Question 1

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Accepted Answer

A)  long-run aggregate supply shifts right 
B)  long-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left 
A)  long-run aggregate supply shifts right 
B)  long-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left

Question 2

Other things the same, if the long-run aggregate supply curve shifts left, prices

Accepted Answer

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

Question 3

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.

Question 4

Which of the following is correct?

Accepted Answer

A)  An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left. 
B)  An increase in stock prices reduces consumption spending so that aggregate demand shifts left. 
C)  An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left. 
D)  A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left. 
A)  An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left. 
B)  An increase in stock prices reduces consumption spending so that aggregate demand shifts left. 
C)  An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left. 
D)  A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left.

Question 5

We depart from the assumptions of classical economics when we focus on the relationship between

Accepted Answer

A)  the quantity of output and the price level. 
B)  the quantity of output and the unemployment rate. 
C)  the price level and the inflation rate. 
D)  inflation and the nominal interest rate. 
A)  the quantity of output and the price level. 
B)  the quantity of output and the unemployment rate. 
C)  the price level and the inflation rate. 
D)  inflation and the nominal interest rate.

Question 6

Which of the following shifts the short-run aggregate supply curve to the right?

Accepted Answer

A)  an increase in the money supply 
B)  an increase in the price level 
C)  a decrease in the expected price level 
D)  All of the above are correct. 
A)  an increase in the money supply 
B)  an increase in the price level 
C)  a decrease in the expected price level 
D)  All of the above are correct.

Question 7

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, the value of the dollar falls. In the short-run

Accepted Answer

A)  real GDP will rise and the price level might rise, fall, or stay the same. 
B)  real GDP will fall and the price level might rise, fall, or stay the same. 
C)  the price level will rise, and real GDP might rise, fall, or stay the same. 
D)  the price level will fall, and real GDP might rise, fall, or stay the same. 
A)  real GDP will rise and the price level might rise, fall, or stay the same. 
B)  real GDP will fall and the price level might rise, fall, or stay the same. 
C)  the price level will rise, and real GDP might rise, fall, or stay the same. 
D)  the price level will fall, and real GDP might rise, fall, or stay the same.

Question 8

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this

Accepted Answer

A)  it is only necessary that long-run aggregate supply shifts right over time. 
B)  it is only necessary that aggregate demand shifts right over time. 
C)  both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther. 
D)  None of the above cases would produce rising prices and growing real GDP over time. 
A)  it is only necessary that long-run aggregate supply shifts right over time. 
B)  it is only necessary that aggregate demand shifts right over time. 
C)  both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther. 
D)  None of the above cases would produce rising prices and growing real GDP over time.

Question 9

During recessions investment

Accepted Answer

A)  falls by a larger percentage than GDP. 
B)  falls by about the same percentage as GDP. 
C)  falls by a smaller percentage than GDP. 
D)  falls but the percentage change is sometimes much larger and sometimes much smaller. 
A)  falls by a larger percentage than GDP. 
B)  falls by about the same percentage as GDP. 
C)  falls by a smaller percentage than GDP. 
D)  falls but the percentage change is sometimes much larger and sometimes much smaller.

Question 10

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  a decrease in the money supply 
B)  increases in the profitability of capital due perhaps to technological progress. 
C)  the repeal of an investment tax credit 
D)  a decrease in the price level 
A)  a decrease in the money supply 
B)  increases in the profitability of capital due perhaps to technological progress. 
C)  the repeal of an investment tax credit 
D)  a decrease in the price level

Question 11

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

Accepted Answer

A)  real GDP and the price level are lower in country B. 
B)  real GDP, but not the price level, is lower in country B. 
C)  the price level, but not real GDP is lower in country B. 
D)  neither the price level or real GDP is lower in country B. 
A)  real GDP and the price level are lower in country B. 
B)  real GDP, but not the price level, is lower in country B. 
C)  the price level, but not real GDP is lower in country B. 
D)  neither the price level or real GDP is lower in country B.

Question 12

In which case can we be sure real GDP rises in the short run?

Accepted Answer

A)  foreign economies expand and taxes rise 
B)  foreign economies expand and taxes fall 
C)  foreign economies contract and taxes fall 
D)  None of the above are correct. 
A)  foreign economies expand and taxes rise 
B)  foreign economies expand and taxes fall 
C)  foreign economies contract and taxes fall 
D)  None of the above are correct.

Question 13

Which of the following fall during a recession?

Accepted Answer

A)  both retail sales and employment 
B)  retail sales but not employment 
C)  employment but not retail sales 
D)  neither employment nor retail sales 
A)  both retail sales and employment 
B)  retail sales but not employment 
C)  employment but not retail sales 
D)  neither employment nor retail sales

Question 14

Which of the following is correct?

Accepted Answer

A)  Real GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations can be predicted with some accuracy. 
B)  Real GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy. 
C)  Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations can be predicted with some accuracy. 
D)  Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy. 
A)  Real GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations can be predicted with some accuracy. 
B)  Real GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy. 
C)  Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations can be predicted with some accuracy. 
D)  Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy.

Question 15

When interest rates fall

Accepted Answer

A)  firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding. 
B)  firms want to borrow more for new plants and equipment and households want to borrow less for homebuilding. 
C)  firms want to borrow less for new plants and equipment and households want to borrow more for homebuilding. 
D)  firms want to borrow less for new plants and equipment and households want to borrow less for homebuilding. 
A)  firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding. 
B)  firms want to borrow more for new plants and equipment and households want to borrow less for homebuilding. 
C)  firms want to borrow less for new plants and equipment and households want to borrow more for homebuilding. 
D)  firms want to borrow less for new plants and equipment and households want to borrow less for homebuilding.

Question 16

Other things the same, if the price level rises, people

Accepted Answer

A)  increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. 
B)  increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. 
C)  decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. 
D)  decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. 
A)  increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. 
B)  increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. 
C)  decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. 
D)  decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.

Question 17

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to

Accepted Answer

A)  decrease consumption, which shifts aggregate supply left. 
B)  decrease consumption, which shifts aggregate demand left. 
C)  increase consumption, which shifts aggregate supply right. 
D)  increase consumption, which shifts aggregate demand right. 
A)  decrease consumption, which shifts aggregate supply left. 
B)  decrease consumption, which shifts aggregate demand left. 
C)  increase consumption, which shifts aggregate supply right. 
D)  increase consumption, which shifts aggregate demand right.

Question 18

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Accepted Answer

A)  as people revise their price-level expectations upward, firms and workers strike bargains for higher nominal wages. 
B)  as people revise their price-level expectations upward, firms and workers strike bargains for lower nominal wages. 
C)  as people revise their price-level expectations downward, firms and workers strike bargains for higher nominal wages. 
D)  as people revise their price-level expectations downward, firms and workers strike bargains for lower nominal wages. 
A)  as people revise their price-level expectations upward, firms and workers strike bargains for higher nominal wages. 
B)  as people revise their price-level expectations upward, firms and workers strike bargains for lower nominal wages. 
C)  as people revise their price-level expectations downward, firms and workers strike bargains for higher nominal wages. 
D)  as people revise their price-level expectations downward, firms and workers strike bargains for lower nominal wages.

Question 19

If output is above its natural rate, then according to sticky-wage theory

Accepted Answer

A)  workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve right. 
B)  workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve left. 
C)  workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve right. 
D)  workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve left. 
A)  workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve right. 
B)  workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve left. 
C)  workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve right. 
D)  workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve left.

Question 20

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)  an increase in the price level 
B)  a decrease in the money supply 
C)  an increase in net exports 
D)  Congress passes a new investment tax credit 
A)  an increase in the price level 
B)  a decrease in the money supply 
C)  an increase in net exports 
D)  Congress passes a new investment tax credit

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Other things the same, if the long-run aggregate supply curve shifts left, prices

The aggregate demand and aggregate supply graph has

Which of the following is correct?

We depart from the assumptions of classical economics when we focus on the relationship between

Which of the following shifts the short-run aggregate supply curve to the right?

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, the value of the dollar falls. In the short-run

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this

During recessions investment

Which of the following shifts aggregate demand to the right?

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

In which case can we be sure real GDP rises in the short run?

Which of the following fall during a recession?

Which of the following is correct?

When interest rates fall

Other things the same, if the price level rises, people

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

If output is above its natural rate, then according to sticky-wage theory

Which of the following shifts aggregate demand to the left?

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

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Other things the same, if the long-run aggregate supply curve shifts left, prices

The aggregate demand and aggregate supply graph has

Which of the following is correct?

We depart from the assumptions of classical economics when we focus on the relationship between

Which of the following shifts the short-run aggregate supply curve to the right?

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, the value of the dollar falls. In the short-run

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this

During recessions investment

Which of the following shifts aggregate demand to the right?

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

In which case can we be sure real GDP rises in the short run?

Which of the following fall during a recession?

Which of the following is correct?

When interest rates fall

Other things the same, if the price level rises, people

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

If output is above its natural rate, then according to sticky-wage theory

Which of the following shifts aggregate demand to the left?

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