Question 1

Microeconomic substitution is impossible for the economy as a whole because

Accepted Answer

A) money is a veil. 
B) real GDP measures the total quantity of goods and services produced by all firms in all markets. 
C) the prices of some goods and services adjust sluggishly in response to changing economic conditions. 
D) a lower price level increases real wealth,which stimulates spending by consumers and vice-versa. 
A) money is a veil. 
B) real GDP measures the total quantity of goods and services produced by all firms in all markets. 
C) the prices of some goods and services adjust sluggishly in response to changing economic conditions. 
D) a lower price level increases real wealth,which stimulates spending by consumers and vice-versa.

Question 2

The classical dichotomy refers to the separation of

Accepted Answer

A) prices and nominal interest rates. 
B) taxes and government spending. 
C) decisions made by the public and decisions made by the government. 
D) real and nominal variables. 
A) prices and nominal interest rates. 
B) taxes and government spending. 
C) decisions made by the public and decisions made by the government. 
D) real and nominal variables.

Question 3

The model of short-run economic fluctuations focuses on

Accepted Answer

A) the price level and real GDP. 
B) productivity and economic growth. 
C) the neutrality of money and inflation. 
D) None of the above is correct. 
A) the price level and real GDP. 
B) productivity and economic growth. 
C) the neutrality of money and inflation. 
D) None of the above is correct.

Question 4

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 5

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

Accepted Answer

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

Question 6

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

Accepted Answer

A) variables measured in terms of money and variables measured in terms of quantities or relative prices 
B) variables measured in terms of money but not variables measured in terms of quantities or relative prices 
C) variables measured in terms of quantities or relative prices,but not variables measured in terms of money 
D) neither variables measured in terms of money nor variables measured in terms of quantities or relative prices 
A) variables measured in terms of money and variables measured in terms of quantities or relative prices 
B) variables measured in terms of money but not variables measured in terms of quantities or relative prices 
C) variables measured in terms of quantities or relative prices,but not variables measured in terms of money 
D) neither variables measured in terms of money nor variables measured in terms of quantities or relative prices

Question 7

The aggregate demand is described graphically as

Accepted Answer

A) ​sloping downward. 
B) ​a vertical line. 
C) ​a horizontal line. 
D) ​sloping upward. 
A) ​sloping downward. 
B) ​a vertical line. 
C) ​a horizontal line. 
D) ​sloping upward.

Question 8

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Accepted Answer

A) the price level and real output. 
B) real output and employment. 
C) employment and the inflation rate. 
D) the value of money and the price level. 
A) the price level and real output. 
B) real output and employment. 
C) employment and the inflation rate. 
D) the value of money and the price level.

Question 9

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 10

"Money is a veil" best describes the

Accepted Answer

A) new-Keynesian view. 
B) Keynesian view. 
C) classical view. 
D) economy in the short run but not the long run. 
A) new-Keynesian view. 
B) Keynesian view. 
C) classical view. 
D) economy in the short run but not the long run.

Question 11

The model of aggregate demand and aggregate supply explains the relationship between

Accepted Answer

A) the price and quantity of a particular good. 
B) unemployment and output. 
C) wages and employment. 
D) real GDP and the price level. 
A) the price and quantity of a particular good. 
B) unemployment and output. 
C) wages and employment. 
D) real GDP and the price level.

Question 12

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

Accepted Answer

A) an increase in firms' inventories. 
B) purchases of goods by households. 
C) firms' purchases of newly produced machinery. 
D) government's tax collections. 
A) an increase in firms' inventories. 
B) purchases of goods by households. 
C) firms' purchases of newly produced machinery. 
D) government's tax collections.

Question 13

The aggregate demand and aggregate supply graph has

Accepted Answer

A) quantity of output on the horizontal axis.Output can be measured by the GDP deflator. 
B) quantity of output on the horizontal axis.Output can be measured by real GDP. 
C) quantity of output on the vertical axis.Output can be measured by the GDP deflator. 
D) quantity of output on the vertical axis.Output can be measured by real GDP. 
A) quantity of output on the horizontal axis.Output can be measured by the GDP deflator. 
B) quantity of output on the horizontal axis.Output can be measured by real GDP. 
C) quantity of output on the vertical axis.Output can be measured by the GDP deflator. 
D) quantity of output on the vertical axis.Output can be measured by real GDP.

Question 14

The average price level is measured by

Accepted Answer

A) the price of oil. 
B) the rate of inflation. 
C) the nominal interest rate. 
D) the GDP deflator or the CPI. 
A) the price of oil. 
B) the rate of inflation. 
C) the nominal interest rate. 
D) the GDP deflator or the CPI.

Question 15

Most economists believe that in the short run

Accepted Answer

A) real and nominal variables are determined independently and that money cannot move real GDP away from its long-run trend. 
B) real and nominal variables are determined independently but that money can temporarily move real GDP away from its long-run trend. 
C) real and nominal variables are highly intertwined but that money cannot move real GDP away from its long-run trend. 
D) real and nominal variables are highly intertwined and that money can temporarily move real GDP away from its long-run trend. 
A) real and nominal variables are determined independently and that money cannot move real GDP away from its long-run trend. 
B) real and nominal variables are determined independently but that money can temporarily move real GDP away from its long-run trend. 
C) real and nominal variables are highly intertwined but that money cannot move real GDP away from its long-run trend. 
D) real and nominal variables are highly intertwined and that money can temporarily move real GDP away from its long-run trend.

Question 16

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Accepted Answer

A) prices and output both increased immediately. 
B) prices increased immediately while output remained unchanged. 
C) it took time for prices to rise;in the meantime output was lower. 
D) it took time for prices to rise;in the meantime output was higher. 
A) prices and output both increased immediately. 
B) prices increased immediately while output remained unchanged. 
C) it took time for prices to rise;in the meantime output was lower. 
D) it took time for prices to rise;in the meantime output was higher.

Question 17

Aggregate demand includes

Accepted Answer

A) the quantity of goods and services the government,households,firms,and customers abroad want to buy. 
B) neither the quantity of goods and services the government,households,nor firms want to buy nor the quantity of goods and services customers abroad want to buy. 
C) the quantity of goods and service the government wants to buy,but not the quantity of goods and services households,firms,or customers abroad want to buy. 
D) the quantity of goods and services households and firms want to buy,but not the quantity of goods and services the government wants to buy. 
A) the quantity of goods and services the government,households,firms,and customers abroad want to buy. 
B) neither the quantity of goods and services the government,households,nor firms want to buy nor the quantity of goods and services customers abroad want to buy. 
C) the quantity of goods and service the government wants to buy,but not the quantity of goods and services households,firms,or customers abroad want to buy. 
D) the quantity of goods and services households and firms want to buy,but not the quantity of goods and services the government wants to buy.

Question 18

The aggregate demand and aggregate supply graph has

Accepted Answer

A) the price level on the horizontal axis.The price level can be measured by the GDP deflator. 
B) the price level on the horizontal axis.The price level can be measured by real GDP. 
C) the price level on the vertical axis.The price level can be measured by the GDP deflator. 
D) the price level on the vertical axis.The price level can be measured by GDP. 
A) the price level on the horizontal axis.The price level can be measured by the GDP deflator. 
B) the price level on the horizontal axis.The price level can be measured by real GDP. 
C) the price level on the vertical axis.The price level can be measured by the GDP deflator. 
D) the price level on the vertical axis.The price level can be measured by GDP.

Exam 20: Aggregate Demand and Aggregate Supply: Explaining Short-Run Economic Fluctuations

Microeconomic substitution is impossible for the economy as a whole because

The classical dichotomy refers to the separation of

The model of short-run economic fluctuations focuses on

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

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

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

The aggregate demand is described graphically as

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Aggregate demand includes

"Money is a veil" best describes the

The model of aggregate demand and aggregate supply explains the relationship between

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

The aggregate demand and aggregate supply graph has

The average price level is measured by

Most economists believe that in the short run

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Aggregate demand includes

The aggregate demand and aggregate supply graph has

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

Application International Trade: Part B