Question 1

All else equal, which of the following happens as the price level falls?

Accepted Answer

A) the money supply falls 
B) interest rate rise 
C) dollars become more valuable 
D) dollars become less valuable 
A) the money supply falls 
B) interest rate rise 
C) dollars become more valuable 
D) dollars become less valuable

Question 2

What happens when the price level rises?

Accepted Answer

A) Interest rates rise, so firms increase investment. 
B) Interest rates rise, so firms decrease investment. 
C) Interest rates fall, so firms increase investment. 
D) Interest rates fall, so firms decrease investment. 
A) Interest rates rise, so firms increase investment. 
B) Interest rates rise, so firms decrease investment. 
C) Interest rates fall, so firms increase investment. 
D) Interest rates fall, so firms decrease investment.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

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

Question 5

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

Accepted Answer

Variables that fall along with real GDP

Question 6

Consider the short-run aggregate supply curve in the following graph.   
a.Calculate approximately the elasticities of the curve at two price levels, P = 20 and P = 100. (Hint: The price elasticity formula is EP = percentage change in Y / percentage change in P.)
b.Explain the meaning of the elasticity in the context of the AS curve.
c.Compare the two elasticities found in (a) and discuss the results. Does this comparison suggest certain policy implications?

Accepted Answer

An easier way of calculating the elastic

Question 7

When is the aggregate supply curve vertical?

Accepted Answer

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

Question 8

Scenario 14-1. The economy is in long-run equilibrium. Suddenly, due to improved international relations and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time.
-Refer to Scenario 14-1. Initially, which curve shifts in which direction?

Accepted Answer

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

Question 9

Which of the following explains why production rises in most years?

Accepted Answer

A) increases in prices of goods and services 
B) increases in stock prices 
C) aging population 
D) technological innovation 
A) increases in prices of goods and services 
B) increases in stock prices 
C) aging population 
D) technological innovation

Question 10

Which of the following best describes the beginning of a recession?

Accepted Answer

A) Production and unemployment both rise. 
B) Production rises and unemployment falls. 
C) Production falls and unemployment rises. 
D) Production and unemployment both fall. 
A) Production and unemployment both rise. 
B) Production rises and unemployment falls. 
C) Production falls and unemployment rises. 
D) Production and unemployment both fall.

Question 11

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

Accepted Answer

A) short-run fluctuations in the economy 
B) the effects of macroeconomic policy on the prices of individual goods 
C) the long-run effects of international trade policies 
D) productivity and economic growth 
A) short-run fluctuations in the economy 
B) the effects of macroeconomic policy on the prices of individual goods 
C) the long-run effects of international trade policies 
D) productivity and economic growth

Question 12

If speculators bid up the value of the dollar in the market for foreign-currency exchange, aggregate demand would shift to the left.

Accepted Answer

A) True 
 B)False

Question 13

Scenario 14-1. The economy is in long-run equilibrium. Suddenly, due to improved international relations and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time.
-Refer to Scenario 14-1. How does the new long-run equilibrium differ from the original one?

Accepted Answer

A) Both the price level and real GDP are higher. 
B) Both the price level and real GDP are lower. 
C) The price level is the same and real GDP is higher. 
D) The price level is higher and real GDP is the same. 
A) Both the price level and real GDP are higher. 
B) Both the price level and real GDP are lower. 
C) The price level is the same and real GDP is higher. 
D) The price level is higher and real GDP is the same.

Question 14

In which of the following situations would the long-run aggregate supply curve shift left?

Accepted Answer

A) if the capital stock increases 
B) if there is a hurricane 
C) if the government removes some environmental regulations that limit production methods 
D) if trade barriers are removed 
A) if the capital stock increases 
B) if there is a hurricane 
C) if the government removes some environmental regulations that limit production methods 
D) if trade barriers are removed

Question 15

Which of the following shifts aggregate demand to the left?

Accepted Answer

A) an increase in the price level 
B) a decrease in the money supply 
C) an increase in net exports 
D) an investment tax credit 
A) an increase in the price level 
B) a decrease in the money supply 
C) an increase in net exports 
D) an investment tax credit

Question 16

Which of the following measures the overall price level?

Accepted Answer

A) the price of some particular commodity or service 
B) the rate of inflation 
C) the consumer price index 
D) the nominal GDP 
A) the price of some particular commodity or service 
B) the rate of inflation 
C) the consumer price index 
D) the nominal GDP

Question 17

Which of the following best defines business cycles?

Accepted Answer

A) long-term trends in economic activity 
B) regular, predictable fluctuations in GDP 
C) the rise and fall of multinational companies 
D) fluctuations in the economy 
A) long-term trends in economic activity 
B) regular, predictable fluctuations in GDP 
C) the rise and fall of multinational companies 
D) fluctuations in the economy

Question 18

What are the effects of an increase in the price level?

Accepted Answer

A) People hold less money, so they lend less, and the interest rate rises. 
B) People hold less money, so they lend more, and the interest rate falls. 
C) People hold more money, so they lend more, and the interest rate falls. 
D) People hold more money, so they lend less, and the interest rate rises. 
A) People hold less money, so they lend less, and the interest rate rises. 
B) People hold less money, so they lend more, and the interest rate falls. 
C) People hold more money, so they lend more, and the interest rate falls. 
D) People hold more money, so they lend less, and the interest rate rises.

Question 19

Stagflation would result from the aggregate supply curve shifting left.

Accepted Answer

A) True 
 B)False

Question 20

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

Accepted Answer

A) The expected price level rises, shifting aggregate demand right. 
B) The expected price level rises, shifting aggregate demand left. 
C) The expected price level falls, shifting aggregate supply right. 
D) The expected price level falls, shifting aggregate supply left. 
A) The expected price level rises, shifting aggregate demand right. 
B) The expected price level rises, shifting aggregate demand left. 
C) The expected price level falls, shifting aggregate supply right. 
D) The expected price level falls, shifting aggregate supply left.

All else equal, which of the following happens as the price level falls?

What happens when the price level rises?

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

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

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

When is the aggregate supply curve vertical?

Which of the following explains why production rises in most years?

Which of the following best describes the beginning of a recession?

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

If speculators bid up the value of the dollar in the market for foreign-currency exchange, aggregate demand would shift to the left.

In which of the following situations would the long-run aggregate supply curve shift left?

Which of the following shifts aggregate demand to the left?

Which of the following measures the overall price level?

Which of the following best defines business cycles?

What are the effects of an increase in the price level?

Stagflation would result from the aggregate supply curve shifting left.

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

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

All else equal, which of the following happens as the price level falls?

What happens when the price level rises?

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

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

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

When is the aggregate supply curve vertical?

Which of the following explains why production rises in most years?

Which of the following best describes the beginning of a recession?

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

If speculators bid up the value of the dollar in the market for foreign-currency exchange, aggregate demand would shift to the left.

In which of the following situations would the long-run aggregate supply curve shift left?

Which of the following shifts aggregate demand to the left?

Which of the following measures the overall price level?

Which of the following best defines business cycles?

What are the effects of an increase in the price level?

Stagflation would result from the aggregate supply curve shifting left.

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

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