Question 1

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Accepted Answer

A)  short-run fluctuations in the economy. 
B)  the effects of macroeconomic policy on the prices of individual goods. 
C)  the long-run effects of international trade policies. 
D)  productivity and economic growth. 
A)  short-run fluctuations in the economy. 
B)  the effects of macroeconomic policy on the prices of individual goods. 
C)  the long-run effects of international trade policies. 
D)  productivity and economic growth.

Question 2

Which of the following would cause prices and real GDP 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 3

As the price level falls,

Accepted Answer

A)  the exchange rate falls,so net exports fall. 
B)  the exchange rate falls,so net exports rise. 
C)  the exchange rate rises,so net exports fall. 
D)  the exchange rate rises,so net exports rise. 
A)  the exchange rate falls,so net exports fall. 
B)  the exchange rate falls,so net exports rise. 
C)  the exchange rate rises,so net exports fall. 
D)  the exchange rate rises,so net exports rise.

Question 4

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 Political Instability Abroad.What would the change in the interest rate created by foreigners wanting to buy more U.S.assets do to investment spending in the U.S.?

Accepted Answer

A)  make it rise which by itself would increase U.S.aggregate demand. 
B)  make it rise which by itself would decrease U.S.aggregate demand. 
C)  make it fall which by itself would increase U.S.aggregate demand. 
D)  make it fall which by itself would decrease U.S.aggregate demand. 
A)  make it rise which by itself would increase U.S.aggregate demand. 
B)  make it rise which by itself would decrease U.S.aggregate demand. 
C)  make it fall which by itself would increase U.S.aggregate demand. 
D)  make it fall which by itself would decrease U.S.aggregate demand.

Question 5

When taxes increase,consumption

Accepted Answer

A)  increases,so aggregate demand shifts right. 
B)  increases,so aggregate supply shifts right. 
C)  decreases,so aggregate demand shifts left. 
D)  decreases,so aggregate supply shifts left. 
A)  increases,so aggregate demand shifts right. 
B)  increases,so aggregate supply shifts right. 
C)  decreases,so aggregate demand shifts left. 
D)  decreases,so aggregate supply shifts left.

Question 6

When the money supply decreases

Accepted Answer

A)  interest rates fall and so aggregate demand shifts right. 
B)  interest rates fall and so aggregate demand shifts left. 
C)  interest rates rise and so aggregate demand shifts right. 
D)  interest rates rise and so aggregate demand shifts left. 
A)  interest rates fall and so aggregate demand shifts right. 
B)  interest rates fall and so aggregate demand shifts left. 
C)  interest rates rise and so aggregate demand shifts right. 
D)  interest rates rise and so aggregate demand shifts left.

Question 7

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

Accepted Answer

A)  an increase in the expected price level 
B)  an increase in the capital stock 
C)  an increase in the quantity of labor available 
D)  All of the above are correct. 
A)  an increase in the expected price level 
B)  an increase in the capital stock 
C)  an increase in the quantity of labor available 
D)  All of the above are correct.

Question 8

Optimism
Imagine that the economy is in long-run equilibrium.Then,perhaps because of improved international relations and increased confidence in policy makers,people become more optimistic about the future and stay this way for some time.
-Refer to Optimism.What happens to the expected price level and what's the result for wage bargaining?

Accepted Answer

A)  The expected price level falls.Bargains are struck for higher wages. 
B)  The expected price level falls.Bargains are struck for lower wages. 
C)  The expected price level rises.Bargains are struck for higher wages. 
D)  The expected price level rises.Bargains are struck for lower wages. 
A)  The expected price level falls.Bargains are struck for higher wages. 
B)  The expected price level falls.Bargains are struck for lower wages. 
C)  The expected price level rises.Bargains are struck for higher wages. 
D)  The expected price level rises.Bargains are struck for lower wages.

Question 9

Other things the same,when the price level falls,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

Aggregate demand shifts left if

Accepted Answer

A)  taxes rise and shifts left if stock prices rise. 
B)  taxes rise and shifts left if stock prices fall. 
C)  taxes fall and shifts left if stock prices rise. 
D)  taxes fall and shifts left is stock prices fall. 
A)  taxes rise and shifts left if stock prices rise. 
B)  taxes rise and shifts left if stock prices fall. 
C)  taxes fall and shifts left if stock prices rise. 
D)  taxes fall and shifts left is stock prices fall.

Question 11

Aggregate demand shifts right if at a given price level

Accepted Answer

A)  net exports rise and shifts left if the money supply increases. 
B)  net exports rise and shifts right if the money supply increases. 
C)  net exports fall and shifts left if the money supply increases. 
D)  net exports fall and shifts right if the money supply increases. 
A)  net exports rise and shifts left if the money supply increases. 
B)  net exports rise and shifts right if the money supply increases. 
C)  net exports fall and shifts left if the money supply increases. 
D)  net exports fall and shifts right if the money supply increases.

Question 12

Other things the same,the aggregate quantity of goods demanded in the U.S.increases if

Accepted Answer

A)  real wealth falls. 
B)  the interest rate rises. 
C)  the dollar depreciates. 
D)  None of the above is correct. 
A)  real wealth falls. 
B)  the interest rate rises. 
C)  the dollar depreciates. 
D)  None of the above is correct.

Question 13

A decrease in the money supply causes the interest rate to rise so that investment falls.

Accepted Answer

A) True 
 B)False

Question 14

The long-run aggregate supply curve shifts left if

Accepted Answer

A)  the capital stock increases. 
B)  there is a natural disaster. 
C)  the government removes some environmental regulations that limit production methods. 
D)  None of the above is correct. 
A)  the capital stock increases. 
B)  there is a natural disaster. 
C)  the government removes some environmental regulations that limit production methods. 
D)  None of the above is correct.

Question 15

If aggregate demand shifts right then in the short run

Accepted Answer

A)  firms will increase production.In the long run increased price expectations shift the short-run aggregate supply curve to the right. 
B)  firms will increase production.In the long run increased price expectations shift the short-run aggregate supply curve to the left. 
C)  firms will decrease production.In the long run increased price expectations shift the short-run aggregate supply curve to the right. 
D)  firms will decrease production.In the long run increased price expectations shift the short-run aggregate supply curve to the left. 
A)  firms will increase production.In the long run increased price expectations shift the short-run aggregate supply curve to the right. 
B)  firms will increase production.In the long run increased price expectations shift the short-run aggregate supply curve to the left. 
C)  firms will decrease production.In the long run increased price expectations shift the short-run aggregate supply curve to the right. 
D)  firms will decrease production.In the long run increased price expectations shift the short-run aggregate supply curve to the left.

Question 16

The aggregate-demand curve shows the

Accepted Answer

A)  quantity of labor and other inputs that firms want to buy at each price level. 
B)  quantity of labor and other inputs that firms want to buy at each inflation rate. 
C)  quantity of domestically produced goods and services that households want to buy at each price level. 
D)  quantity of domestically produced goods and services that households,firms,the government,and customers abroad want to buy at each price level. 
A)  quantity of labor and other inputs that firms want to buy at each price level. 
B)  quantity of labor and other inputs that firms want to buy at each inflation rate. 
C)  quantity of domestically produced goods and services that households want to buy at each price level. 
D)  quantity of domestically produced goods and services that households,firms,the government,and customers abroad want to buy at each price level.

Question 17

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  an increase in the money supply 
B)  an increase in net exports due to something other than a change in domestic prices 
C)  an investment tax credit 
D)  All of the above are correct. 
A)  an increase in the money supply 
B)  an increase in net exports due to something other than a change in domestic prices 
C)  an investment tax credit 
D)  All of the above are correct.

Question 18

Changes in the price of oil

Accepted Answer

A)  can only lead to recessions. 
B)  have not contributed much to output fluctuations in the United States. 
C)  change the economy principally by changing aggregate demand. 
D)  created both inflation and recession in the United States in the 1970s. 
A)  can only lead to recessions. 
B)  have not contributed much to output fluctuations in the United States. 
C)  change the economy principally by changing aggregate demand. 
D)  created both inflation and recession in the United States in the 1970s.

Question 19

Aggregate demand shifts to the left if the money supply increases.

Accepted Answer

A) True 
 B)False

Question 20

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

Accepted Answer

A) True 
 B)False

Exam 23: Aggregate Demand and Aggregate Supply

Most economists use the aggregate demand and aggregate supply model primarily to analyze

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

As the price level falls,

When taxes increase,consumption

When the money supply decreases

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

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

Aggregate demand shifts left if

Aggregate demand shifts right if at a given price level

Other things the same,the aggregate quantity of goods demanded in the U.S.increases if

A decrease in the money supply causes the interest rate to rise so that investment falls.

The long-run aggregate supply curve shifts left if

If aggregate demand shifts right then in the short run

The aggregate-demand curve shows the

Which of the following shifts aggregate demand to the right?

Changes in the price of oil

Aggregate demand shifts to the left if the money supply increases.

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

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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