Question 1

As the price level rises,

Accepted Answer

A)  the exchange rate falls,so net exports fall. 
B)  the exchange rate falls,so net exports rise. 
C)  the exchange rate rises,so net exports fall. 
D)  the exchange rate rises,so net exports rise. 
A)  the exchange rate falls,so net exports fall. 
B)  the exchange rate falls,so net exports rise. 
C)  the exchange rate rises,so net exports fall. 
D)  the exchange rate rises,so net exports rise.

Question 2

As the price level falls

Accepted Answer

A)  people are more willing to lend,so interest rates rise. 
B)  people are more willing to lend,so interest rates fall. 
C)  people are less willing to lend,so interest rates fall. 
D)  people are less willing to lend,so interest rates rise. 
A)  people are more willing to lend,so interest rates rise. 
B)  people are more willing to lend,so interest rates fall. 
C)  people are less willing to lend,so interest rates fall. 
D)  people are less willing to lend,so interest rates rise.

Question 3

A decrease in the expected price level shifts short-run aggregate supply to the

Accepted Answer

A)  right,and an increase in the actual price level shifts short-run aggregate supply to the right. 
B)  right,and an increase in the actual price level does not shift short-run aggregate supply. 
C)  left,and an increase in the actual price level shifts short-run aggregate supply to the left. 
D)  left,and an increase in the actual price level does not shift short-run aggregate supply. 
A)  right,and an increase in the actual price level shifts short-run aggregate supply to the right. 
B)  right,and an increase in the actual price level does not shift short-run aggregate supply. 
C)  left,and an increase in the actual price level shifts short-run aggregate supply to the left. 
D)  left,and an increase in the actual price level does not shift short-run aggregate supply.

Question 4

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 5

At a given price level,an increase in which of the following shifts aggregate demand to the right?

Accepted Answer

A)  consumption 
B)  investment 
C)  government expenditures 
D)  All of the above are correct. 
A)  consumption 
B)  investment 
C)  government expenditures 
D)  All of the above are correct.

Question 6

If the central bank increased the money supply in response to a decrease in short-run aggregate supply,unemployment would return towards its natural rate,but prices would rise even more.

Accepted Answer

A) True 
 B)False

Question 7

Most macroeconomic variables that measure some type of income,spending,or production fluctuate closely together.

Accepted Answer

A) True 
 B)False

Question 8

Other things the same,continued increases in the money supply 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)  a one-time permanent increase in both prices and real GDP. 
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)  a one-time permanent increase in both prices and real GDP.

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

Keynes believed that economies experiencing high unemployment should adopt policies to

Accepted Answer

A)  reduce the money supply. 
B)  reduce government expenditures. 
C)  increase aggregate demand. 
D)  increase aggregate supply. 
A)  reduce the money supply. 
B)  reduce government expenditures. 
C)  increase aggregate demand. 
D)  increase aggregate supply.

Question 11

A relaively mild period of falling incomes and rising unemployment is called a

Accepted Answer

A)  depression. 
B)  recession. 
C)  expansion. 
D)  business cycle. 
A)  depression. 
B)  recession. 
C)  expansion. 
D)  business cycle.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Of the following theories,which is consistent with a vertical long-run aggregate supply curve?

Accepted Answer

A)  the sticky-wage theory 
B)  misperceptions theory 
C)  both the sticky-wage and misperceptions theories. 
D)  neither the sticky-wage nor the misperceptions theory. 
A)  the sticky-wage theory 
B)  misperceptions theory 
C)  both the sticky-wage and misperceptions theories. 
D)  neither the sticky-wage nor the misperceptions theory.

Question 14

The classical model is appropriate for analysis of the economy in the

Accepted Answer

A)  long run,since evidence indicates that money is not neutral in the long run. 
B)  long run,since real and nominal variables are essentially determined separately in the long run. 
C)  short run,provided money is not neutral. 
D)  short run,provided real and nominal variables are highly intertwined. 
A)  long run,since evidence indicates that money is not neutral in the long run. 
B)  long run,since real and nominal variables are essentially determined separately in the long run. 
C)  short run,provided money is not neutral. 
D)  short run,provided real and nominal variables are highly intertwined.

Question 15

As the price level rises

Accepted Answer

A)  people will want to buy more bonds,so the interest rate rises. 
B)  people will want to buy fewer bonds,so the interest rate falls. 
C)  people will want to buy more bonds,so the interest rate falls. 
D)  people will want to buy fewer bonds,so the interest rate rises. 
A)  people will want to buy more bonds,so the interest rate rises. 
B)  people will want to buy fewer bonds,so the interest rate falls. 
C)  people will want to buy more bonds,so the interest rate falls. 
D)  people will want to buy fewer bonds,so the interest rate rises.

Question 16

The aggregate quantity of goods and service demanded changes as the price level falls because

Accepted Answer

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

Question 17

Other things the same,if the price level is lower than expected,then some firms believe that the relative price of what they produce has

Accepted Answer

A)  decreased,so they increase production. 
B)  decreased,so they decrease production. 
C)  increased,so they increase production. 
D)  increased,so they decrease production. 
A)  decreased,so they increase production. 
B)  decreased,so they decrease production. 
C)  increased,so they increase production. 
D)  increased,so they decrease production.

Question 18

According to the aggregate demand and aggregate supply model,in the long run an increase in the money supply leads to

Accepted Answer

A)  increases in both the price level and real GDP. 
B)  an increase in real GDP but does not change the price level. 
C)  an increase in the price level but does not change real GDP. 
D)  no change in either the price level or real GDP. 
A)  increases in both the price level and real GDP. 
B)  an increase in real GDP but does not change the price level. 
C)  an increase in the price level but does not change real GDP. 
D)  no change in either the price level or real GDP.

Question 19

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 20

Stagflation exists when prices

Accepted Answer

A)  and output rise. 
B)  rise and output falls. 
C)  fall and output rises. 
D)  and output fall. 
A)  and output rise. 
B)  rise and output falls. 
C)  fall and output rises. 
D)  and output fall.

Exam 33: Aggregate Demand and Aggregate Supply

As the price level rises,

As the price level falls

A decrease in the expected price level shifts short-run aggregate supply to the

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

At a given price level,an increase in which of the following shifts aggregate demand to the right?

If the central bank increased the money supply in response to a decrease in short-run aggregate supply,unemployment would return towards its natural rate,but prices would rise even more.

Most macroeconomic variables that measure some type of income,spending,or production fluctuate closely together.

Other things the same,continued increases in the money supply lead to

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

Keynes believed that economies experiencing high unemployment should adopt policies to

A relaively mild period of falling incomes and rising unemployment is called a

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

Of the following theories,which is consistent with a vertical long-run aggregate supply curve?

The classical model is appropriate for analysis of the economy in the

As the price level rises

The aggregate quantity of goods and service demanded changes as the price level falls because

Other things the same,if the price level is lower than expected,then some firms believe that the relative price of what they produce has

According to the aggregate demand and aggregate supply model,in the long run an increase in the money supply leads to

When taxes decrease,consumption

Stagflation exists when prices

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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 Macroeconomics: Basic Concepts

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

Five Debates Over Macroeconomic Policy

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