

Which of the following would make the price level decrease and real GDP increase?

Accepted Answer

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

Question 18

Most economists believe that classical theory explains the world in the short run, but not the long run.

Accepted Answer

A) True 
 B)False

Question 19

Changes in the price level affect which of the following components of aggregate demand?

Accepted Answer

A) only consumption and investment 
B) only consumption and net exports 
C) only consumption 
D) consumption, investment, and net exports 
A) only consumption and investment 
B) only consumption and net exports 
C) only consumption 
D) consumption, investment, and net exports

Question 20

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, what would we expect to happen?

Accepted Answer

A) The price level and real GDP will both rise. 
B) The price level and real GDP will both fall. 
C) The price level and real GDP will both stay the same. 
D) The price level will increase, and the real GDP will fall. 
A) The price level and real GDP will both rise. 
B) The price level and real GDP will both fall. 
C) The price level and real GDP will both stay the same. 
D) The price level will increase, and the real GDP will fall.

Most economists believe that classical economic theory is a good description of the world over which of the following time periods?

An increase in the money supply raises output in the long run.

Suppose a stock market crash makes people feel poorer. What are the effects of this decrease in wealth?

Suppose a fall in stock prices makes people feel poorer. What are the effects of this decrease in wealth?

According to the sticky wage theory, which of the following is consistent with a more-than-expected increase in the price level?

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 long run?

How do changes in the price of oil affect economies?

Why does an increase in the price level cause a decrease in the aggregate quantity of goods and services demanded?

Use the sticky wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

What is the effect of technological progress and increases in the money supply on prices in the long run?

Because not all prices adjust instantly to changing conditions, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

In the aggregate demand and aggregate supply model, when does the aggregate quantity of goods demanded increase?

What did Keynes believe caused recessions and depressions?

Which of the following does NOT determine the long-run level of real GDP?

Which of the following is NOT included in aggregate demand?

Which of the following would make the price level decrease and real GDP increase?

Most economists believe that classical theory explains the world in the short run, but not the long run.

Changes in the price level affect which of the following components of aggregate demand?

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, what would we expect to happen?

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

Most economists believe that classical economic theory is a good description of the world over which of the following time periods?

An increase in the money supply raises output in the long run.

Suppose a stock market crash makes people feel poorer. What are the effects of this decrease in wealth?

Suppose a fall in stock prices makes people feel poorer. What are the effects of this decrease in wealth?

According to the sticky wage theory, which of the following is consistent with a more-than-expected increase in the price level?

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 long run?

How do changes in the price of oil affect economies?

Why does an increase in the price level cause a decrease in the aggregate quantity of goods and services demanded?

Use the sticky wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

What is the effect of technological progress and increases in the money supply on prices in the long run?

Because not all prices adjust instantly to changing conditions, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

In the aggregate demand and aggregate supply model, when does the aggregate quantity of goods demanded increase?

What did Keynes believe caused recessions and depressions?

Which of the following does NOT determine the long-run level of real GDP?

Which of the following is NOT included in aggregate demand?

Which of the following would make the price level decrease and real GDP increase?

Most economists believe that classical theory explains the world in the short run, but not the long run.

Changes in the price level affect which of the following components of aggregate demand?

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, what would we expect to happen?

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