Question 1

An increase in the expected price level shifts the short-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 2

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Accepted Answer

A)  the price level and real output. 
B)  real output and employment. 
C)  employment and the inflation rate. 
D)  the value of money and the price level. 
A)  the price level and real output. 
B)  real output and employment. 
C)  employment and the inflation rate. 
D)  the value of money and the price level.

Question 3

Other things the same,as the price level falls,a country's exchange rate

Accepted Answer

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

Question 4

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 5

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases.Their reaction would initially shift

Accepted Answer

A)  aggregate demand right. 
B)  aggregate demand left. 
C)  aggregate supply right. 
D)  aggregate supply left. 
A)  aggregate demand right. 
B)  aggregate demand left. 
C)  aggregate supply right. 
D)  aggregate supply left.

Question 6

Which of the following is correct?

Accepted Answer

A)  Over the business cycle consumption fluctuates more than investment. 
B)  Economic fluctuations are easy to predict. 
C)  During recessions sales and profits tend to fall. 
D)  Because of government policy the U.S.has suffered no recessions in the last 25 years. 
A)  Over the business cycle consumption fluctuates more than investment. 
B)  Economic fluctuations are easy to predict. 
C)  During recessions sales and profits tend to fall. 
D)  Because of government policy the U.S.has suffered no recessions in the last 25 years.

Question 7

When the price level falls

Accepted Answer

A)  The interest rate falls because people will want to hold more money and so sell bonds. 
B)  Firms will want to spend more on new business buildings and business equipment and households will want to spend more building new homes. 
C)  Both A and B are correct. 
D)  None of the above are correct. 
A)  The interest rate falls because people will want to hold more money and so sell bonds. 
B)  Firms will want to spend more on new business buildings and business equipment and households will want to spend more building new homes. 
C)  Both A and B are correct. 
D)  None of the above are correct.

Question 8

When the price level rises more than expected,a firm with a sticky price will sell its output at a price that is

Accepted Answer

A)  less than it desires and increase its production. 
B)  less than it desires and decrease its production. 
C)  more than it desires and increase its production. 
D)  less than it desires and decrease its production 
A)  less than it desires and increase its production. 
B)  less than it desires and decrease its production. 
C)  more than it desires and increase its production. 
D)  less than it desires and decrease its production

Question 9

Suppose the economy is in long-run equilibrium.If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers,then in the short run,

Accepted Answer

A)  real GDP will rise and the price level might rise,fall,or stay the same.In the long-run,real GDP will rise and the price level might rise,fall,or stay the same. 
B)  the price level will fall,and real GDP might rise,fall,or stay the same.In the long-run,real GDP and the price level will be unaffected. 
C)  the price level will rise,and real GDP might rise,fall,or stay the same.In the long run,real GDP will rise and the price level will fall. 
D)  the price level will fall,and real GDP might rise,fall,or stay the same.In the long run,real GDP will rise and the price level will fall. 
A)  real GDP will rise and the price level might rise,fall,or stay the same.In the long-run,real GDP will rise and the price level might rise,fall,or stay the same. 
B)  the price level will fall,and real GDP might rise,fall,or stay the same.In the long-run,real GDP and the price level will be unaffected. 
C)  the price level will rise,and real GDP might rise,fall,or stay the same.In the long run,real GDP will rise and the price level will fall. 
D)  the price level will fall,and real GDP might rise,fall,or stay the same.In the long run,real GDP will rise and the price level will fall.

Question 10

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 11

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 12

The Stock Market Boom of 2015
Imagine that in 2015 the economy is in long-run equilibrium.Then stock prices rise more than expected and stay high for some time.
-Refer to Stock Market Boom 2015.In the long run,the change in price expectations created by the stock market boom 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 13

The Stock Market Boom of 2015
Imagine that in 2015 the economy is in long-run equilibrium.Then stock prices rise more than expected and stay high for some time.
-Refer to Stock Market Boom 2015.How is the new long-run equilibrium different from the original one?

Accepted Answer

A)  the price level and real GDP are higher 
B)  the price level and real GDP are lower. 
C)  the price level is higher and real GDP is the same. 
D)  the price level is the same and real GDP is higher. 
A)  the price level and real GDP are higher 
B)  the price level and real GDP are lower. 
C)  the price level is higher and real GDP is the same. 
D)  the price level is the same and real GDP is higher.

Question 14

In the long-run,an increase in aggregate demand increases the price level,but not real GDP.

Accepted Answer

A) True 
 B)False

Question 15

Most economists believe that in the short run

Accepted Answer

A)  real and nominal variables are determined independently and that money cannot move real GDP away from its long-run trend. 
B)  real and nominal variables are determined independently but that money can temporarily move real GDP away from its long-run trend. 
C)  real and nominal variables are highly intertwined but that money cannot move real GDP away from its long-run trend. 
D)  real and nominal variables are highly intertwined and that money can temporarily move real GDP away from its long-run trend. 
A)  real and nominal variables are determined independently and that money cannot move real GDP away from its long-run trend. 
B)  real and nominal variables are determined independently but that money can temporarily move real GDP away from its long-run trend. 
C)  real and nominal variables are highly intertwined but that money cannot move real GDP away from its long-run trend. 
D)  real and nominal variables are highly intertwined and that money can temporarily move real GDP away from its long-run trend.

Question 16

When taxes increase,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 17

The aggregate-demand curve shows the quantity of domestic goods and services that households,firms,the government,and customers abroad want to buy at each price level.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)  a decrease in the actual price level 
B)  a decrease in the expected price level 
C)  a decrease in the capital stock 
D)  a decrease in the money supply 
A)  a decrease in the actual price level 
B)  a decrease in the expected price level 
C)  a decrease in the capital stock 
D)  a decrease in the money supply

Question 19

When the actual change in the price level differs from its expected change,which of the following can explain why firms might change their production?

Accepted Answer

A)  both menu costs and mistaking a price level change for a change in relative prices 
B)  menu costs but not mistaking a price level change for a change in relative prices 
C)  mistaking a price level change for a change in relative price but not menu costs 
D)  neither menu costs nor mistaking a price level change for a change in relative prices 
A)  both menu costs and mistaking a price level change for a change in relative prices 
B)  menu costs but not mistaking a price level change for a change in relative prices 
C)  mistaking a price level change for a change in relative price but not menu costs 
D)  neither menu costs nor mistaking a price level change for a change in relative prices

Question 20

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.This can be explained

Accepted Answer

A)  only by technological progress. 
B)  only by money supply growth. 
C)  by technological progress and money supply growth. 
D)  None of the above is correct. 
A)  only by technological progress. 
B)  only by money supply growth. 
C)  by technological progress and money supply growth. 
D)  None of the above is correct.

Exam 23: Aggregate Demand and Aggregate Supply

An increase in the expected price level shifts the short-run aggregate supply curve to the right.

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Other things the same,as the price level falls,a country's exchange rate

Which of the following would cause stagflation?

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases.Their reaction would initially shift

Which of the following is correct?

When the price level falls

When the price level rises more than expected,a firm with a sticky price will sell its output at a price that is

Suppose the economy is in long-run equilibrium.If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers,then in the short run,

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

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

The Stock Market Boom of 2015 Imagine that in 2015 the economy is in long-run equilibrium.Then stock prices rise more than expected and stay high for some time. -Refer to Stock Market Boom 2015.In the long run,the change in price expectations created by the stock market boom shifts

The Stock Market Boom of 2015 Imagine that in 2015 the economy is in long-run equilibrium.Then stock prices rise more than expected and stay high for some time. -Refer to Stock Market Boom 2015.How is the new long-run equilibrium different from the original one?

In the long-run,an increase in aggregate demand increases the price level,but not real GDP.

Most economists believe that in the short run

When taxes increase,consumption

The aggregate-demand curve shows the quantity of domestic goods and services that households,firms,the government,and customers abroad want to buy at each price level.

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

When the actual change in the price level differs from its expected change,which of the following can explain why firms might change their production?

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.This can be explained

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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