Exam 20: Aggregate Demand and Aggregate Supply: Part B

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The recessions associated with the business cycle come at regular intervals.

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(True/False)

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Question 1

Correct Answer:

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False

If not all prices adjust instantly to changing economic circumstances,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.

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Question 2

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True

All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the expected price level.

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Question 3

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True

The effect of a change in the value of the dollar in the foreign exchange market due to a change in the price level helps explain the slope of aggregate demand,but does not shift it.The effects of a change in the value of the dollar in the foreign exchange market due to speculation is shown by shifting the aggregate demand curve.

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Question 4

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

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Question 5

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

(True/False)

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Question 6

Recessions occur at irregular intervals and are almost impossible to predict with much accuracy.

(True/False)

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Question 7

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

(True/False)

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Question 8

If the central bank increased the money supply in response to a decrease in short-run aggregate supply,unemployment would return towards its natural rate,but prices would rise even more.

(True/False)

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Question 9

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

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Question 10

According to classical macroeconomic theory,changes in the money supply change nominal but not real variables.

(True/False)

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Question 11

A change in the supply of labor,all else remaining the same,will shift the short-run aggregate-supply curve.

(True/False)

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Question 12

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

(True/False)

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Question 13

Because economists understand what things change GDP,they can predict recessions with a fair amount of accuracy.

(True/False)

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Question 14

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

(True/False)

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Question 15

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

(True/False)

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Question 16

Other things the same,as the price level falls,the exchange rate rises.A rise in the exchange rate leads to a decrease in net exports.

(True/False)

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Question 17

Most economist agree that money changes real GDP in both the short and long run.

(True/False)

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Question 18

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.

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Question 19

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

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Question 20

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Exam 20: Aggregate Demand and Aggregate Supply: Part B

The recessions associated with the business cycle come at regular intervals.

If not all prices adjust instantly to changing economic circumstances,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.

All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the expected price level.

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

Recessions occur at irregular intervals and are almost impossible to predict with much accuracy.

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

If the central bank increased the money supply in response to a decrease in short-run aggregate supply,unemployment would return towards its natural rate,but prices would rise even more.

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

According to classical macroeconomic theory,changes in the money supply change nominal but not real variables.

A change in the supply of labor,all else remaining the same,will shift the short-run aggregate-supply curve.

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

Because economists understand what things change GDP,they can predict recessions with a fair amount of accuracy.

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

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

Other things the same,as the price level falls,the exchange rate rises.A rise in the exchange rate leads to a decrease in net exports.

Most economist agree that money changes real GDP in both the short and long run.

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.

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

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A