Question 1

Most economists believe that classical theory describes the world in the short run but not in the long run.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would increase output in the short run?

Accepted Answer

A)  an increase in stock prices makes people feel wealthier 
B)  government spending increases 
C)  firms chose to purchase more investment goods 
D)  All of the above are correct. 
A)  an increase in stock prices makes people feel wealthier 
B)  government spending increases 
C)  firms chose to purchase more investment goods 
D)  All of the above are correct.

Question 3

The quantity of aggregate goods and service demanded rises when the

Accepted Answer

A)  price level rises, because the interest rate rises. 
B)  price level rises, because the interest rate falls. 
C)  price level falls, because the interest rate rises. 
D)  price level falls, because the interest rate falls. 
A)  price level rises, because the interest rate rises. 
B)  price level rises, because the interest rate falls. 
C)  price level falls, because the interest rate rises. 
D)  price level falls, because the interest rate falls.

Question 4

Which of the following would cause stagflation?

Accepted Answer

A)  rising government expenditures 
B)  rising oil prices 
C)  a falling money supply 
D)  technical progress 
A)  rising government expenditures 
B)  rising oil prices 
C)  a falling money supply 
D)  technical progress

Question 5

If there are sticky wages, and the price level is greater than what was expected, then

Accepted Answer

A)  the quantity of aggregate goods and services supplied falls, which is shown by a shift of the short-run aggregate supply curve to the left. 
B)  the quantity of aggregate goods and services supplied falls, as shown by a movement to the left along the short-run aggregate supply curve. 
C)  the quantity of aggregate goods and services supplied rises, as shown by a shift of the short-run aggregate supply curve to the right. 
D)  the quantity of aggregate goods and services supplied rises, as shown by a movement to the right along the short-run aggregate supply curve. 
A)  the quantity of aggregate goods and services supplied falls, which is shown by a shift of the short-run aggregate supply curve to the left. 
B)  the quantity of aggregate goods and services supplied falls, as shown by a movement to the left along the short-run aggregate supply curve. 
C)  the quantity of aggregate goods and services supplied rises, as shown by a shift of the short-run aggregate supply curve to the right. 
D)  the quantity of aggregate goods and services supplied rises, as shown by a movement to the right along the short-run aggregate supply curve.

Question 6

When the dollar appreciates, U.S.

Accepted Answer

A)  exports decrease, while imports increase. 
B)  exports and imports decrease. 
C)  exports and imports increase. 
D)  exports increase, while imports decrease. 
A)  exports decrease, while imports increase. 
B)  exports and imports decrease. 
C)  exports and imports increase. 
D)  exports increase, while imports decrease.

Question 7

Which of the following is correct?

Accepted Answer

A)  Over the business cycle consumption fluctuates more than investment. 
B)  Economic fluctuations are easy to predict. 
C)  During recessions sales and profits tend to fall. 
D)  Because of government policy the U.S. has suffered no recessions in the last 25 years. 
A)  Over the business cycle consumption fluctuates more than investment. 
B)  Economic fluctuations are easy to predict. 
C)  During recessions sales and profits tend to fall. 
D)  Because of government policy the U.S. has suffered no recessions in the last 25 years.

Question 8

Investment is a

Accepted Answer

A)  small part of real GDP, so it accounts for a small share of the fluctuation in real GDP. 
B)  small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. 
C)  large part of real GDP, so it accounts for a large share of the fluctuation in real GDP. 
D)  large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP. 
A)  small part of real GDP, so it accounts for a small share of the fluctuation in real GDP. 
B)  small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. 
C)  large part of real GDP, so it accounts for a large share of the fluctuation in real GDP. 
D)  large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.

Question 9

The initial impact of an increase in an investment tax credit is to shift

Accepted Answer

A)  aggregate demand right. 
B)  aggregate demand left. 
C)  aggregate supply right. 
D)  aggregate supply left. 
A)  aggregate demand right. 
B)  aggregate demand left. 
C)  aggregate supply right. 
D)  aggregate supply left.

Question 10

Sticky nominal wages can result in

Accepted Answer

A)  lower profits for firms when the price level is lower than expected. 
B)  a decrease in real wages when the price level is lower than expected. 
C)  a short-run aggregate-supply curve that is vertical. 
D)  a long-run aggregate-supply curve that is upward-sloping. 
A)  lower profits for firms when the price level is lower than expected. 
B)  a decrease in real wages when the price level is lower than expected. 
C)  a short-run aggregate-supply curve that is vertical. 
D)  a long-run aggregate-supply curve that is upward-sloping.

Question 11

When the price level falls

Accepted Answer

A)  the interest rate rises, so the quantity of goods and services demand rises. 
B)  the interest rate rises, so the quantity of goods and services demand falls. 
C)  the interest rate falls, so the quantity of goods and services demand rises. 
D)  the interest rate falls, so the quantity of goods and services demand falls. 
A)  the interest rate rises, so the quantity of goods and services demand rises. 
B)  the interest rate rises, so the quantity of goods and services demand falls. 
C)  the interest rate falls, so the quantity of goods and services demand rises. 
D)  the interest rate falls, so the quantity of goods and services demand falls.

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

Other things the same, if the price level falls, domestic interest rates

Accepted Answer

A)  rise, so domestic residents will want to hold more foreign bonds. 
B)  rise, so domestic residents will want to hold fewer foreign bonds. 
C)  fall, so domestic residents will want to hold more foreign bonds. 
D)  fall, so domestic residents will want to hold fewer foreign bonds. 
A)  rise, so domestic residents will want to hold more foreign bonds. 
B)  rise, so domestic residents will want to hold fewer foreign bonds. 
C)  fall, so domestic residents will want to hold more foreign bonds. 
D)  fall, so domestic residents will want to hold fewer foreign bonds.

Question 14

A decrease in U.S. interest rates leads to

Accepted Answer

A)  a depreciation of the dollar that leads to greater net exports. 
B)  a depreciation of the dollar that leads to smaller net exports. 
C)  an appreciation of the dollar that leads to greater net exports. 
D)  an appreciation of the dollar that leads to smaller net exports. 
A)  a depreciation of the dollar that leads to greater net exports. 
B)  a depreciation of the dollar that leads to smaller net exports. 
C)  an appreciation of the dollar that leads to greater net exports. 
D)  an appreciation of the dollar that leads to smaller net exports.

Question 15

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level

Accepted Answer

A)  and output are higher than in the original long-run equilibrium. 
B)  and output are lower than in the original long-run equilibrium. 
C)  is lower and output is the same as the original long-run equilibrium. 
D)  is the same and output is lower than in the original long-run equilibrium. 
A)  and output are higher than in the original long-run equilibrium. 
B)  and output are lower than in the original long-run equilibrium. 
C)  is lower and output is the same as the original long-run equilibrium. 
D)  is the same and output is lower than in the original long-run equilibrium.

Question 16

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 17

Historical evidence for the U.S. economy indicates that

Accepted Answer

A)  recessions have occurred roughly once every six years since the 1960s. 
B)  the unemployment rate usually decreases during a recession and increases shortly after the recession ends. 
C)  real GDP usually remains roughly constant during a recession and decreases shortly after the recession ends. 
D)  changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle. 
A)  recessions have occurred roughly once every six years since the 1960s. 
B)  the unemployment rate usually decreases during a recession and increases shortly after the recession ends. 
C)  real GDP usually remains roughly constant during a recession and decreases shortly after the recession ends. 
D)  changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle.

Question 18

Figure 15-2.
  
-Refer to Financial Crisis. If nominal wages are sticky, which of the following helps explains the change in output?

Accepted Answer

A)  real wages fall, so firms choose to produce less 
B)  real wages fall, so firms choose to produce more 
C)  real wages rise, so firms choose to produce less 
D)  real wages rise, so firms choose to produce more 
A)  real wages fall, so firms choose to produce less 
B)  real wages fall, so firms choose to produce more 
C)  real wages rise, so firms choose to produce less 
D)  real wages rise, so firms choose to produce more

Question 19

Figure 15-2.
  
-Refer to Stock Market Boom 2015. Which curve shifts and in which direction?

Accepted Answer

A)  aggregate demand shifts right 
B)  aggregate demand shifts left 
C)  aggregate supply shifts right 
D)  aggregate supply shifts left. 
A)  aggregate demand shifts right 
B)  aggregate demand shifts left 
C)  aggregate supply shifts right 
D)  aggregate supply shifts left.

Question 20

When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is

Accepted Answer

A)  less than it desires and increase its production. 
B)  less than it desires and decrease its production 
C)  more than it desires and increase its production. 
D)  less than it desires and decrease its production. 
A)  less than it desires and increase its production. 
B)  less than it desires and decrease its production 
C)  more than it desires and increase its production. 
D)  less than it desires and decrease its production.

Most economists believe that classical theory describes the world in the short run but not in the long run.

Which of the following would increase output in the short run?

The quantity of aggregate goods and service demanded rises when the

Which of the following would cause stagflation?

If there are sticky wages, and the price level is greater than what was expected, then

When the dollar appreciates, U.S.

Which of the following is correct?

Investment is a

The initial impact of an increase in an investment tax credit is to shift

Sticky nominal wages can result in

When the price level falls

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

Other things the same, if the price level falls, domestic interest rates

A decrease in U.S. interest rates leads to

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level

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

Historical evidence for the U.S. economy indicates that

Figure 15-2. -Refer to Financial Crisis. If nominal wages are sticky, which of the following helps explains the change in output?

Figure 15-2. -Refer to Stock Market Boom 2015. Which curve shifts and in which direction?

When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is

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

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 15: Aggregate Demand and Aggregate Supply

Most economists believe that classical theory describes the world in the short run but not in the long run.

Which of the following would increase output in the short run?

The quantity of aggregate goods and service demanded rises when the

Which of the following would cause stagflation?

If there are sticky wages, and the price level is greater than what was expected, then

When the dollar appreciates, U.S.

Which of the following is correct?

Investment is a

The initial impact of an increase in an investment tax credit is to shift

Sticky nominal wages can result in

When the price level falls

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

Other things the same, if the price level falls, domestic interest rates

A decrease in U.S. interest rates leads to

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level

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

Historical evidence for the U.S. economy indicates that

Figure 15-2. -Refer to Financial Crisis. If nominal wages are sticky, which of the following helps explains the change in output?

Figure 15-2. -Refer to Stock Market Boom 2015. Which curve shifts and in which direction?

When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is

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

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters