Question 1

A decrease in the money supply causes the interest rate to rise so that investment falls.

Accepted Answer

A) True 
 B)False

Question 2

Suppose a fall in stock prices makes people feel poorer.The decrease in wealth would induce people to desire

Accepted Answer

A)  decreased consumption,shown as a movement to the left along a given aggregate-demand curve. 
B)  increase consumption,shown as a movement to the right along a given aggregate-demand curve. 
C)  decreased consumption,shifting the aggregate-demand curve to the left. 
D)  increased consumption,shifting the aggregate-demand curve to the right. 
A)  decreased consumption,shown as a movement to the left along a given aggregate-demand curve. 
B)  increase consumption,shown as a movement to the right along a given aggregate-demand curve. 
C)  decreased consumption,shifting the aggregate-demand curve to the left. 
D)  increased consumption,shifting the aggregate-demand curve to the right.

Question 3

Which of the following would cause stagflation?

Accepted Answer

A)  rising government expenditures 
B)  rising oil prices 
C)  a falling money supply 
D)  technical progress 
A)  rising government expenditures 
B)  rising oil prices 
C)  a falling money supply 
D)  technical progress

Question 4

Which of the following shifts short-run aggregate supply left?

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)  None of the above is correct. 
A)  an increase in the actual price level 
B)  an increase in the expected price level 
C)  an increase in the capital stock 
D)  None of the above is correct.

Question 5

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

Accepted Answer

A)  both the United States and Europe. 
B)  the United States but not Europe. 
C)  Europe,but not the United States. 
D)  neither the United States,nor Europe. 
A)  both the United States and Europe. 
B)  the United States but not Europe. 
C)  Europe,but not the United States. 
D)  neither the United States,nor Europe.

Question 6

Other things the same,the aggregate quantity of output supplied will increase if the price level

Accepted Answer

A)  is lower than expected so that firms believe the relative price of their output has increased. 
B)  is lower than expected so that firms believe the relative price of their output has decreased. 
C)  is higher than expected so that firms believe the relative price of their output has increased. 
D)  is higher than expected so that firms believe the relative price of their output has decreased. 
A)  is lower than expected so that firms believe the relative price of their output has increased. 
B)  is lower than expected so that firms believe the relative price of their output has decreased. 
C)  is higher than expected so that firms believe the relative price of their output has increased. 
D)  is higher than expected so that firms believe the relative price of their output has decreased.

Question 7

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

Accepted Answer

A)  5 percent,1 percent 
B)  3 percent,5 percent 
C)  -1 percent,3 percent 
D)  -2 percent,4 percent 
A)  5 percent,1 percent 
B)  3 percent,5 percent 
C)  -1 percent,3 percent 
D)  -2 percent,4 percent

Question 8

According to classical macroeconomic theory,changes in the money supply affect

Accepted Answer

A)  nominal variables and real variables. 
B)  nominal variables,but not real variables. 
C)  real variables,but not nominal variables. 
D)  neither nominal nor real variables. 
A)  nominal variables and real variables. 
B)  nominal variables,but not real variables. 
C)  real variables,but not nominal variables. 
D)  neither nominal nor real variables.

Question 9

The aggregate demand and aggregate supply graph has

Accepted Answer

A)  quantity of output on the horizontal axis.Output can be measured by the GDP deflator. 
B)  quantity of output on the horizontal axis.Output can be measured by real GDP. 
C)  quantity of output on the vertical axis.Output can be measured by the GDP deflator. 
D)  quantity of output on the vertical axis.Output can be measured by real GDP. 
A)  quantity of output on the horizontal axis.Output can be measured by the GDP deflator. 
B)  quantity of output on the horizontal axis.Output can be measured by real GDP. 
C)  quantity of output on the vertical axis.Output can be measured by the GDP deflator. 
D)  quantity of output on the vertical axis.Output can be measured by real GDP.

Question 10

When the price level falls

Accepted Answer

A)  households want to lend more,so the interest rate rises making the quantity of goods and services demanded rise. 
B)  households want to lend more,so the interest rate falls,making the quantity of goods and services demanded rise. 
C)  households want to lend more,so the interest rate rises,making the quantity of goods and services demanded fall. 
D)  None of the above are correct. 
A)  households want to lend more,so the interest rate rises making the quantity of goods and services demanded rise. 
B)  households want to lend more,so the interest rate falls,making the quantity of goods and services demanded rise. 
C)  households want to lend more,so the interest rate rises,making the quantity of goods and services demanded fall. 
D)  None of the above are correct.

Question 11

Aggregate demand shifts to the left if the money supply increases.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that during the Great Depression long-run aggregate supply shifted left.To be consistent with what happened to the price level and output,what would have had to happen to aggregate demand?

Accepted Answer

A)  It would have to shifted left by less than aggregate supply. 
B)  It would have to shifted left by more than aggregate supply. 
C)  It would have to shifted right by less than aggregate supply. 
D)  It would have to shifted right by more than aggregate supply. 
A)  It would have to shifted left by less than aggregate supply. 
B)  It would have to shifted left by more than aggregate supply. 
C)  It would have to shifted right by less than aggregate supply. 
D)  It would have to shifted right by more than aggregate supply.

Question 13

Which of the following shifts the long-run aggregate supply curve to the left?

Accepted Answer

A)  either an increase in the price of imported natural resources or opening up international trade 
B)  neither an increase in the price of imported natural resources or opening up international trade 
C)  an increase in the price of imported natural resources,but not opening up international trade 
D)  opening up international trade,but not an increase in the price of imported natural resources 
A)  either an increase in the price of imported natural resources or opening up international trade 
B)  neither an increase in the price of imported natural resources or opening up international trade 
C)  an increase in the price of imported natural resources,but not opening up international trade 
D)  opening up international trade,but not an increase in the price of imported natural resources

Question 14

The sticky-price theory implies that

Accepted Answer

A)  the short-run aggregate-supply curve is upward-sloping. 
B)  an unexpected fall in the price level induces firms to reduce the quantity of goods and services they produce. 
C)  menu costs influence the speed of adjustment of prices. 
D)  All of the above are correct. 
A)  the short-run aggregate-supply curve is upward-sloping. 
B)  an unexpected fall in the price level induces firms to reduce the quantity of goods and services they produce. 
C)  menu costs influence the speed of adjustment of prices. 
D)  All of the above are correct.

Question 15

Which of the following has been suggested as a cause of the Great Depression?

Accepted Answer

A)  a decline in the money supply 
B)  a decrease in stock prices 
C)  the collapse of the banking system 
D)  All of the above are correct. 
A)  a decline in the money supply 
B)  a decrease in stock prices 
C)  the collapse of the banking system 
D)  All of the above are correct.

Question 16

Imagine two economies that are identical except that for a long time,economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion.It follows that

Accepted Answer

A)  real GDP and the price level are lower in country B. 
B)  real GDP,but not the price level,is lower in country B. 
C)  the price level,but not real GDP is lower in country B. 
D)  neither the price level or real GDP is lower in country B. 
A)  real GDP and the price level are lower in country B. 
B)  real GDP,but not the price level,is lower in country B. 
C)  the price level,but not real GDP is lower in country B. 
D)  neither the price level or real GDP is lower in country B.

Question 17

Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time.
-Refer to Pessimism.In the long run,the change in price expectations created by pessimism shifts

Accepted Answer

A)  long-run aggregate supply right. 
B)  long-run aggregate supply left. 
C)  short-run aggregate supply right. 
D)  short-run aggregate supply left. 
A)  long-run aggregate supply right. 
B)  long-run aggregate supply left. 
C)  short-run aggregate supply right. 
D)  short-run aggregate supply left.

Question 18

Suppose the economy is in long-run equilibrium.In a short span of time,there is a large influx of skilled immigrants,a major new discovery of oil,and a major new technological advance in electricity production.In the short run,we would expect

Accepted Answer

A)  the price level to rise and real GDP to fall. 
B)  the price level to fall and real GDP to rise. 
C)  the price level and real GDP both to stay the same. 
D)  All of the above are possible. 
A)  the price level to rise and real GDP to fall. 
B)  the price level to fall and real GDP to rise. 
C)  the price level and real GDP both to stay the same. 
D)  All of the above are possible.

Question 19

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 20

Most economists use the aggregate demand and aggregate supply model primarily to analyze

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.

Exam 33: Aggregate Demand and Aggregate Supply

A decrease in the money supply causes the interest rate to rise so that investment falls.

Suppose a fall in stock prices makes people feel poorer.The decrease in wealth would induce people to desire

Which of the following would cause stagflation?

Which of the following shifts short-run aggregate supply left?

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

Other things the same,the aggregate quantity of output supplied will increase if the price level

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

According to classical macroeconomic theory,changes in the money supply affect

The aggregate demand and aggregate supply graph has

When the price level falls

Aggregate demand shifts to the left if the money supply increases.

Suppose that during the Great Depression long-run aggregate supply shifted left.To be consistent with what happened to the price level and output,what would have had to happen to aggregate demand?

Which of the following shifts the long-run aggregate supply curve to the left?

The sticky-price theory implies that

Which of the following has been suggested as a cause of the Great Depression?

Imagine two economies that are identical except that for a long time,economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion.It follows that

Suppose the economy is in long-run equilibrium.In a short span of time,there is a large influx of skilled immigrants,a major new discovery of oil,and a major new technological advance in electricity production.In the short run,we would expect

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Most economists use the aggregate demand and aggregate supply model primarily to analyze

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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