Question 1

Which of the following characterizes business cycles?

Accepted Answer

A) They are mainly fluctuations in consumption. 
B) They are no longer very important due to government policy. 
C) They are fluctuations in real GDP and related variables over time. 
D) They are easily predicted by competent economists. 
A) They are mainly fluctuations in consumption. 
B) They are no longer very important due to government policy. 
C) They are fluctuations in real GDP and related variables over time. 
D) They are easily predicted by competent economists.

Question 2

Which of the following does the downward slope of the aggregate demand curve show?

Accepted Answer

A) that an increase in the money supply causes the aggregate quantity of goods and services demanded to increase 
B) that an increase in the money supply causes the aggregate quantity of goods and services demanded to decrease 
C) that an increase in the price level causes the aggregate quantity of goods and services demanded to increase 
D) that an increase in the price level causes the aggregate quantity of goods and services demanded to decrease 
A) that an increase in the money supply causes the aggregate quantity of goods and services demanded to increase 
B) that an increase in the money supply causes the aggregate quantity of goods and services demanded to decrease 
C) that an increase in the price level causes the aggregate quantity of goods and services demanded to increase 
D) that an increase in the price level causes the aggregate quantity of goods and services demanded to decrease

Question 3

Which of the following best describes the effects of an increase in the price level?

Accepted Answer

A) Dollars are worth more, so people spend more. 
B) Dollars are worth more, so people spend less. 
C) Dollars are worth less, so people spend more. 
D) Dollars are worth less, so people spend less. 
A) Dollars are worth more, so people spend more. 
B) Dollars are worth more, so people spend less. 
C) Dollars are worth less, so people spend more. 
D) Dollars are worth less, so people spend less.

Question 4

Consider the exhibit below for the following questions.
Figure 14-1  
-Refer to Figure 14-1. In the short run, which of the following would result from a favourable shift in aggregate supply?

Accepted Answer

A) It would move the economy from A to B. 
B) It would move the economy from B to C. 
C) It would move the economy from C to D. 
D) It would move the economy from D to A. 
A) It would move the economy from A to B. 
B) It would move the economy from B to C. 
C) It would move the economy from C to D. 
D) It would move the economy from D to A.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

What happens when the dollar appreciates?

Accepted Answer

A) Net exports increase, and aggregate demand shifts right. 
B) Net exports increase, and aggregate demand shifts left. 
C) Net exports decrease, and aggregate demand shifts right. 
D) Net exports decrease, and aggregate demand shifts left. 
A) Net exports increase, and aggregate demand shifts right. 
B) Net exports increase, and aggregate demand shifts left. 
C) Net exports decrease, and aggregate demand shifts right. 
D) Net exports decrease, and aggregate demand shifts left.

Question 7

Use the misperceptions theory to discuss the economic forces that shift the aggregate supply curve when the expectations about the overall price level change.

Accepted Answer

According to the misperceptions theory,

Question 8

When taxes decrease, consumption increases. How is this situation represented in the aggregate demand and aggregate supply model?

Accepted Answer

A) by a movement to the right along a given aggregate demand curve 
B) by shifting aggregate demand to the right 
C) by shifting aggregate supply to the right 
D) by a movement to the left along the aggregate demand curve 
A) by a movement to the right along a given aggregate demand curve 
B) by shifting aggregate demand to the right 
C) by shifting aggregate supply to the right 
D) by a movement to the left along the aggregate demand curve

Question 9

What are the effects of a decrease in the price level?

Accepted Answer

A) The real interest rate increases, the dollar appreciates, and net exports increase. 
B) The real interest rate increases, the dollar depreciates, and net exports decrease. 
C) The real interest rate decreases, the dollar depreciates, and net exports increase. 
D) The real interest rate decreases, the dollar appreciates, and net exports decrease. 
A) The real interest rate increases, the dollar appreciates, and net exports increase. 
B) The real interest rate increases, the dollar depreciates, and net exports decrease. 
C) The real interest rate decreases, the dollar depreciates, and net exports increase. 
D) The real interest rate decreases, the dollar appreciates, and net exports decrease.

Question 10

Some economists argue that at low levels of GDP shifts in the aggregate demand curve increase output without significant increases in the price levels (without inflation), while at higher level of output a shift in the aggregate demand increases significantly the price level without much effect on output. How would an aggregate supply curve look like according to this theory?

Accepted Answer

This theory describes an AS cu

Question 11

Consider the exhibit below for the following questions.
Figure 14-1  
-Refer to Figure 14-1. If the economy starts at A and moves to D, what happens to the economy in the long run?

Accepted Answer

A) It moves to A. 
B) It moves to B. 
C) It moves to C. 
D) It moves back to D. 
A) It moves to A. 
B) It moves to B. 
C) It moves to C. 
D) It moves back to D.

Question 12

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

Accepted Answer

An AD-induced recession lowers prices an

Question 13

In which of the following situations would stagflation exist?

Accepted Answer

A) when prices and output rise 
B) when prices rise and output falls 
C) when prices fall and output rises 
D) when prices and output fall 
A) when prices and output rise 
B) when prices rise and output falls 
C) when prices fall and output rises 
D) when prices and output fall

Question 14

Like real GDP, investment fluctuates, but investment fluctuates by a larger percentage.

Accepted Answer

A) True 
 B)False

Question 15

An unexpected increase in the price level does not shift the aggregate supply curve, but an expected increase in the price level shifts the aggregate supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 16

By how much did the real GDP per person increase during World War II?

Accepted Answer

A) 25 percent 
B) 50 percent 
C) 60 percent 
D) 80 percent 
A) 25 percent 
B) 50 percent 
C) 60 percent 
D) 80 percent

Question 17

What does an increase in the interest rate cause?

Accepted Answer

A) It causes investment to rise and the exchange rate to appreciate. 
B) It causes investment to fall and the exchange rate to depreciate. 
C) It causes investment to rise and the exchange rate to depreciate. 
D) It causes investment to fall and the exchange rate to appreciate. 
A) It causes investment to rise and the exchange rate to appreciate. 
B) It causes investment to fall and the exchange rate to depreciate. 
C) It causes investment to rise and the exchange rate to depreciate. 
D) It causes investment to fall and the exchange rate to appreciate.

Question 18

Increased output and prices in Canada in the early 1940s was mostly the result of increased government expenditures.

Accepted Answer

A) True 
 B)False

Question 19

What did Keynes believe that economies experiencing high unemployment should do?

Accepted Answer

A) adopt policies to reduce the money supply 
B) adopt policies to reduce government expenditures 
C) adopt policies to increase aggregate demand 
D) adopt policies to increase aggregate supply 
A) adopt policies to reduce the money supply 
B) adopt policies to reduce government expenditures 
C) adopt policies to increase aggregate demand 
D) adopt policies to increase aggregate supply

Question 20

Which of the following is consistent with an increase in the quantity of output supplied, according to the misperceptions theory?

Accepted Answer

A) The price level increases less than expected so that firms believe the relative price of their output has increased. 
B) The price level increases less than expected so that firms believe the relative price of their output has decreased. 
C) The price level increases more than expected so that firms believe the relative price of their output has increased. 
D) The price level increases more than expected so that firms believe the relative price of their output has decreased. 
A) The price level increases less than expected so that firms believe the relative price of their output has increased. 
B) The price level increases less than expected so that firms believe the relative price of their output has decreased. 
C) The price level increases more than expected so that firms believe the relative price of their output has increased. 
D) The price level increases more than expected so that firms believe the relative price of their output has decreased.

Which of the following characterizes business cycles?

Which of the following does the downward slope of the aggregate demand curve show?

Which of the following best describes the effects of an increase in the price level?

Consider the exhibit below for the following questions. Figure 14-1 -Refer to Figure 14-1. In the short run, which of the following would result from a favourable shift in aggregate supply?

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

What happens when the dollar appreciates?

Use the misperceptions theory to discuss the economic forces that shift the aggregate supply curve when the expectations about the overall price level change.

When taxes decrease, consumption increases. How is this situation represented in the aggregate demand and aggregate supply model?

What are the effects of a decrease in the price level?

Consider the exhibit below for the following questions. Figure 14-1 -Refer to Figure 14-1. If the economy starts at A and moves to D, what happens to the economy in the long run?

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

In which of the following situations would stagflation exist?

Like real GDP, investment fluctuates, but investment fluctuates by a larger percentage.

An unexpected increase in the price level does not shift the aggregate supply curve, but an expected increase in the price level shifts the aggregate supply curve to the left.

By how much did the real GDP per person increase during World War II?

What does an increase in the interest rate cause?

Increased output and prices in Canada in the early 1940s was mostly the result of increased government expenditures.

What did Keynes believe that economies experiencing high unemployment should do?

Which of the following is consistent with an increase in the quantity of output supplied, according to the misperceptions theory?

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 characterizes business cycles?

Which of the following does the downward slope of the aggregate demand curve show?

Which of the following best describes the effects of an increase in the price level?

Consider the exhibit below for the following questions. Figure 14-1 -Refer to Figure 14-1. In the short run, which of the following would result from a favourable shift in aggregate supply?

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

What happens when the dollar appreciates?

Use the misperceptions theory to discuss the economic forces that shift the aggregate supply curve when the expectations about the overall price level change.

When taxes decrease, consumption increases. How is this situation represented in the aggregate demand and aggregate supply model?

What are the effects of a decrease in the price level?

Consider the exhibit below for the following questions. Figure 14-1 -Refer to Figure 14-1. If the economy starts at A and moves to D, what happens to the economy in the long run?

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

In which of the following situations would stagflation exist?

Like real GDP, investment fluctuates, but investment fluctuates by a larger percentage.

An unexpected increase in the price level does not shift the aggregate supply curve, but an expected increase in the price level shifts the aggregate supply curve to the left.

By how much did the real GDP per person increase during World War II?

What does an increase in the interest rate cause?

Increased output and prices in Canada in the early 1940s was mostly the result of increased government expenditures.

What did Keynes believe that economies experiencing high unemployment should do?

Which of the following is consistent with an increase in the quantity of output supplied, according to the misperceptions theory?

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