Question 1

Other things the same,as the price level rises,exchange rates

Accepted Answer

A)  and interest rates rise. 
B)  and interest rates fall. 
C)  fall and interest rates rise. 
D)  rise and interest rates fall. 
A)  and interest rates rise. 
B)  and interest rates fall. 
C)  fall and interest rates rise. 
D)  rise and interest rates fall.

Question 2

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 3

During recessions which type of spending falls?

Accepted Answer

A)  consumption and investment 
B)  investment but not consumption 
C)  consumption but not investment 
D)  neither consumption nor investment 
A)  consumption and investment 
B)  investment but not consumption 
C)  consumption but not investment 
D)  neither consumption nor investment

Question 4

The aggregate-demand curve

Accepted Answer

A)  has a slope that is explained in the same way as the slope of the demand curve for a particular product. 
B)  is vertical in the long run. 
C)  shows an inverse relation between the price level and the quantity of all goods and services demanded. 
D)  All of the above are correct. 
A)  has a slope that is explained in the same way as the slope of the demand curve for a particular product. 
B)  is vertical in the long run. 
C)  shows an inverse relation between the price level and the quantity of all goods and services demanded. 
D)  All of the above are correct.

Question 5

During recessions unemployment typically rises

Accepted Answer

A)  little.As the recession ends,unemployment declines gradually. 
B)  little.As the recession ends,unemployment declines rapidly. 
C)  substantially.As the recession ends,unemployment declines gradually. 
D)  substantially.As the recession ends,unemployment declines rapidly. 
A)  little.As the recession ends,unemployment declines gradually. 
B)  little.As the recession ends,unemployment declines rapidly. 
C)  substantially.As the recession ends,unemployment declines gradually. 
D)  substantially.As the recession ends,unemployment declines rapidly.

Question 6

Other things the same,as the price level rises,the real value of money

Accepted Answer

A)  and the exchange rate rise. 
B)  and the exchange rate fall. 
C)  rises and the exchange rate falls. 
D)  falls and the exchange rate rises. 
A)  and the exchange rate rise. 
B)  and the exchange rate fall. 
C)  rises and the exchange rate falls. 
D)  falls and the exchange rate rises.

Question 7

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

Accepted Answer

A)  both an increase in the price level that is greater than expected and an increase in the expected price level. 
B)  an increase in the price level that is greater than expected,but not an increase in the expected price level. 
C)  an increase in the expected price level,but not an increase in the price level that is greater than expected. 
D)  neither an increase in the price level that is greater than expected nor an increase in the expected price level. 
A)  both an increase in the price level that is greater than expected and an increase in the expected price level. 
B)  an increase in the price level that is greater than expected,but not an increase in the expected price level. 
C)  an increase in the expected price level,but not an increase in the price level that is greater than expected. 
D)  neither an increase in the price level that is greater than expected nor an increase in the expected price level.

Question 8

Which of the following effects provide incentives for consumers to spend less when the price level rises?

Accepted Answer

A)  the wealth effect and the interest-rate effect 
B)  the wealth effect but not the interest-rate effect 
C)  the interest-rate effect but not the wealth effect 
D)  neither the wealth-effect nor the interest rate effect 
A)  the wealth effect and the interest-rate effect 
B)  the wealth effect but not the interest-rate effect 
C)  the interest-rate effect but not the wealth effect 
D)  neither the wealth-effect nor the interest rate effect

Question 9

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Accepted Answer

When people expect the price l

Question 10

Aggregate demand includes

Accepted Answer

A)  both the quantity of goods and services the government and customers abroad want to buy. 
B)  neither the quantity of goods and services the government wants to buy nor the quantity of goods and services customers abroad want to buy. 
C)  the quantity of goods and service the government wants to buy,but not the quantity of goods and services customers abroad want to buy. 
D)  the quantity of goods and services customers abroad want to buy,but not the quantity of goods and services the government wants to buy. 
A)  both the quantity of goods and services the government and customers abroad want to buy. 
B)  neither the quantity of goods and services the government wants to buy nor the quantity of goods and services customers abroad want to buy. 
C)  the quantity of goods and service the government wants to buy,but not the quantity of goods and services customers abroad want to buy. 
D)  the quantity of goods and services customers abroad want to buy,but not the quantity of goods and services the government wants to buy.

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

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 13

We depart from the assumptions of classical economics when we focus on the relationship between

Accepted Answer

A)  the quantity of output and the price level. 
B)  the quantity of output and the unemployment rate. 
C)  the price level and the inflation rate. 
D)  inflation and the nominal interest rate. 
A)  the quantity of output and the price level. 
B)  the quantity of output and the unemployment rate. 
C)  the price level and the inflation rate. 
D)  inflation and the nominal interest rate.

Question 14

Which of the following statements concerning the aggregate demand and aggregate supply model is correct?

Accepted Answer

A)  The aggregate demand and aggregate supply model is nothing more than a large version of the model of market demand and supply. 
B)  The price level and quantity of output adjust to bring aggregate demand and supply into balance. 
C)  The aggregate supply curve shows the quantity of goods and services that households,firms,and the government want to buy at each price. 
D)  All of the above are correct. 
A)  The aggregate demand and aggregate supply model is nothing more than a large version of the model of market demand and supply. 
B)  The price level and quantity of output adjust to bring aggregate demand and supply into balance. 
C)  The aggregate supply curve shows the quantity of goods and services that households,firms,and the government want to buy at each price. 
D)  All of the above are correct.

Question 15

Other things the same,if the price level rises,then domestic interest rates

Accepted Answer

A)  rise,so domestic residents will want to hold more foreign bonds. 
B)  rise,so domestic residents will want to hold fewer foreign bonds. 
C)  fall,so domestic residents will want to hold more foreign bonds. 
D)  fall,so domestic residents will want to hold fewer foreign bonds. 
A)  rise,so domestic residents will want to hold more foreign bonds. 
B)  rise,so domestic residents will want to hold fewer foreign bonds. 
C)  fall,so domestic residents will want to hold more foreign bonds. 
D)  fall,so domestic residents will want to hold fewer foreign bonds.

Question 16

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 Optimism.In the short run what happens to the price level and real GDP?

Accepted Answer

A)  both the price level and real GDP rise. 
B)  both the price level and real GDP fall. 
C)  the price level rises and real GDP falls. 
D)  the price level falls and real GDP rises. 
A)  both the price level and real GDP rise. 
B)  both the price level and real GDP fall. 
C)  the price level rises and real GDP falls. 
D)  the price level falls and real GDP rises.

Question 17

Figure 23-2.  
-Refer to Figure 23-2.Point B represents

Accepted Answer

A)  a short-run equilibrium and a long-run equilibrium. 
B)  a short-run equilibrium but not a long-run equilibrium. 
C)  a long-run equilibrium but not a short-run equilibrium. 
D)  neither a short-run equilibrium nor a long-run equilibrium. 
A)  a short-run equilibrium and a long-run equilibrium. 
B)  a short-run equilibrium but not a long-run equilibrium. 
C)  a long-run equilibrium but not a short-run equilibrium. 
D)  neither a short-run equilibrium nor a long-run equilibrium.

Question 18

Which of the following lists includes only changes that shift aggregate demand to the right?

Accepted Answer

A)  repeal of an investment tax credit,an increase in the money supply 
B)  repeal of an investment tax credit,a decrease in the money supply 
C)  passing of an investment tax credit,an increase in the money supply 
D)  passing of an investment tax credit,a decrease in the money supply 
A)  repeal of an investment tax credit,an increase in the money supply 
B)  repeal of an investment tax credit,a decrease in the money supply 
C)  passing of an investment tax credit,an increase in the money supply 
D)  passing of an investment tax credit,a decrease in the money supply

Question 19

Other things the same,if the U.S.price level falls,then

Accepted Answer

A)  U.S.residents want to buy more foreign bonds.The real exchange rate rises. 
B)  U.S.residents want to buy more foreign bonds.The real exchange rate falls. 
C)  U.S.residents want to buy fewer foreign bonds.The real exchange rate rises. 
D)  U.S.residents want to buy fewer foreign bonds.The real exchange rate falls. 
A)  U.S.residents want to buy more foreign bonds.The real exchange rate rises. 
B)  U.S.residents want to buy more foreign bonds.The real exchange rate falls. 
C)  U.S.residents want to buy fewer foreign bonds.The real exchange rate rises. 
D)  U.S.residents want to buy fewer foreign bonds.The real exchange rate falls.

Question 20

Consider the exhibit below for the following questions.
Figure 23-1  
-Refer to Figure 23-1.If the economy is at A and there is a fall in aggregate demand,in the short run the economy

Accepted Answer

A)  stays at A. 
B)  moves to B. 
C)  moves to C. 
D)  moves to D. 
A)  stays at A. 
B)  moves to B. 
C)  moves to C. 
D)  moves to D.

Exam 23: Aggregate Demand and Aggregate Supply

Other things the same,as the price level rises,exchange rates

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

During recessions which type of spending falls?

The aggregate-demand curve

During recessions unemployment typically rises

Other things the same,as the price level rises,the real value of money

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

Which of the following effects provide incentives for consumers to spend less when the price level rises?

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Aggregate demand includes

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

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

We depart from the assumptions of classical economics when we focus on the relationship between

Which of the following statements concerning the aggregate demand and aggregate supply model is correct?

Other things the same,if the price level rises,then domestic interest rates

Figure 23-2. -Refer to Figure 23-2.Point B represents

Which of the following lists includes only changes that shift aggregate demand to the right?

Other things the same,if the U.S.price level falls,then

Consider the exhibit below for the following questions. Figure 23-1 -Refer to Figure 23-1.If the economy is at A and there is a fall in aggregate demand,in the short run the economy

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 Costs of Production

Firms in Competitive Markets

Monopoly

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

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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