Question 1

Which of the following would cause prices to fall and output to rise in the short run?

Accepted Answer

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

Question 2

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

Accepted Answer

A) True 
 B)False

Question 3

According to classical macroeconomic theory,changes in the money supply affect

Accepted Answer

A)  nominal variables and real variables. 
B)  nominal variables,but not real variables. 
C)  real variables,but not nominal variables. 
D)  neither nominal nor real variables. 
A)  nominal variables and real variables. 
B)  nominal variables,but not real variables. 
C)  real variables,but not nominal variables. 
D)  neither nominal nor real variables.

Question 4

During the 2008-2009 recession real GDP fell by about

Accepted Answer

A)  2% 
B)  4% 
C)  6% 
D)  8% 
A)  2% 
B)  4% 
C)  6% 
D)  8%

Question 5

Which of the following would not be included in aggregate demand?

Accepted Answer

A)  additions of newly produced goods to inventory 
B)  purchases of U.S.services by foreigners 
C)  the purchase of newly produced capital goods 
D)  government transfer payments such as Social Security payments 
A)  additions of newly produced goods to inventory 
B)  purchases of U.S.services by foreigners 
C)  the purchase of newly produced capital goods 
D)  government transfer payments such as Social Security payments

Question 6

If the government provides an investment tax credit and increases income taxes,

Accepted Answer

A)  real GDP rises,and the price level could rise,fall,or stay the same. 
B)  real GDP falls,and the price level could rise,fall,or stay the same. 
C)  the price level rises and real GDP could rise,fall or stay the same 
D)  None of the above are necessarily correct. 
A)  real GDP rises,and the price level could rise,fall,or stay the same. 
B)  real GDP falls,and the price level could rise,fall,or stay the same. 
C)  the price level rises and real GDP could rise,fall or stay the same 
D)  None of the above are necessarily correct.

Question 7

Which of the following adjust to bring aggregate supply and demand into balance?

Accepted Answer

A)  the price level and real output 
B)  the real rate of interest and the money supply 
C)  government expenditures and taxes 
D)  the saving rate and net exports 
A)  the price level and real output 
B)  the real rate of interest and the money supply 
C)  government expenditures and taxes 
D)  the saving rate and net exports

Question 8

Which of the following would raise the price level in both the short and long run?

Accepted Answer

A)  an increase in taxes 
B)  an increase in government expenditures 
C)  a decrease in the minimum wage 
D)  an increase in the capital stock 
A)  an increase in taxes 
B)  an increase in government expenditures 
C)  a decrease in the minimum wage 
D)  an increase in the capital stock

Question 9

Other things the same,when the price level rises,interest rates

Accepted Answer

A)  rise,so firms increase investment. 
B)  rise,so firms decrease investment. 
C)  fall,so firms increase investment. 
D)  fall,so firms decrease investment. 
A)  rise,so firms increase investment. 
B)  rise,so firms decrease investment. 
C)  fall,so firms increase investment. 
D)  fall,so firms decrease investment.

Question 10

Which of the following has been suggested as a cause of the Great Depression?

Accepted Answer

A)  a decline in the money supply 
B)  a decrease in stock prices 
C)  the collapse of the banking system 
D)  All of the above are correct. 
A)  a decline in the money supply 
B)  a decrease in stock prices 
C)  the collapse of the banking system 
D)  All of the above are correct.

Question 11

According to the misperceptions theory of aggregate supply,if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent,then the firm would believe that the relative price of what it produce had

Accepted Answer

A)  increased,so it would increase production. 
B)  increased,so it would decrease production. 
C)  decreased,so it would increase production. 
D)  decreased,so it would decrease production. 
A)  increased,so it would increase production. 
B)  increased,so it would decrease production. 
C)  decreased,so it would increase production. 
D)  decreased,so it would decrease production.

Question 12

If countries that imported goods and services from the United States went into recession,we would expect that U.S.net exports would

Accepted Answer

A)  rise,making aggregate demand shift right. 
B)  rise,making aggregate demand shift left. 
C)  fall,making aggregate demand shift right. 
D)  fall,making aggregate demand shift left. 
A)  rise,making aggregate demand shift right. 
B)  rise,making aggregate demand shift left. 
C)  fall,making aggregate demand shift right. 
D)  fall,making aggregate demand shift left.

Question 13

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.To explain this

Accepted Answer

A)  it is only necessary that long-run aggregate supply shifts right over time. 
B)  it is only necessary that aggregate demand shifts right over time. 
C)  both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther. 
D)  None of the above cases would produce rising prices and growing real GDP over time. 
A)  it is only necessary that long-run aggregate supply shifts right over time. 
B)  it is only necessary that aggregate demand shifts right over time. 
C)  both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther. 
D)  None of the above cases would produce rising prices and growing real GDP over time.

Question 14

According to classical macroeconomic theory,changes in the money supply affect

Accepted Answer

A)  real GDP and the price level. 
B)  real GDP but not the price level. 
C)  the price level,but not real GDP. 
D)  neither the price level nor real GDP. 
A)  real GDP and the price level. 
B)  real GDP but not the price level. 
C)  the price level,but not real GDP. 
D)  neither the price level nor real GDP.

Question 15

In order to understand how the economy works in the short run,we need to

Accepted Answer

A)  study the classical model. 
B)  study a model in which real and nominal variables interact. 
C)  understand that "money is a veil." 
D)  understand that money is neutral in the short run. 
A)  study the classical model. 
B)  study a model in which real and nominal variables interact. 
C)  understand that "money is a veil." 
D)  understand that money is neutral in the short run.

Question 16

When the price level rises unexpectedly,some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

Accepted Answer

A) True 
 B)False

Question 17

Other things the same,a decrease in the price level makes the interest rate decrease,which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 18

As the price level falls

Accepted Answer

A)  people are more willing to lend,so interest rates rise. 
B)  people are more willing to lend,so interest rates fall. 
C)  people are less willing to lend,so interest rates fall. 
D)  people are less willing to lend,so interest rates rise. 
A)  people are more willing to lend,so interest rates rise. 
B)  people are more willing to lend,so interest rates fall. 
C)  people are less willing to lend,so interest rates fall. 
D)  people are less willing to lend,so interest rates rise.

Question 19

If output is above its natural rate,then according to sticky-wage theory

Accepted Answer

A)  workers and firms will strike bargains for higher wages.This increase in wages shifts the short-run aggregate supply curve right. 
B)  workers and firms will strike bargains for higher wages.This increase in wages shifts the short-run aggregate supply curve left. 
C)  workers and firms will strike bargains for lower wages.This decrease in wages shifts the short-run aggregate supply curve right. 
D)  workers and firms will strike bargains for lower wages.This decrease in wages shifts the short-run aggregate supply curve left. 
A)  workers and firms will strike bargains for higher wages.This increase in wages shifts the short-run aggregate supply curve right. 
B)  workers and firms will strike bargains for higher wages.This increase in wages shifts the short-run aggregate supply curve left. 
C)  workers and firms will strike bargains for lower wages.This decrease in wages shifts the short-run aggregate supply curve right. 
D)  workers and firms will strike bargains for lower wages.This decrease in wages shifts the short-run aggregate supply curve left.

Question 20

Which of the following would both shift aggregate demand right?

Accepted Answer

A)  the price level decreases and government expenditures increase 
B)  the price level decreases and the government repeals an investment tax credit 
C)  government expenditures increase and the money supply increases 
D)  None of the above are correct. 
A)  the price level decreases and government expenditures increase 
B)  the price level decreases and the government repeals an investment tax credit 
C)  government expenditures increase and the money supply increases 
D)  None of the above are correct.

Exam 23: Aggregate Demand and Aggregate Supply

Which of the following would cause prices to fall and output to rise in the short run?

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

According to classical macroeconomic theory,changes in the money supply affect

During the 2008-2009 recession real GDP fell by about

Which of the following would not be included in aggregate demand?

If the government provides an investment tax credit and increases income taxes,

Which of the following adjust to bring aggregate supply and demand into balance?

Which of the following would raise the price level in both the short and long run?

Other things the same,when the price level rises,interest rates

Which of the following has been suggested as a cause of the Great Depression?

According to the misperceptions theory of aggregate supply,if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent,then the firm would believe that the relative price of what it produce had

If countries that imported goods and services from the United States went into recession,we would expect that U.S.net exports would

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.To explain this

According to classical macroeconomic theory,changes in the money supply affect

In order to understand how the economy works in the short run,we need to

When the price level rises unexpectedly,some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

Other things the same,a decrease in the price level makes the interest rate decrease,which leads to a depreciation of the dollar in the market for foreign-currency exchange.

As the price level falls

If output is above its natural rate,then according to sticky-wage theory

Which of the following would both shift aggregate demand right?

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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