Question 1

Like real GDP,investment fluctuates,but it fluctuates much less than real GDP.

Accepted Answer

A) True 
 B)False

Question 2

If the dollar appreciates because of speculation or government policy U.S.

Accepted Answer

A)  aggregate demand shifts left.U.S.aggregate demand also shifts left if other countries experience recessions. 
B)  aggregate demand shifts left.U.S.aggregate demand shifts right if other countries experience recessions. 
C)  aggregate demand shifts right.U.S.aggregate demand also shifts right if other countries experience recessions. 
D)  aggregate demand shifts right.U.S.aggregate demand shifts left if other countries experience recessions. 
A)  aggregate demand shifts left.U.S.aggregate demand also shifts left if other countries experience recessions. 
B)  aggregate demand shifts left.U.S.aggregate demand shifts right if other countries experience recessions. 
C)  aggregate demand shifts right.U.S.aggregate demand also shifts right if other countries experience recessions. 
D)  aggregate demand shifts right.U.S.aggregate demand shifts left if other countries experience recessions.

Question 3

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected,some firms will have

Accepted Answer

A)  higher than desired prices which leads to an increase in the aggregate quantity of goods and services supplied. 
B)  higher than desired prices which leads to a decrease in the aggregate quantity of goods and service supplied. 
C)  lower than desired prices which leads to an increase in the aggregate quantity of goods and services supplied. 
D)  lower than desired prices which leads to a decrease in the aggregate quantity of goods and services supplied 
A)  higher than desired prices which leads to an increase in the aggregate quantity of goods and services supplied. 
B)  higher than desired prices which leads to a decrease in the aggregate quantity of goods and service supplied. 
C)  lower than desired prices which leads to an increase in the aggregate quantity of goods and services supplied. 
D)  lower than desired prices which leads to a decrease in the aggregate quantity of goods and services supplied

Question 4

Which of the following would cause prices and real GDP to rise in the short run?

Accepted Answer

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

Question 5

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

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 6

During recessions declines in investment account for about

Accepted Answer

A)  1/6 of the decline in real GDP. 
B)  1/3 of the decline in real GDP. 
C)  1/2 of the decline in real GDP. 
D)  2/3 of the decline in real GDP. 
A)  1/6 of the decline in real GDP. 
B)  1/3 of the decline in real GDP. 
C)  1/2 of the decline in real GDP. 
D)  2/3 of the decline in real GDP.

Question 7

Which of the following fall during a recession?

Accepted Answer

A)  both retail sales and employment 
B)  retail sales but not employment 
C)  employment but not retail sales 
D)  neither employment nor retail sales 
A)  both retail sales and employment 
B)  retail sales but not employment 
C)  employment but not retail sales 
D)  neither employment nor retail sales

Question 8

When the price level increases,the real value of people's money holdings

Accepted Answer

A)  falls,so they buy more. 
B)  falls,so they buy less. 
C)  rises,so they buy more. 
D)  rises,so they buy less. 
A)  falls,so they buy more. 
B)  falls,so they buy less. 
C)  rises,so they buy more. 
D)  rises,so they buy less.

Question 9

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  a decrease in the money supply 
B)  increases in the profitability of capital due perhaps to technological progress. 
C)  the repeal of an investment tax credit 
D)  a decrease in the price level 
A)  a decrease in the money supply 
B)  increases in the profitability of capital due perhaps to technological progress. 
C)  the repeal of an investment tax credit 
D)  a decrease in the price level

Question 10

Other things the same,an increase in the price level induces people to hold

Accepted Answer

A)  less money,so they lend less,and the interest rate rises. 
B)  less money,so they lend more,and the interest rate falls. 
C)  more money,so they lend more,and the interest rate falls. 
D)  more money,so they lend less,and the interest rate rises. 
A)  less money,so they lend less,and the interest rate rises. 
B)  less money,so they lend more,and the interest rate falls. 
C)  more money,so they lend more,and the interest rate falls. 
D)  more money,so they lend less,and the interest rate rises.

Question 11

If the economy is initially at long-run equilibrium and aggregate demand declines,then in the long run the price level

Accepted Answer

A)  and output are higher than in the original long-run equilibrium. 
B)  and output are lower than in the original long-run equilibrium. 
C)  is lower and output is the same as the original long-run equilibrium. 
D)  is the same and output is lower than in the original long-run equilibrium. 
A)  and output are higher than in the original long-run equilibrium. 
B)  and output are lower than in the original long-run equilibrium. 
C)  is lower and output is the same as the original long-run equilibrium. 
D)  is the same and output is lower than in the original long-run equilibrium.

Question 12

Which of the following decreases in response to the interest-rate effect from an increase in the price level?

Accepted Answer

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

Question 13

Which of the following,other things the same,would make the price level decrease and real GDP increase?

Accepted Answer

A)  long-run aggregate supply shifts right 
B)  long-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left 
A)  long-run aggregate supply shifts right 
B)  long-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left

Question 14

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

Accepted Answer

A)  an increase in the money supply 
B)  an increase in the price level 
C)  a decrease in the expected price level 
D)  All of the above are correct. 
A)  an increase in the money supply 
B)  an increase in the price level 
C)  a decrease in the expected price level 
D)  All of the above are correct.

Question 15

Suppose that the economy is at 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. 
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 16

Which of the following is a lesson concerning shifts in aggregate demand?

Accepted Answer

A)  they contribute to fluctuations in output. 
B)  in the long-run they change real output,but not the price level. 
C)  policymakers are unable to mitigate the severity of economic fluctuations. 
D)  All of the above are correct. 
A)  they contribute to fluctuations in output. 
B)  in the long-run they change real output,but not the price level. 
C)  policymakers are unable to mitigate the severity of economic fluctuations. 
D)  All of the above are correct.

Question 17

Which of the following would shift long-run aggregate supply to the right?

Accepted Answer

A)  increased immigration from abroad 
B)  a decrease in the price of an imported natural resource 
C)  opening the economy to international trade 
D)  All of the above are correct. 
A)  increased immigration from abroad 
B)  a decrease in the price of an imported natural resource 
C)  opening the economy to international trade 
D)  All of the above are correct.

Question 18

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 19

Other things the same,technological progress raises the price level.

Accepted Answer

A) True 
 B)False

Question 20

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Accepted Answer

A)  the relationship between output and unemployment is erratic and difficult to characterize. 
B)  when one macroeconomic variable that measures income or spending is falling,other macroeconomic variables that measure income or spending are likely to be rising. 
C)  recessions do not occur at regular intervals. 
D)  All of the above are correct. 
A)  the relationship between output and unemployment is erratic and difficult to characterize. 
B)  when one macroeconomic variable that measures income or spending is falling,other macroeconomic variables that measure income or spending are likely to be rising. 
C)  recessions do not occur at regular intervals. 
D)  All of the above are correct.

Exam 23: Aggregate Demand and Aggregate Supply

Like real GDP,investment fluctuates,but it fluctuates much less than real GDP.

If the dollar appreciates because of speculation or government policy U.S.

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected,some firms will have

Which of the following would cause prices and real GDP to rise in the short run?

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

During recessions declines in investment account for about

Which of the following fall during a recession?

When the price level increases,the real value of people's money holdings

Which of the following shifts aggregate demand to the right?

Other things the same,an increase in the price level induces people to hold

If the economy is initially at long-run equilibrium and aggregate demand declines,then in the long run the price level

Which of the following decreases in response to the interest-rate effect from an increase in the price level?

Which of the following,other things the same,would make the price level decrease and real GDP increase?

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

Suppose that the economy is at 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

Which of the following is a lesson concerning shifts in aggregate demand?

Which of the following would shift long-run aggregate supply to the right?

Other things the same,technological progress raises the price level.

When we say that economic fluctuations are "irregular and unpredictable," we mean that

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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