Question 1

In which case can we be sure aggregate demand shifts left overall?

Accepted Answer

A)  people want to save more for retirement and the government raises taxes 
B)  people want to save more for retirement and the government cuts taxes 
C)  people want to save less for retirement and the government raises taxes 
D)  people want to save less for retirement and the government cuts taxes 
A)  people want to save more for retirement and the government raises taxes 
B)  people want to save more for retirement and the government cuts taxes 
C)  people want to save less for retirement and the government raises taxes 
D)  people want to save less for retirement and the government cuts taxes

Question 2

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Accepted Answer

There are occasional short-lived periods

Question 3

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production.This is inconsistent with monetary neutrality because

Accepted Answer

A)  monetary neutrality would mean that neither prices nor production should have risen. 
B)  monetary neutrality would mean that production should have risen,but prices should not have. 
C)  monetary neutrality would mean the prices should have risen,but production should not have changed. 
D)  monetary neutrality would mean that prices and production should both have fallen. 
A)  monetary neutrality would mean that neither prices nor production should have risen. 
B)  monetary neutrality would mean that production should have risen,but prices should not have. 
C)  monetary neutrality would mean the prices should have risen,but production should not have changed. 
D)  monetary neutrality would mean that prices and production should both have fallen.

Question 4

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

Accepted Answer

A)  an increase in the minimum wage 
B)  an increase in immigration from abroad 
C)  an increase in the price of oil 
D)  an increase in the actual price level 
A)  an increase in the minimum wage 
B)  an increase in immigration from abroad 
C)  an increase in the price of oil 
D)  an increase in the actual price level

Question 5

Other things the same,a decrease in the price level causes real wealth to

Accepted Answer

A)  fall,interest rates to fall,and the dollar to appreciate. 
B)  fall,interest rates to rise,and the dollar to depreciate. 
C)  rise,interest rates to rise,and the dollar to appreciate. 
D)  rise,interest rates to fall,and the dollar to depreciate. 
A)  fall,interest rates to fall,and the dollar to appreciate. 
B)  fall,interest rates to rise,and the dollar to depreciate. 
C)  rise,interest rates to rise,and the dollar to appreciate. 
D)  rise,interest rates to fall,and the dollar to depreciate.

Question 6

Refer to U.S.Financial Crisis.What would happen in the market for foreign-currency exchange.

Accepted Answer

A)  the supply of dollars would shift right and the exchange rate would rise. 
B)  the supply of dollars would shift right and the exchange rate would fall. 
C)  the supply of dollars would shift left and the exchange rate would rise. 
D)  None of the above is correct. 
A)  the supply of dollars would shift right and the exchange rate would rise. 
B)  the supply of dollars would shift right and the exchange rate would fall. 
C)  the supply of dollars would shift left and the exchange rate would rise. 
D)  None of the above is correct.

Question 7

An increase in the interest rate causes investment to

Accepted Answer

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

Question 8

Keynes thought that the behavior of the economy in the short run was influenced by what he called "animal spirits." By this he meant that business people sometimes felt good about the economy,and carried out lots of investment,and at other times felt bad about the economy,and so cut back on their investment spending.Explain how such fluctuations in investment would lead to fluctuations in real GDP and prices.

Accepted Answer

Fluctuations in investment cause the agg

Question 9

Refer to U.S.Financial Crisis.What would happen to U.S.aggregate demand?

Accepted Answer

A)  it would shift right because U.S.net exports would rise. 
B)  it would shift right because U.S.net exports would fall. 
C)  it would shift left because U.S.net exports would rise. 
D)  it would shift left because U.S.net exports would fall. 
A)  it would shift right because U.S.net exports would rise. 
B)  it would shift right because U.S.net exports would fall. 
C)  it would shift left because U.S.net exports would rise. 
D)  it would shift left because U.S.net exports would fall.

Question 10

Which of the following would both shift aggregate demand right?

Accepted Answer

A)  the price level decreases and government expenditures increase 
B)  the price level decreases and the government repeals an investment tax credit 
C)  government expenditures increase and the money supply increases 
D)  None of the above are correct. 
A)  the price level decreases and government expenditures increase 
B)  the price level decreases and the government repeals an investment tax credit 
C)  government expenditures increase and the money supply increases 
D)  None of the above are correct.

Question 11

Other things the same,an increase in the expected price level shifts

Accepted Answer

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

Question 12

Aggregate demand shifts right when the government

Accepted Answer

A)  raises personal income taxes. 
B)  increases the money supply. 
C)  repeals an investment tax credit. 
D)  All of the above are correct. 
A)  raises personal income taxes. 
B)  increases the money supply. 
C)  repeals an investment tax credit. 
D)  All of the above are correct.

Question 13

A candidate for political office announces the following policies which,he says,economics clearly demonstrates will lead to higher output in the long run.1.reduce immigration from abroad 2.make trade more open between the US and other countries:

Accepted Answer

A)  1 and 2 both shift long-run aggregate supply right. 
B)  1 and 2 both shift long-run aggregate supply left. 
C)  1 shifts long-run aggregate supply right,2 shifts long-run aggregate supply left. 
D)  1 shifts long-run aggregate supply left,2 shifts long-run aggregate supply right. 
A)  1 and 2 both shift long-run aggregate supply right. 
B)  1 and 2 both shift long-run aggregate supply left. 
C)  1 shifts long-run aggregate supply right,2 shifts long-run aggregate supply left. 
D)  1 shifts long-run aggregate supply left,2 shifts long-run aggregate supply right.

Question 14

The effect of a change in the value of the dollar in the foreign exchange market due to a change in the price level helps explain the slope of aggregate demand,but does not shift it.The effects of a change in the value of the dollar in the foreign exchange market due to speculation is shown by shifting the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 15

During recessions investment

Accepted Answer

A)  falls by a larger percentage than GDP. 
B)  falls by about the same percentage as GDP. 
C)  falls by a smaller percentage than GDP. 
D)  falls but the percentage change is sometimes much larger and sometimes much smaller. 
A)  falls by a larger percentage than GDP. 
B)  falls by about the same percentage as GDP. 
C)  falls by a smaller percentage than GDP. 
D)  falls but the percentage change is sometimes much larger and sometimes much smaller.

Question 16

Suppose the economy is in long-run equilibrium.If there is a tax cut at the same time that major new sources of oil are discovered in the country,then in the short-run

Accepted Answer

A)  real GDP will rise and the price level might rise,fall,or stay the same. 
B)  real GDP will fall and the price level might rise,fall,or stay the same. 
C)  the price level will rise,and real GDP might rise,fall,or stay the same. 
D)  the price level will fall,and real GDP might rise,fall,or stay the same. 
A)  real GDP will rise and the price level might rise,fall,or stay the same. 
B)  real GDP will fall and the price level might rise,fall,or stay the same. 
C)  the price level will rise,and real GDP might rise,fall,or stay the same. 
D)  the price level will fall,and real GDP might rise,fall,or stay the same.

Question 17

The long-run effect of an increase in government spending is to raise

Accepted Answer

A)  both real output and the price level. 
B)  real output and lower the price level. 
C)  real output and leave the price level unchanged. 
D)  the price level and leave real output unchanged. 
A)  both real output and the price level. 
B)  real output and lower the price level. 
C)  real output and leave the price level unchanged. 
D)  the price level and leave real output unchanged.

Question 18

Refer to Political Instability Abroad.What would the change in the exchange rate make happen to U.S.net exports and U.S.aggregate demand?

Accepted Answer

A)  Net exports would rise and so U.S.aggregate demand would fall. 
B)  Net exports would rise and so U.S.aggregate demand would rise. 
C)  Net exports would fall and so U.S.aggregate demand would fall. 
D)  Net exports would fall and so U.S.aggregate demand would rise. 
A)  Net exports would rise and so U.S.aggregate demand would fall. 
B)  Net exports would rise and so U.S.aggregate demand would rise. 
C)  Net exports would fall and so U.S.aggregate demand would fall. 
D)  Net exports would fall and so U.S.aggregate demand would rise.

Question 19

Recessions in China and India would cause

Accepted Answer

A)  the U.S.price level and real GDP to rise. 
B)  the U.S.price level and real GDP to fall. 
C)  the U.S.price level to rise and real GDP to fall. 
D)  the U.S.price level to fall and real GDP to rise. 
A)  the U.S.price level and real GDP to rise. 
B)  the U.S.price level and real GDP to fall. 
C)  the U.S.price level to rise and real GDP to fall. 
D)  the U.S.price level to fall and real GDP to rise.

Question 20

If countries that imported goods and services from the United States went into recession,we would expect that U.S.net exports would

Accepted Answer

A)  rise,making aggregate demand shift right. 
B)  rise,making aggregate demand shift left. 
C)  fall,making aggregate demand shift right. 
D)  fall,making aggregate demand shift left. 
A)  rise,making aggregate demand shift right. 
B)  rise,making aggregate demand shift left. 
C)  fall,making aggregate demand shift right. 
D)  fall,making aggregate demand shift left.

Exam 33: Aggregate Demand and Aggregate Supply

In which case can we be sure aggregate demand shifts left overall?

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production.This is inconsistent with monetary neutrality because

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

Other things the same,a decrease in the price level causes real wealth to

Refer to U.S.Financial Crisis.What would happen in the market for foreign-currency exchange.

An increase in the interest rate causes investment to

Refer to U.S.Financial Crisis.What would happen to U.S.aggregate demand?

Which of the following would both shift aggregate demand right?

Other things the same,an increase in the expected price level shifts

Aggregate demand shifts right when the government

A candidate for political office announces the following policies which,he says,economics clearly demonstrates will lead to higher output in the long run.1.reduce immigration from abroad 2.make trade more open between the US and other countries:

During recessions investment

Suppose the economy is in long-run equilibrium.If there is a tax cut at the same time that major new sources of oil are discovered in the country,then in the short-run

The long-run effect of an increase in government spending is to raise

Refer to Political Instability Abroad.What would the change in the exchange rate make happen to U.S.net exports and U.S.aggregate demand?

Recessions in China and India would cause

If countries that imported goods and services from the United States went into recession,we would expect that U.S.net exports would

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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