Question 1

According to classical economic theory,which of the following do changes in the money supply affect?

Accepted Answer

A)  incentives to invest 
B)  prices 
C)  unemployment rates 
D)  aggregate supply 
A)  incentives to invest 
B)  prices 
C)  unemployment rates 
D)  aggregate supply

Question 2

An increase in the price level makes consumers feel less wealthy.How is this situation represented?

Accepted Answer

A)  Aggregate demand shifts right. 
B)  Aggregate demand shifts left. 
C)  There is a movement to right along a given aggregate-demand curve. 
D)  There is a movement to the left along a given aggregate-demand curve. 
A)  Aggregate demand shifts right. 
B)  Aggregate demand shifts left. 
C)  There is a movement to right along a given aggregate-demand curve. 
D)  There is a movement to the left along a given aggregate-demand curve.

Question 3

What happened in the first few years of the Great Depression?

Accepted Answer

A)  Unemployment rose by about 10 percent,and prices rose about 27 percent. 
B)  Unemployment rose by about 19 percent,and prices rose about 12 percent. 
C)  Unemployment rose by about 20 percent,and prices fell about 12 percent. 
D)  Unemployment rose by about 21 percent,and prices fell about 19 percent. 
A)  Unemployment rose by about 10 percent,and prices rose about 27 percent. 
B)  Unemployment rose by about 19 percent,and prices rose about 12 percent. 
C)  Unemployment rose by about 20 percent,and prices fell about 12 percent. 
D)  Unemployment rose by about 21 percent,and prices fell about 19 percent.

Question 4

When taxes decrease,consumption increases.How is this situation represented in the aggregate demand and aggregate supply model?

Accepted Answer

A)  by a movement to the right along a given aggregate-demand curve 
B)  by shifting aggregate demand to the right 
C)  by shifting aggregate supply to the right 
D)  by a movement to the left along a given aggregate-demand curve 
A)  by a movement to the right along a given aggregate-demand curve 
B)  by shifting aggregate demand to the right 
C)  by shifting aggregate supply to the right 
D)  by a movement to the left along a given aggregate-demand curve

Question 5

Because not all prices adjust instantly to changing conditions,an unexpected fall in the price level leaves some firms with higher-than-desired prices,and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)  an increase in exports 
B)  an increase in taxes 
C)  a decrease in imports 
D)  a decrease in interest rates 
A)  an increase in exports 
B)  an increase in taxes 
C)  a decrease in imports 
D)  a decrease in interest rates

Question 7

According to the misperceptions theory of the short-run aggregate supply curve,if the price level increases more than people expect,how do firms change their behaviour?

Accepted Answer

A)  They believe that the relative price has decreased,so they increase production. 
B)  They believe that the relative price has decreased,so they decrease production. 
C)  They believe that the relative price has increased,so they increase production. 
D)  They believe that the relative price has increased,so they decrease production. 
A)  They believe that the relative price has decreased,so they increase production. 
B)  They believe that the relative price has decreased,so they decrease production. 
C)  They believe that the relative price has increased,so they increase production. 
D)  They believe that the relative price has increased,so they decrease production.

Question 8

Which statement best describes what happens when the price level falls?

Accepted Answer

A)  Households increase foreign bond purchases,and the supply of dollars increases. 
B)  Households increase foreign bond purchases,and the supply of dollars decreases. 
C)  Households decrease foreign bond purchases,and the supply of dollars increases. 
D)  Households decrease foreign bond purchases,and the supply of dollars decreases. 
A)  Households increase foreign bond purchases,and the supply of dollars increases. 
B)  Households increase foreign bond purchases,and the supply of dollars decreases. 
C)  Households decrease foreign bond purchases,and the supply of dollars increases. 
D)  Households decrease foreign bond purchases,and the supply of dollars decreases.

Question 9

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  the federal government reduces purchases of new weapons 
B)  an increase in the money supply 
C)  the price level falls 
D)  net exports fall 
A)  the federal government reduces purchases of new weapons 
B)  an increase in the money supply 
C)  the price level falls 
D)  net exports fall

Question 10

In the aggregate demand and aggregate supply model,when does the aggregate quantity of goods demanded increase?

Accepted Answer

A)  when real wealth rises 
B)  when the interest rate rises 
C)  when the dollar appreciates 
D)  when the expected price level rises 
A)  when real wealth rises 
B)  when the interest rate rises 
C)  when the dollar appreciates 
D)  when the expected price level rises

Question 11

Which statement best explains an increase in consumer spending?

Accepted Answer

A)  People spend more when the price level rises because the dollars they hold are worth more. 
B)  People spend more when the price level rises because the dollars they hold are worth less. 
C)  People spend more when the price level falls because the dollars they hold are worth more. 
D)  People spend more when the price level falls because the dollars they hold are worth less. 
A)  People spend more when the price level rises because the dollars they hold are worth more. 
B)  People spend more when the price level rises because the dollars they hold are worth less. 
C)  People spend more when the price level falls because the dollars they hold are worth more. 
D)  People spend more when the price level falls because the dollars they hold are worth less.

Question 12

According to the classical view in economics,which variable or policy can influence economic growth in the long run?

Accepted Answer

A)  an increase in capital stock 
B)  an increase in money supply 
C)  an increase in unemployment benefits 
D)  an increase in nominal interest rates 
A)  an increase in capital stock 
B)  an increase in money supply 
C)  an increase in unemployment benefits 
D)  an increase in nominal interest rates

Question 13

In addition to the price level,what does the aggregate demand and aggregate supply model focus on?

Accepted Answer

A)  real GDP 
B)  nominal GDP 
C)  the real interest rate 
D)  stock prices 
A)  real GDP 
B)  nominal GDP 
C)  the real interest rate 
D)  stock prices

Question 14

What is the current estimate of the natural rate of unemployment in Canada?

Accepted Answer

A)  5 percent 
B)  7 percent 
C)  9 percent 
D)  11 percent 
A)  5 percent 
B)  7 percent 
C)  9 percent 
D)  11 percent

Question 15

In the aggregate demand and aggregate supply model,when does the aggregate quantity of goods demanded increase?

Accepted Answer

A)  when real wealth falls 
B)  when the interest rate rises 
C)  when the dollar depreciates 
D)  when stock prices decrease 
A)  when real wealth falls 
B)  when the interest rate rises 
C)  when the dollar depreciates 
D)  when stock prices decrease

Question 16

What happens when the dollar appreciates?

Accepted Answer

A)  Net exports increase,and aggregate demand shifts right. 
B)  Net exports increase,and aggregate demand shifts left. 
C)  Net exports decrease,and aggregate demand shifts right. 
D)  Net exports decrease,and aggregate demand shifts left. 
A)  Net exports increase,and aggregate demand shifts right. 
B)  Net exports increase,and aggregate demand shifts left. 
C)  Net exports decrease,and aggregate demand shifts right. 
D)  Net exports decrease,and aggregate demand shifts left.

Question 17

Which statement best describes the beginning of a recession?

Accepted Answer

A)  Production and unemployment both rise. 
B)  Production rises and unemployment falls. 
C)  Production falls and unemployment rises. 
D)  Production and unemployment both fall. 
A)  Production and unemployment both rise. 
B)  Production rises and unemployment falls. 
C)  Production falls and unemployment rises. 
D)  Production and unemployment both fall.

Question 18

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

Question 19

What happens to prices and output when the long-run aggregate-supply curve shifts left?

Accepted Answer

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

Question 20

An increase in the money supply raises output in the long run.

Accepted Answer

A) True 
 B)False

According to classical economic theory,which of the following do changes in the money supply affect?

An increase in the price level makes consumers feel less wealthy.How is this situation represented?

What happened in the first few years of the Great Depression?

When taxes decrease,consumption increases.How is this situation represented in the aggregate demand and aggregate supply model?

Because not all prices adjust instantly to changing conditions,an unexpected fall in the price level leaves some firms with higher-than-desired prices,and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Which of the following shifts aggregate demand to the left?

According to the misperceptions theory of the short-run aggregate supply curve,if the price level increases more than people expect,how do firms change their behaviour?

Which statement best describes what happens when the price level falls?

Which of the following shifts aggregate demand to the right?

In the aggregate demand and aggregate supply model,when does the aggregate quantity of goods demanded increase?

Which statement best explains an increase in consumer spending?

According to the classical view in economics,which variable or policy can influence economic growth in the long run?

In addition to the price level,what does the aggregate demand and aggregate supply model focus on?

What is the current estimate of the natural rate of unemployment in Canada?

In the aggregate demand and aggregate supply model,when does the aggregate quantity of goods demanded increase?

What happens when the dollar appreciates?

Which statement best describes the beginning of a recession?

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

What happens to prices and output when the long-run aggregate-supply curve shifts left?

An increase in the money supply raises output in the long run.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 14: Aggregate Demand and Aggregate Supply

According to classical economic theory,which of the following do changes in the money supply affect?

An increase in the price level makes consumers feel less wealthy.How is this situation represented?

What happened in the first few years of the Great Depression?

When taxes decrease,consumption increases.How is this situation represented in the aggregate demand and aggregate supply model?

Because not all prices adjust instantly to changing conditions,an unexpected fall in the price level leaves some firms with higher-than-desired prices,and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Which of the following shifts aggregate demand to the left?

According to the misperceptions theory of the short-run aggregate supply curve,if the price level increases more than people expect,how do firms change their behaviour?

Which statement best describes what happens when the price level falls?

Which of the following shifts aggregate demand to the right?

In the aggregate demand and aggregate supply model,when does the aggregate quantity of goods demanded increase?

Which statement best explains an increase in consumer spending?

According to the classical view in economics,which variable or policy can influence economic growth in the long run?

In addition to the price level,what does the aggregate demand and aggregate supply model focus on?

What is the current estimate of the natural rate of unemployment in Canada?

In the aggregate demand and aggregate supply model,when does the aggregate quantity of goods demanded increase?

What happens when the dollar appreciates?

Which statement best describes the beginning of a recession?

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

What happens to prices and output when the long-run aggregate-supply curve shifts left?

An increase in the money supply raises output in the long run.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters