Question 1

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

Accepted Answer

A)  decreases the real value of money. 
B)  increases the real value of the dollar in foreign exchange markets. 
C)  decreases the interest rate. 
D)  All of the above are correct. 
A)  decreases the real value of money. 
B)  increases the real value of the dollar in foreign exchange markets. 
C)  decreases the interest rate. 
D)  All of the above are correct.

Question 2

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

Accepted Answer

A)  an increase in the price level 
B)  an increase in the minimum wage 
C)  a decrease in the price of oil 
D)  more people migrate abroad than immigrate from abroad 
A)  an increase in the price level 
B)  an increase in the minimum wage 
C)  a decrease in the price of oil 
D)  more people migrate abroad than immigrate from abroad

Question 3

When the price level increases, the real value of people's money holdings

Accepted Answer

A)  falls, so they buy more. 
B)  falls, so they buy less. 
C)  rises, so they buy more. 
D)  rises, so they buy less. 
A)  falls, so they buy more. 
B)  falls, so they buy less. 
C)  rises, so they buy more. 
D)  rises, so they buy less.

Question 4

Figure 15-2.
  
-Refer to Figure 15-2. The appearance of the long-run aggregate-supply (LRAS) curve

Accepted Answer

A)  is inconsistent with the concept of monetary neutrality. 
B)  is consistent with the idea that point A represents a long-run equilibrium but not a short-run equilibrium when the relevant short-run aggregate-supply curve is AS1. 
C)  indicates that Y1 is the natural rate of output. 
D)  All of the above are correct. 
A)  is inconsistent with the concept of monetary neutrality. 
B)  is consistent with the idea that point A represents a long-run equilibrium but not a short-run equilibrium when the relevant short-run aggregate-supply curve is AS1. 
C)  indicates that Y1 is the natural rate of output. 
D)  All of the above are correct.

Question 5

During recessions unemployment typically rises

Accepted Answer

A)  little. As the recession ends, unemployment declines gradually. 
B)  little. As the recession ends, unemployment declines rapidly. 
C)  substantially. As the recession ends, unemployment declines gradually. 
D)  substantially. As the recession ends, unemployment declines rapidly. 
A)  little. As the recession ends, unemployment declines gradually. 
B)  little. As the recession ends, unemployment declines rapidly. 
C)  substantially. As the recession ends, unemployment declines gradually. 
D)  substantially. As the recession ends, unemployment declines rapidly.

Question 6

Which of the following shifts aggregate demand right?

Accepted Answer

A)  both a decrease in the price level and the implementation of an investment tax credit 
B)  a decrease in the price level but not the implementation of an investment tax credit 
C)  the implementation of an investment tax credit but not a decrease in the price level 
D)  neither a decrease in the price level nor the implementation of an investment tax credit 
A)  both a decrease in the price level and the implementation of an investment tax credit 
B)  a decrease in the price level but not the implementation of an investment tax credit 
C)  the implementation of an investment tax credit but not a decrease in the price level 
D)  neither a decrease in the price level nor the implementation of an investment tax credit

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Figure 15-1
  
-Refer to Figure 15-1. If the economy starts at A and there is a fall in aggregate demand, the economy moves

Accepted Answer

A)  back to A in the long run. 
B)  to B in the long run. 
C)  to C in the long run. 
D)  to D in the long run. 
A)  back to A in the long run. 
B)  to B in the long run. 
C)  to C in the long run. 
D)  to D in the long run.

Question 9

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

Accepted Answer

A)  It would have to have shifted left by less than aggregate supply. 
B)  It would have to have shifted left by more than aggregate supply. 
C)  It would have to have shifted right by less than aggregate supply. 
D)  It would have to have shifted right by more than aggregate supply. 
A)  It would have to have shifted left by less than aggregate supply. 
B)  It would have to have shifted left by more than aggregate supply. 
C)  It would have to have shifted right by less than aggregate supply. 
D)  It would have to have shifted right by more than aggregate supply.

Question 10

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  an increase in the money supply 
B)  an increase in net exports due to something other than a change in domestic prices 
C)  an investment tax credit 
D)  All of the above are correct. 
A)  an increase in the money supply 
B)  an increase in net exports due to something other than a change in domestic prices 
C)  an investment tax credit 
D)  All of the above are correct.

Question 11

Figure 15-2.
  
-Refer to Stock Market Boom 2015. In the short run what happens to the price level and real GDP?

Accepted Answer

A)  both the price level and real GDP rise. 
B)  both the price level and real GDP fall. 
C)  the price level rises and real GDP falls. 
D)  the price level falls and real GDP rises. 
A)  both the price level and real GDP rise. 
B)  both the price level and real GDP fall. 
C)  the price level rises and real GDP falls. 
D)  the price level falls and real GDP rises.

Question 12

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes. We would expect that the rebuilding increased aggregate demand in

Accepted Answer

A)  both the United States and Europe. 
B)  the United States but not Europe. 
C)  Europe, but not the United States. 
D)  neither the United States, nor Europe. 
A)  both the United States and Europe. 
B)  the United States but not Europe. 
C)  Europe, but not the United States. 
D)  neither the United States, nor Europe.

Question 13

Most economists believe that in the long run, changes in the money supply

Accepted Answer

A)  affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory. 
B)  affect nominal but not real variables. This view that money is ultimately neutral is inconsistent with classical theory. 
C)  affect real but not nominal variables. This view that money is ultimately neutral is consistent with classical theory. 
D)  affect real but not nominal variables. This view that money is ultimately neutral is inconsistent with classical theory. 
A)  affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory. 
B)  affect nominal but not real variables. This view that money is ultimately neutral is inconsistent with classical theory. 
C)  affect real but not nominal variables. This view that money is ultimately neutral is consistent with classical theory. 
D)  affect real but not nominal variables. This view that money is ultimately neutral is inconsistent with classical theory.

Question 14

The aggregate-demand curve shows the

Accepted Answer

A)  quantity of labor and other inputs that firms want to buy at each price level. 
B)  quantity of labor and other inputs that firms want to buy at each inflation rate. 
C)  quantity of domestically produced goods and services that households want to buy at each price level. 
D)  quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level. 
A)  quantity of labor and other inputs that firms want to buy at each price level. 
B)  quantity of labor and other inputs that firms want to buy at each inflation rate. 
C)  quantity of domestically produced goods and services that households want to buy at each price level. 
D)  quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Question 15

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

Accepted Answer

A)  the price level and real GDP both to rise. 
B)  the price level and real GDP both to fall. 
C)  the price level and real GDP both to stay the same. 
D)  All of the above are possible. 
A)  the price level and real GDP both to rise. 
B)  the price level and real GDP both to fall. 
C)  the price level and real GDP both to stay the same. 
D)  All of the above are possible.

Question 16

Figure 15-2.
  
-Refer to Stock Market Boom 2015. How is the new long-run equilibrium different from the original one?

Accepted Answer

A)  the price level and real GDP are higher 
B)  the price level and real GDP are lower. 
C)  the price level is higher and real GDP is the same. 
D)  the price level is the same and real GDP is higher. 
A)  the price level and real GDP are higher 
B)  the price level and real GDP are lower. 
C)  the price level is higher and real GDP is the same. 
D)  the price level is the same and real GDP is higher.

Question 17

Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

Accepted Answer

A)  Reducing either the minimum wage or the time and cost to open a business would have no effect on the long-run aggregate supply curve. 
B)  Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right. 
C)  Reducing the minimum wage would shift long-run aggregate supply to the right. Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve. 
D)  Reducing the minimum wage would have no affect on the long-run aggregate supply curve. Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right. 
A)  Reducing either the minimum wage or the time and cost to open a business would have no effect on the long-run aggregate supply curve. 
B)  Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right. 
C)  Reducing the minimum wage would shift long-run aggregate supply to the right. Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve. 
D)  Reducing the minimum wage would have no affect on the long-run aggregate supply curve. Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right.

Question 18

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 19

Real GDP

Accepted Answer

A)  is the current dollar value of all goods produced by the citizens of an economy within a given time. 
B)  measures economic activity and income. 
C)  is used primarily to measure long-run changes rather than short-run fluctuations. 
D)  All of the above are correct. 
A)  is the current dollar value of all goods produced by the citizens of an economy within a given time. 
B)  measures economic activity and income. 
C)  is used primarily to measure long-run changes rather than short-run fluctuations. 
D)  All of the above are correct.

Question 20

The aggregate demand and aggregate supply graph has the

Accepted Answer

A)  quantity of output on the horizontal axis. Output is best measured by real GDP. 
B)  quantity of output on the horizontal axis. Output is best measured by nominal GDP. 
C)  quantity of output on the vertical axis. Output is best measured by real GDP. 
D)  quantity of output on the vertical axis. Output is best measured by nominal GDP. 
A)  quantity of output on the horizontal axis. Output is best measured by real GDP. 
B)  quantity of output on the horizontal axis. Output is best measured by nominal GDP. 
C)  quantity of output on the vertical axis. Output is best measured by real GDP. 
D)  quantity of output on the vertical axis. Output is best measured by nominal GDP.

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

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

When the price level increases, the real value of people's money holdings

Figure 15-2. -Refer to Figure 15-2. The appearance of the long-run aggregate-supply (LRAS) curve

During recessions unemployment typically rises

Which of the following shifts aggregate demand right?

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

Figure 15-1 -Refer to Figure 15-1. If the economy starts at A and there is a fall in aggregate demand, the economy moves

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

Which of the following shifts aggregate demand to the right?

Figure 15-2. -Refer to Stock Market Boom 2015. In the short run what happens to the price level and real GDP?

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes. We would expect that the rebuilding increased aggregate demand in

Most economists believe that in the long run, changes in the money supply

The aggregate-demand curve shows the

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

Figure 15-2. -Refer to Stock Market Boom 2015. How is the new long-run equilibrium different from the original one?

Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Real GDP

The aggregate demand and aggregate supply graph has the

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

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

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

When the price level increases, the real value of people's money holdings

Figure 15-2. -Refer to Figure 15-2. The appearance of the long-run aggregate-supply (LRAS) curve

During recessions unemployment typically rises

Which of the following shifts aggregate demand right?

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

Figure 15-1 -Refer to Figure 15-1. If the economy starts at A and there is a fall in aggregate demand, the economy moves

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

Which of the following shifts aggregate demand to the right?

Figure 15-2. -Refer to Stock Market Boom 2015. In the short run what happens to the price level and real GDP?

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes. We would expect that the rebuilding increased aggregate demand in

Most economists believe that in the long run, changes in the money supply

The aggregate-demand curve shows the

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

Figure 15-2. -Refer to Stock Market Boom 2015. How is the new long-run equilibrium different from the original one?

Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Real GDP

The aggregate demand and aggregate supply graph has the

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