Question 1

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

Accepted Answer

A)  an increase in the price level 
B)  an increase in the minimum wage 
C)  a decrease in the price of oil 
D)  more people migrate abroad than immigrate from abroad 
A)  an increase in the price level 
B)  an increase in the minimum wage 
C)  a decrease in the price of oil 
D)  more people migrate abroad than immigrate from abroad

Question 2

All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the expected price level.

Accepted Answer

A) True 
 B)False

Question 3

The initial impact of an increase in an investment tax credit is to 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 4

Other things the same,if the price level falls,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 5

Historically,as recessions have ended the unemployment rate declined

Accepted Answer

A)  gradually to near zero. 
B)  rapidly to near zero. 
C)  gradually to a rate of about 5%-6%. 
D)  rapidly to a rate of about 5%-6%. 
A)  gradually to near zero. 
B)  rapidly to near zero. 
C)  gradually to a rate of about 5%-6%. 
D)  rapidly to a rate of about 5%-6%.

Question 6

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

Accepted Answer

A)  production is more profitable and employment rises. 
B)  production is more profitable and employment falls. 
C)  production is less profitable and employment rises. 
D)  production is less profitable and employment falls. 
A)  production is more profitable and employment rises. 
B)  production is more profitable and employment falls. 
C)  production is less profitable and employment rises. 
D)  production is less profitable and employment falls.

Question 7

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S.bonds,

Accepted Answer

A)  the dollar would appreciate which would cause aggregate demand to shift right. 
B)  the dollar would appreciate which would cause aggregate demand to shift left. 
C)  the dollar would depreciate which would cause aggregate demand to shift right. 
D)  the dollar would depreciate which would cause aggregate demand to shift left. 
A)  the dollar would appreciate which would cause aggregate demand to shift right. 
B)  the dollar would appreciate which would cause aggregate demand to shift left. 
C)  the dollar would depreciate which would cause aggregate demand to shift right. 
D)  the dollar would depreciate which would cause aggregate demand to shift left.

Question 8

Which of the following did not happen during the onset of the Great Depression?

Accepted Answer

A)  The money supply fell as households took money out of bank deposits. 
B)  The Fed conducted expansionary monetary policy. 
C)  Stock prices fell about 90 percent. 
D)  Disruption of the banking system made it difficult for some firms to obtain funds for investment. 
A)  The money supply fell as households took money out of bank deposits. 
B)  The Fed conducted expansionary monetary policy. 
C)  Stock prices fell about 90 percent. 
D)  Disruption of the banking system made it difficult for some firms to obtain funds for investment.

Question 9

If aggregate demand shifts right,then eventually price level expectations rise.The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.

Accepted Answer

A) True 
 B)False

Question 10

If aggregate demand shifts left,then in the short run

Accepted Answer

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

Question 11

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)  an increase in the price level 
B)  a decrease in the money supply 
C)  an increase in net exports 
D)  Congress passes a new investment tax credit 
A)  an increase in the price level 
B)  a decrease in the money supply 
C)  an increase in net exports 
D)  Congress passes a new investment tax credit

Question 12

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes.We would expect that the rebuilding increased aggregate demand in

Accepted Answer

A)  both the United States and Europe. 
B)  the United States but not Europe. 
C)  Europe,but not the United States. 
D)  neither the United States,nor Europe. 
A)  both the United States and Europe. 
B)  the United States but not Europe. 
C)  Europe,but not the United States. 
D)  neither the United States,nor Europe.

Question 13

The aggregate-demand curve shows that a decrease in the price level

Accepted Answer

A)  decreases the dollar value of goods and services demanded in the economy. 
B)  decreases the real value of goods and services demanded in the economy. 
C)  increases the dollar value of goods and services demanded in the economy. 
D)  increases the real value of goods and services demanded in the economy. 
A)  decreases the dollar value of goods and services demanded in the economy. 
B)  decreases the real value of goods and services demanded in the economy. 
C)  increases the dollar value of goods and services demanded in the economy. 
D)  increases the real value of goods and services demanded in the economy.

Question 14

Other things the same,a decrease in the price level motivates 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 rises. 
D)  more money,so they lend less,and the interest rate falls. 
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 rises. 
D)  more money,so they lend less,and the interest rate falls.

Question 15

According to classical macroeconomic theory,changes in the money supply change nominal but not real variables.

Accepted Answer

A) True 
 B)False

Question 16

In the first few years of the Great Depression,unemployment rose to about

Accepted Answer

A)  10 percent,and prices rose about 14 percent. 
B)  15 percent,and prices rose about 22 percent. 
C)  20 percent,and prices fell about 14 percent. 
D)  25 percent,and prices fell about 22 percent. 
A)  10 percent,and prices rose about 14 percent. 
B)  15 percent,and prices rose about 22 percent. 
C)  20 percent,and prices fell about 14 percent. 
D)  25 percent,and prices fell about 22 percent.

Question 17

The logic of the exchange-rate effect begins with a change in the price level changing the interest rate.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following alone can explain the change in the price level and output during World War II?

Accepted Answer

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

Question 19

If wages are sticky,then a greater than expected increase in the price level

Accepted Answer

A)  raises the real costs of production,so the short-run aggregate supply curve shifts left. 
B)  raises the real costs of production,so the aggregate quantity of goods and services declines. 
C)  reduces the real costs of production,so the short-run aggregate supply curve shifts right. 
D)  reduces the real costs of production,so the aggregate quantity of good and services rises. 
A)  raises the real costs of production,so the short-run aggregate supply curve shifts left. 
B)  raises the real costs of production,so the aggregate quantity of goods and services declines. 
C)  reduces the real costs of production,so the short-run aggregate supply curve shifts right. 
D)  reduces the real costs of production,so the aggregate quantity of good and services rises.

Question 20

Which part of real GDP fluctuates most over the course of the business cycle?

Accepted Answer

A)  consumption expenditures 
B)  government expenditures 
C)  investment expenditures 
D)  net exports 
A)  consumption expenditures 
B)  government expenditures 
C)  investment expenditures 
D)  net exports

Exam 23: Aggregate Demand and Aggregate Supply

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

All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the expected price level.

The initial impact of an increase in an investment tax credit is to shift

Other things the same,if the price level falls,domestic interest rates

Historically,as recessions have ended the unemployment rate declined

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S.bonds,

Which of the following did not happen during the onset of the Great Depression?

If aggregate demand shifts right,then eventually price level expectations rise.The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.

If aggregate demand shifts left,then in the short run

Which of the following shifts aggregate demand to the left?

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes.We would expect that the rebuilding increased aggregate demand in

The aggregate-demand curve shows that a decrease in the price level

Other things the same,a decrease in the price level motivates people to hold

According to classical macroeconomic theory,changes in the money supply change nominal but not real variables.

In the first few years of the Great Depression,unemployment rose to about

The logic of the exchange-rate effect begins with a change in the price level changing the interest rate.

Which of the following alone can explain the change in the price level and output during World War II?

If wages are sticky,then a greater than expected increase in the price level

Which part of real GDP fluctuates most over the course of the business cycle?

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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