Question 1

Which of the following both shift aggregate demand right?

Accepted Answer

A)  net exports rise for some reason other than a price change and the money supply rises. 
B)  net exports rise for some reason other than a price change and the price level rises. 
C)  net exports fall for some reason other than a price change and the money supply rises. 
D)  net exports fall for some reason other than a price change and the price level rises. 
A)  net exports rise for some reason other than a price change and the money supply rises. 
B)  net exports rise for some reason other than a price change and the price level rises. 
C)  net exports fall for some reason other than a price change and the money supply rises. 
D)  net exports fall for some reason other than a price change and the price level rises.

Question 2

The curve that shows the quantity of goods and services that firms produce and sell

Accepted Answer

A)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-demand curve. 
B)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-supply curve. 
C)  as it relates to the overall price level is called the aggregate-demand curve. 
D)  as it relates to the overall price level is called the aggregate-supply curve. 
A)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-demand curve. 
B)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-supply curve. 
C)  as it relates to the overall price level is called the aggregate-demand curve. 
D)  as it relates to the overall price level is called the aggregate-supply curve.

Question 3

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

Accepted Answer

A)  an increase in price expectations 
B)  an increase in the actual price level 
C)  a decrease in the money supply 
D)  a decrease in the price of oil 
A)  an increase in price expectations 
B)  an increase in the actual price level 
C)  a decrease in the money supply 
D)  a decrease in the price of oil

Question 4

Which of the following shifts aggregate demand right?

Accepted Answer

A)  both a decrease in the price level and the implementation of an investment tax credit 
B)  a decrease in the price level but not the implementation of an investment tax credit 
C)  the implementation of an investment tax credit but not a decrease in the price level 
D)  neither a decrease in the price level nor the implementation of an investment tax credit 
A)  both a decrease in the price level and the implementation of an investment tax credit 
B)  a decrease in the price level but not the implementation of an investment tax credit 
C)  the implementation of an investment tax credit but not a decrease in the price level 
D)  neither a decrease in the price level nor the implementation of an investment tax credit

Question 5

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

Accepted Answer

A)  increases by less than expected so that firms believe the relative price of their output has increased. 
B)  increases by less than expected so that firms believe the relative price of their output has decreased. 
C)  increases by more than expected so that firms believe the relative price of their output has increased. 
D)  increases by more than expected so that firms believe the relative price of their output has decreased. 
A)  increases by less than expected so that firms believe the relative price of their output has increased. 
B)  increases by less than expected so that firms believe the relative price of their output has decreased. 
C)  increases by more than expected so that firms believe the relative price of their output has increased. 
D)  increases by more than expected so that firms believe the relative price of their output has decreased.

Question 6

According to the aggregate demand and aggregate supply model,in the long run an increase in the money supply leads to

Accepted Answer

A)  increases in both the price level and real GDP. 
B)  an increase in real GDP but does not change the price level. 
C)  an increase in the price level but does not change real GDP. 
D)  no change in either the price level or real GDP. 
A)  increases in both the price level and real GDP. 
B)  an increase in real GDP but does not change the price level. 
C)  an increase in the price level but does not change real GDP. 
D)  no change in either the price level or real GDP.

Question 7

Although wages,incomes,and interest rates are most often discussed in nominal terms,what matters most are their real values.

Accepted Answer

A) True 
 B)False

Question 8

In the last half of 1999,the U.S.unemployment rate was about 4 percent.Historical experience suggests that this is

Accepted Answer

A)  above the natural rate,so real GDP growth was likely low. 
B)  above the natural rate,so real GDP growth was likely high. 
C)  below the natural rate,so real GDP growth was likely low. 
D)  below the natural rate,so real GDP growth was likely high. 
A)  above the natural rate,so real GDP growth was likely low. 
B)  above the natural rate,so real GDP growth was likely high. 
C)  below the natural rate,so real GDP growth was likely low. 
D)  below the natural rate,so real GDP growth was likely high.

Question 9

Other things the same,an increase in the amount of capital firms wish to purchase 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 10

An increase in the interest rate causes investment to

Accepted Answer

A)  rise and the exchange rate to appreciate. 
B)  fall and the exchange rate to depreciate. 
C)  rise and the exchange rate to depreciate. 
D)  fall and the exchange rate to appreciate. 
A)  rise and the exchange rate to appreciate. 
B)  fall and the exchange rate to depreciate. 
C)  rise and the exchange rate to depreciate. 
D)  fall and the exchange rate to appreciate.

Question 11

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%,then firms 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 services 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 services 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 12

Real GDP

Accepted Answer

A)  moves in the same direction as unemployment. 
B)  is not adjusted for inflation. 
C)  measures economic activity and real income. 
D)  All of the above are correct. 
A)  moves in the same direction as unemployment. 
B)  is not adjusted for inflation. 
C)  measures economic activity and real income. 
D)  All of the above are correct.

Question 13

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage.They may infer that the reward to working is

Accepted Answer

A)  temporarily low and so supply a smaller quantity of labor. 
B)  temporarily low and so supply a larger quantity of labor. 
C)  temporarily high and so supply a smaller quantity of labor. 
D)  temporarily high and so supply a larger quantity of labor. 
A)  temporarily low and so supply a smaller quantity of labor. 
B)  temporarily low and so supply a larger quantity of labor. 
C)  temporarily high and so supply a smaller quantity of labor. 
D)  temporarily high and so supply a larger quantity of labor.

Question 14

The equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level),where a is a positive number,represents

Accepted Answer

A)  an upward-sloping short-run aggregate supply curve 
B)  a vertical short-run aggregate supply curve 
C)  a downward-sloping aggregate demand curve 
D)  None of the above is correct. 
A)  an upward-sloping short-run aggregate supply curve 
B)  a vertical short-run aggregate supply curve 
C)  a downward-sloping aggregate demand curve 
D)  None of the above is correct.

Question 15

The long-run aggregate supply curve shifts right if

Accepted Answer

A)  the price level rises. 
B)  the price level falls. 
C)  the capital stock increases. 
D)  the capital stock decreases. 
A)  the price level rises. 
B)  the price level falls. 
C)  the capital stock increases. 
D)  the capital stock decreases.

Question 16

Most economists believe that in the long run,changes in the money supply

Accepted Answer

A)  affect nominal but not real variables.This view that money is ultimately neutral is consistent with classical theory. 
B)  affect nominal but not real variables.This view that money is ultimately neutral is inconsistent with classical theory. 
C)  affect real but not nominal variables.This view that money is ultimately neutral is consistent with classical theory. 
D)  affect real but not nominal variables.This view that money is ultimately neutral is inconsistent with classical theory. 
A)  affect nominal but not real variables.This view that money is ultimately neutral is consistent with classical theory. 
B)  affect nominal but not real variables.This view that money is ultimately neutral is inconsistent with classical theory. 
C)  affect real but not nominal variables.This view that money is ultimately neutral is consistent with classical theory. 
D)  affect real but not nominal variables.This view that money is ultimately neutral is inconsistent with classical theory.

Question 17

Other things the same,continued increases in the money supply lead to

Accepted Answer

A)  continued increases in the price level and real GDP. 
B)  continued increases in the price level but not continued increases in real GDP. 
C)  continued increases in real GDP but not continued increases in the price level. 
D)  a one-time permanent increase in both prices and real GDP. 
A)  continued increases in the price level and real GDP. 
B)  continued increases in the price level but not continued increases in real GDP. 
C)  continued increases in real GDP but not continued increases in the price level. 
D)  a one-time permanent increase in both prices and real GDP.

Question 18

Which of the following effects helps to explain the slope of the aggregate-demand curve?

Accepted Answer

A)  the exchange-rate effect 
B)  the wealth effect 
C)  the interest-rate effect 
D)  All of the above are correct. 
A)  the exchange-rate effect 
B)  the wealth effect 
C)  the interest-rate effect 
D)  All of the above are correct.

Question 19

Investment is a

Accepted Answer

A)  small part of real GDP,so it accounts for a small share of the fluctuation in real GDP. 
B)  small part of real GDP,yet it accounts for a large share of the fluctuation in real GDP. 
C)  large part of real GDP,so it accounts for a large share of the fluctuation in real GDP. 
D)  large part of real GDP,yet it accounts for a small share of the fluctuation in real GDP. 
A)  small part of real GDP,so it accounts for a small share of the fluctuation in real GDP. 
B)  small part of real GDP,yet it accounts for a large share of the fluctuation in real GDP. 
C)  large part of real GDP,so it accounts for a large share of the fluctuation in real GDP. 
D)  large part of real GDP,yet it accounts for a small share of the fluctuation in real GDP.

Question 20

In which case can we be sure aggregate demand shifts left overall?

Accepted Answer

A)  people want to save more for retirement and the government raises taxes 
B)  people want to save more for retirement and the government cuts taxes 
C)  people want to save less for retirement and the government raises taxes 
D)  people want to save less for retirement and the government cuts taxes 
A)  people want to save more for retirement and the government raises taxes 
B)  people want to save more for retirement and the government cuts taxes 
C)  people want to save less for retirement and the government raises taxes 
D)  people want to save less for retirement and the government cuts taxes

Exam 23: Aggregate Demand and Aggregate Supply

Which of the following both shift aggregate demand right?

The curve that shows the quantity of goods and services that firms produce and sell

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

Which of the following shifts aggregate demand right?

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

According to the aggregate demand and aggregate supply model,in the long run an increase in the money supply leads to

Although wages,incomes,and interest rates are most often discussed in nominal terms,what matters most are their real values.

In the last half of 1999,the U.S.unemployment rate was about 4 percent.Historical experience suggests that this is

Other things the same,an increase in the amount of capital firms wish to purchase would initially shift

An increase in the interest rate causes investment to

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%,then firms have

Real GDP

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage.They may infer that the reward to working is

The equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level),where a is a positive number,represents

The long-run aggregate supply curve shifts right if

Most economists believe that in the long run,changes in the money supply

Other things the same,continued increases in the money supply lead to

Which of the following effects helps to explain the slope of the aggregate-demand curve?

Investment is a

In which case can we be sure aggregate demand shifts left overall?

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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