Question 1

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

Accepted Answer

A) True 
 B)False

Question 2

Financial Crisis
Suppose that banks are less able to raise funds and so lend less.Consequently,because people and households are less able to borrow,they spend less at any given price level than they would otherwise.The crisis is persistent so lending should remain depressed for some time.
-Refer to Financial Crisis.What happens to the price level and real GDP in the short run?

Accepted Answer

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

Question 3

Which of the following would cause stagflation?

Accepted Answer

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

Question 4

Aggregate demand includes

Accepted Answer

A)  only the quantity of goods and services households want to buy. 
B)  only the quantity of goods and services households and firms want to buy. 
C)  only the quantity of goods and services households,firms,and the government want to buy. 
D)  the quantity of goods and services households,firms,the government,and customer abroad want to buy. 
A)  only the quantity of goods and services households want to buy. 
B)  only the quantity of goods and services households and firms want to buy. 
C)  only the quantity of goods and services households,firms,and the government want to buy. 
D)  the quantity of goods and services households,firms,the government,and customer abroad want to buy.

Question 5

Suppose the economy is in long-run equilibrium.In a short span of time,there is a large influx of skilled immigrants,a major new discovery of oil,and a major new technological advance in electricity production.In the short run,we would expect

Accepted Answer

A)  the price level to rise and real GDP to fall. 
B)  the price level to fall and real GDP to rise. 
C)  the price level and real GDP both to stay the same. 
D)  All of the above are possible. 
A)  the price level to rise and real GDP to fall. 
B)  the price level to fall and real GDP to rise. 
C)  the price level and real GDP both to stay the same. 
D)  All of the above are possible.

Question 6

During World War II,

Accepted Answer

A)  government purchases of goods and services increased fivefold. 
B)  the economy's production increased about 25 percent. 
C)  unemployment fell to about 5%. 
D)  All of the above are correct. 
A)  government purchases of goods and services increased fivefold. 
B)  the economy's production increased about 25 percent. 
C)  unemployment fell to about 5%. 
D)  All of the above are correct.

Question 7

An increase in the money supply

Accepted Answer

A)  and an investment tax credit both cause aggregate demand to shift right. 
B)  and an investment tax credit both cause aggregate demand to shift left. 
C)  causes aggregate demand to shift right,while an investment tax credit causes aggregate demand to shift left. 
D)  causes aggregate demand to shift left,while an investment tax credit causes aggregate demand to shift right. 
A)  and an investment tax credit both cause aggregate demand to shift right. 
B)  and an investment tax credit both cause aggregate demand to shift left. 
C)  causes aggregate demand to shift right,while an investment tax credit causes aggregate demand to shift left. 
D)  causes aggregate demand to shift left,while an investment tax credit causes aggregate demand to shift right.

Question 8

In response to a decrease in output,the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in short-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following will reduce the price level and real output in the short run?

Accepted Answer

A)  an increase in the money supply 
B)  an increase in oil prices 
C)  a decrease in the money supply 
D)  technical progress 
A)  an increase in the money supply 
B)  an increase in oil prices 
C)  a decrease in the money supply 
D)  technical progress

Question 10

As the price level rises,the interest rate

Accepted Answer

A)  falls,so the supply of dollars in the market for foreign currency exchange shifts left. 
B)  falls,so the supply of dollars in the market for foreign currency exchange shifts right. 
C)  rises,so the supply of dollars in the market for foreign currency exchange shifts left. 
D)  rises,so the supply of dollars in the market for foreign currency exchange shifts right. 
A)  falls,so the supply of dollars in the market for foreign currency exchange shifts left. 
B)  falls,so the supply of dollars in the market for foreign currency exchange shifts right. 
C)  rises,so the supply of dollars in the market for foreign currency exchange shifts left. 
D)  rises,so the supply of dollars in the market for foreign currency exchange shifts right.

Question 11

When the price level falls

Accepted Answer

A)  households want to lend more,so the interest rate rises making the quantity of goods and services demanded rise. 
B)  households want to lend more,so the interest rate falls,making the quantity of goods and services demanded rise. 
C)  households want to lend more,so the interest rate rises,making the quantity of goods and services demanded fall. 
D)  None of the above are correct. 
A)  households want to lend more,so the interest rate rises making the quantity of goods and services demanded rise. 
B)  households want to lend more,so the interest rate falls,making the quantity of goods and services demanded rise. 
C)  households want to lend more,so the interest rate rises,making the quantity of goods and services demanded fall. 
D)  None of the above are correct.

Question 12

Political Instability Abroad
Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets.
-Refer to U.S.Financial Crisis.What would happen in the market for foreign-currency exchange?

Accepted Answer

A)  the supply of dollars would shift right and the exchange rate would rise. 
B)  the supply of dollars would shift right and the exchange rate would fall. 
C)  the supply of dollars would shift left and the exchange rate would rise. 
D)  None of the above is correct. 
A)  the supply of dollars would shift right and the exchange rate would rise. 
B)  the supply of dollars would shift right and the exchange rate would fall. 
C)  the supply of dollars would shift left and the exchange rate would rise. 
D)  None of the above is correct.

Question 13

Which of the following would increase output in the short run?

Accepted Answer

A)  an increase in stock prices makes people feel wealthier 
B)  government spending increases 
C)  firms chose to purchase more investment goods 
D)  All of the above are correct. 
A)  an increase in stock prices makes people feel wealthier 
B)  government spending increases 
C)  firms chose to purchase more investment goods 
D)  All of the above are correct.

Question 14

When the price level falls

Accepted Answer

A)  households want to lend less. 
B)  the interest rate rises. 
C)  firms want to spend less on investment goods. 
D)  None of the above are correct. 
A)  households want to lend less. 
B)  the interest rate rises. 
C)  firms want to spend less on investment goods. 
D)  None of the above are correct.

Question 15

Suppose the economy is in long-run equilibrium.In a short span of time,there is a sharp increase in the minimum wage,a major new discovery of oil,a large influx of immigrants,and new environmental regulations that raise the cost of electricity production.In the short run

Accepted Answer

A)  the price level will rise and real GDP will fall. 
B)  the price level will fall and real GDP will rise. 
C)  the price level and real GDP will both stay the same. 
D)  All of the above are possible. 
A)  the price level will rise and real GDP will fall. 
B)  the price level will fall and real GDP will rise. 
C)  the price level and real GDP will both stay the same. 
D)  All of the above are possible.

Question 16

The long-run aggregate supply curve shifts right if

Accepted Answer

A)  immigration from abroad increases. 
B)  the capital stock increases. 
C)  technology advances. 
D)  All of the above are correct. 
A)  immigration from abroad increases. 
B)  the capital stock increases. 
C)  technology advances. 
D)  All of the above are correct.

Question 17

Other things the same,when the price level rises more than expected,some firms will have

Accepted Answer

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

Question 18

Consider the exhibit below for the following questions.
Figure 23-1  
-Refer to Figure 23-1.If the economy starts at A and there is a fall in aggregate demand,the economy moves

Accepted Answer

A)  back to A in the long run. 
B)  to B in the long run. 
C)  to C in the long run. 
D)  to D in the long run. 
A)  back to A in the long run. 
B)  to B in the long run. 
C)  to C in the long run. 
D)  to D in the long run.

Question 19

Which of the following is not a determinant of the long-run level of real GDP?

Accepted Answer

A)  the price level 
B)  the supply of labor 
C)  available natural resources 
D)  available technology 
A)  the price level 
B)  the supply of labor 
C)  available natural resources 
D)  available technology

Question 20

Other things the same,if the long-run aggregate supply curve shifts left,prices

Accepted Answer

A)  and output both increase. 
B)  and output both decrease. 
C)  increase and output decreases. 
D)  decrease and output increases. 
A)  and output both increase. 
B)  and output both decrease. 
C)  increase and output decreases. 
D)  decrease and output increases.

Exam 23: Aggregate Demand and Aggregate Supply

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

Which of the following would cause stagflation?

Aggregate demand includes

Suppose the economy is in long-run equilibrium.In a short span of time,there is a large influx of skilled immigrants,a major new discovery of oil,and a major new technological advance in electricity production.In the short run,we would expect

During World War II,

An increase in the money supply

In response to a decrease in output,the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in short-run aggregate supply.

Which of the following will reduce the price level and real output in the short run?

As the price level rises,the interest rate

When the price level falls

Political Instability Abroad Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets. -Refer to U.S.Financial Crisis.What would happen in the market for foreign-currency exchange?

Which of the following would increase output in the short run?

When the price level falls

Suppose the economy is in long-run equilibrium.In a short span of time,there is a sharp increase in the minimum wage,a major new discovery of oil,a large influx of immigrants,and new environmental regulations that raise the cost of electricity production.In the short run

The long-run aggregate supply curve shifts right if

Other things the same,when the price level rises more than expected,some firms will have

Consider the exhibit below for the following questions. Figure 23-1 -Refer to Figure 23-1.If the economy starts at A and there is a fall in aggregate demand,the economy moves

Which of the following is not a determinant of the long-run level of real GDP?

Other things the same,if the long-run aggregate supply curve shifts left,prices

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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