Question 1

When the price level falls

Accepted Answer

A)  people want to hold less money. 
B)  the interest rate falls. 
C)  investment spending rises. 
D)  All of the above are correct. 
A)  people want to hold less money. 
B)  the interest rate falls. 
C)  investment spending rises. 
D)  All of the above are correct.

Question 2

When output rises,unemployment falls.

Accepted Answer

A) True 
 B)False

Question 3

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

Accepted Answer

A)  decreases the real value of money. 
B)  increases the real value of the dollar in foreign exchange markets. 
C)  decreases the interest rate. 
D)  All of the above are correct. 
A)  decreases the real value of money. 
B)  increases the real value of the dollar in foreign exchange markets. 
C)  decreases the interest rate. 
D)  All of the above are correct.

Question 4

If speculators bid up the value of the U.S.dollar in the market for foreign exchange,then

Accepted Answer

A)  U.S.goods become more expensive relative to foreign goods so aggregate demand shifts right. 
B)  U.S.goods become less expensive relative to foreign goods so aggregate demand shifts right. 
C)  U.S.goods become more expensive relative to foreign goods so aggregate demand shifts left. 
D)  U.S.goods become less expensive relative to foreign goods so aggregate demand shifts left. 
A)  U.S.goods become more expensive relative to foreign goods so aggregate demand shifts right. 
B)  U.S.goods become less expensive relative to foreign goods so aggregate demand shifts right. 
C)  U.S.goods become more expensive relative to foreign goods so aggregate demand shifts left. 
D)  U.S.goods become less expensive relative to foreign goods so aggregate demand shifts left.

Question 5

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 6

Other things the same,if the price level falls,people

Accepted Answer

A)  increase foreign bond purchases,so the supply of dollars in the market for foreign-currency exchange increases. 
B)  increase foreign bond purchases,so the supply of dollars in the market for foreign-currency exchange decreases. 
C)  decrease foreign bond purchases,so the supply of dollars in market for foreign-currency exchange increases. 
D)  decrease foreign bond purchases,so the supply of dollars in the market for foreign-currency exchange decreases. 
A)  increase foreign bond purchases,so the supply of dollars in the market for foreign-currency exchange increases. 
B)  increase foreign bond purchases,so the supply of dollars in the market for foreign-currency exchange decreases. 
C)  decrease foreign bond purchases,so the supply of dollars in market for foreign-currency exchange increases. 
D)  decrease foreign bond purchases,so the supply of dollars in the market for foreign-currency exchange decreases.

Question 7

From 2001 to 2005 there was a dramatic rise in the price of houses.If this rise made people feel wealthier,then it would have shifted

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 8

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,then in the short run,real GDP will

Accepted Answer

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

Question 9

When the dollar appreciates,U.S.

Accepted Answer

A)  exports decrease,while imports increase. 
B)  exports and imports decrease. 
C)  exports and imports increase. 
D)  exports increase,while imports decrease. 
A)  exports decrease,while imports increase. 
B)  exports and imports decrease. 
C)  exports and imports increase. 
D)  exports increase,while imports decrease.

Question 10

When the price level falls,people want to

Accepted Answer

A)  hold more money and the quantity of aggregate goods and services demanded increases. 
B)  hold more money and the quantity of aggregate goods and services demanded decreases. 
C)  hold less money and the quantity of aggregate goods and services demanded increases. 
D)  hold less money and the quantity of aggregate goods and services demanded decreases. 
A)  hold more money and the quantity of aggregate goods and services demanded increases. 
B)  hold more money and the quantity of aggregate goods and services demanded decreases. 
C)  hold less money and the quantity of aggregate goods and services demanded increases. 
D)  hold less money and the quantity of aggregate goods and services demanded decreases.

Question 11

Figure 23-2.  
-Refer to Figure 23-2.Starting from point B and assuming that aggregate demand is held constant,in the long run the economy is likely to experience

Accepted Answer

A)  a falling price level and a falling level of output. 
B)  a falling price level and a rising level of output. 
C)  a rising price level and a falling level of output. 
D)  a rising price level and a rising level of output. 
A)  a falling price level and a falling level of output. 
B)  a falling price level and a rising level of output. 
C)  a rising price level and a falling level of output. 
D)  a rising price level and a rising level of output.

Question 12

When the dollar depreciates,each dollar buys

Accepted Answer

A)  more foreign currency,and so buys more foreign goods. 
B)  more foreign currency,and so buys fewer foreign goods. 
C)  less foreign currency,and so buys more foreign goods. 
D)  less foreign currency,and so buys fewer foreign goods. 
A)  more foreign currency,and so buys more foreign goods. 
B)  more foreign currency,and so buys fewer foreign goods. 
C)  less foreign currency,and so buys more foreign goods. 
D)  less foreign currency,and so buys fewer foreign goods.

Question 13

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)  6 percent,0 percent 
B)  3 percent,10 percent 
C)  -1 percent,6 percent 
D)  -3 percent,2 percent 
A)  6 percent,0 percent 
B)  3 percent,10 percent 
C)  -1 percent,6 percent 
D)  -3 percent,2 percent

Question 14

Consider the exhibit below for the following questions.
Figure 23-1  
-Refer to Figure 23-1.In the short run,a favorable shift in aggregate supply would move the economy from

Accepted Answer

A)  A to B. 
B)  B to C. 
C)  C to D. 
D)  D to A. 
A)  A to B. 
B)  B to C. 
C)  C to D. 
D)  D to A.

Question 15

Keynes explained that recessions and depressions occur because of

Accepted Answer

A)  excess aggregate demand. 
B)  inadequate aggregate demand. 
C)  excess aggregate supply. 
D)  inadequate aggregate supply. 
A)  excess aggregate demand. 
B)  inadequate aggregate demand. 
C)  excess aggregate supply. 
D)  inadequate aggregate supply.

Question 16

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 17

Other things the same,an unexpected fall in the price level results in some firms having

Accepted Answer

A)  lower than desired prices which increases their sales. 
B)  lower than desired prices which depresses their sales. 
C)  higher than desired prices which increases their sales. 
D)  higher than desired prices which depresses their sales. 
A)  lower than desired prices which increases their sales. 
B)  lower than desired prices which depresses their sales. 
C)  higher than desired prices which increases their sales. 
D)  higher than desired prices which depresses their sales.

Question 18

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,then we would expect that 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 19

Suppose the economy is in long-run equilibrium and the government decreases its expenditures.Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Accepted Answer

A)  as people revise their price-level expectations upward,firms and workers strike bargains for higher nominal wages. 
B)  as people revise their price-level expectations upward,firms and workers strike bargains for lower nominal wages. 
C)  as people revise their price-level expectations downward,firms and workers strike bargains for higher nominal wages. 
D)  as people revise their price-level expectations downward,firms and workers strike bargains for lower nominal wages. 
A)  as people revise their price-level expectations upward,firms and workers strike bargains for higher nominal wages. 
B)  as people revise their price-level expectations upward,firms and workers strike bargains for lower nominal wages. 
C)  as people revise their price-level expectations downward,firms and workers strike bargains for higher nominal wages. 
D)  as people revise their price-level expectations downward,firms and workers strike bargains for lower nominal wages.

Question 20

If there are sticky wages,and the price level is greater than what was expected,then

Accepted Answer

A)  the quantity of aggregate goods and services supplied falls,which is shown by a shift of the short-run aggregate supply curve to the left. 
B)  the quantity of aggregate goods and services supplied falls,as shown by a movement to the left along the short-run aggregate supply curve. 
C)  the quantity of aggregate goods and services supplied rises,as shown by a shift of the short-run aggregate supply curve to the right. 
D)  the quantity of aggregate goods and services supplied rises,as shown by a movement to the right along the short-run aggregate supply curve. 
A)  the quantity of aggregate goods and services supplied falls,which is shown by a shift of the short-run aggregate supply curve to the left. 
B)  the quantity of aggregate goods and services supplied falls,as shown by a movement to the left along the short-run aggregate supply curve. 
C)  the quantity of aggregate goods and services supplied rises,as shown by a shift of the short-run aggregate supply curve to the right. 
D)  the quantity of aggregate goods and services supplied rises,as shown by a movement to the right along the short-run aggregate supply curve.

Exam 23: Aggregate Demand and Aggregate Supply

When the price level falls

When output rises,unemployment falls.

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

If speculators bid up the value of the U.S.dollar in the market for foreign exchange,then

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:

Other things the same,if the price level falls,people

From 2001 to 2005 there was a dramatic rise in the price of houses.If this rise made people feel wealthier,then it would have shifted

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,then in the short run,real GDP will

When the dollar appreciates,U.S.

When the price level falls,people want to

Figure 23-2. -Refer to Figure 23-2.Starting from point B and assuming that aggregate demand is held constant,in the long run the economy is likely to experience

When the dollar depreciates,each dollar buys

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?

Consider the exhibit below for the following questions. Figure 23-1 -Refer to Figure 23-1.In the short run,a favorable shift in aggregate supply would move the economy from

Keynes explained that recessions and depressions occur because of

Aggregate demand shifts right when the government

Other things the same,an unexpected fall in the price level results in some firms having

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,then we would expect that in the short-run,

Suppose the economy is in long-run equilibrium and the government decreases its expenditures.Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

If there are sticky wages,and the price level is greater than what was expected,then

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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