Question 1

Which of the following rises when the U.S. price level falls?

Accepted Answer

A)  interest rates 
B)  the value of the dollar in the market for foreign-currency exchange 
C)  real wealth 
D)  All of the above are correct. 
A)  interest rates 
B)  the value of the dollar in the market for foreign-currency exchange 
C)  real wealth 
D)  All of the above are correct.

Question 2

Policymakers who influence aggregate demand can potentially mitigate the severity of economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)  a decrease in the actual price level 
B)  an increase in the actual price level 
C)  a decrease in the expected price level 
D)  an increase in the expected price level 
A)  a decrease in the actual price level 
B)  an increase in the actual price level 
C)  a decrease in the expected price level 
D)  an increase in the expected price level

Question 4

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 5

In the first few years of the Great Depression, unemployment rose to about

Accepted Answer

A)  10 percent, and prices rose about 14 percent. 
B)  15 percent, and prices rose about 22 percent. 
C)  20 percent, and prices fell about 14 percent. 
D)  25 percent, and prices fell about 22 percent. 
A)  10 percent, and prices rose about 14 percent. 
B)  15 percent, and prices rose about 22 percent. 
C)  20 percent, and prices fell about 14 percent. 
D)  25 percent, and prices fell about 22 percent.

Question 6

As the price level falls,

Accepted Answer

A)  the exchange rate falls, so net exports fall. 
B)  the exchange rate falls, so net exports rise. 
C)  the exchange rate rises, so net exports fall. 
D)  the exchange rate rises, so net exports rise. 
A)  the exchange rate falls, so net exports fall. 
B)  the exchange rate falls, so net exports rise. 
C)  the exchange rate rises, so net exports fall. 
D)  the exchange rate rises, so net exports rise.

Question 7

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

Accepted Answer

A) True 
 B)False

Question 8

The recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is a lesson concerning shifts in aggregate demand?

Accepted Answer

A)  they contribute to fluctuations in output. 
B)  in the long-run they change real output, but not the price level. 
C)  policymakers are unable to mitigate the severity of economic fluctuations. 
D)  All of the above are correct. 
A)  they contribute to fluctuations in output. 
B)  in the long-run they change real output, but not the price level. 
C)  policymakers are unable to mitigate the severity of economic fluctuations. 
D)  All of the above are correct.

Question 10

Other things the same, a decrease in the price level motivates people to hold

Accepted Answer

A)  less money, so they lend less, and the interest rate rises. 
B)  less money, so they lend more, and the interest rate falls. 
C)  more money, so they lend more, and the interest rate rises. 
D)  more money, so they lend less, and the interest rate falls. 
A)  less money, so they lend less, and the interest rate rises. 
B)  less money, so they lend more, and the interest rate falls. 
C)  more money, so they lend more, and the interest rate rises. 
D)  more money, so they lend less, and the interest rate falls.

Question 11

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Accepted Answer

A) True 
 B)False

Question 12

Make a list of things that would shift the aggregate demand curve to the right.

Accepted Answer

Examples (and variations on examples) in

Question 13

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Accepted Answer

A) True 
 B)False

Question 14

The average price level is measured by

Accepted Answer

A)  any real variable. 
B)  the rate of inflation. 
C)  the level of the money supply. 
D)  the CPI or the GDP deflator. 
A)  any real variable. 
B)  the rate of inflation. 
C)  the level of the money supply. 
D)  the CPI or the GDP deflator.

Question 15

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because

Accepted Answer

A)  monetary neutrality would mean that neither prices nor production should have risen. 
B)  monetary neutrality would mean that production should have risen, but prices should not have. 
C)  monetary neutrality would mean the prices should have risen, but production should not have changed. 
D)  monetary neutrality would mean that prices and production should both have fallen. 
A)  monetary neutrality would mean that neither prices nor production should have risen. 
B)  monetary neutrality would mean that production should have risen, but prices should not have. 
C)  monetary neutrality would mean the prices should have risen, but production should not have changed. 
D)  monetary neutrality would mean that prices and production should both have fallen.

Question 16

Stagflation exists when prices

Accepted Answer

A)  and output rise. 
B)  rise and output falls. 
C)  fall and output rises. 
D)  and output fall. 
A)  and output rise. 
B)  rise and output falls. 
C)  fall and output rises. 
D)  and output fall.

Question 17

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

Accepted Answer

A)  stays at A. 
B)  moves to B. 
C)  moves to C. 
D)  moves to D. 
A)  stays at A. 
B)  moves to B. 
C)  moves to C. 
D)  moves to D.

Question 18

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

Accepted Answer

A)  an increase in either the physical or human capital stock 
B)  an increase in the human but not the physical capital stock 
C)  an increase in the physical capital stock, but no the human capital stock 
D)  neither an increase in the physical capital stock or the human capital stock 
A)  an increase in either the physical or human capital stock 
B)  an increase in the human but not the physical capital stock 
C)  an increase in the physical capital stock, but no the human capital stock 
D)  neither an increase in the physical capital stock or the human capital stock

Question 19

An increase in the expected price level shifts the short-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 20

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

Accepted Answer

A)  the real value of wealth 
B)  the interest rate 
C)  the value of currency in the market for foreign exchange 
D)  All of the above are correct. 
A)  the real value of wealth 
B)  the interest rate 
C)  the value of currency in the market for foreign exchange 
D)  All of the above are correct.

Which of the following rises when the U.S. price level falls?

Policymakers who influence aggregate demand can potentially mitigate the severity of economic fluctuations.

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

Most economists believe that in the short run

In the first few years of the Great Depression, unemployment rose to about

As the price level falls,

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

The recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

Which of the following is a lesson concerning shifts in aggregate demand?

Other things the same, a decrease in the price level motivates people to hold

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Make a list of things that would shift the aggregate demand curve to the right.

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

The average price level is measured by

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because

Stagflation exists when prices

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

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

An increase in the expected price level shifts the short-run aggregate supply curve to the right.

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

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

Exam 15: Aggregate Demand and Aggregate Supply

Which of the following rises when the U.S. price level falls?

Policymakers who influence aggregate demand can potentially mitigate the severity of economic fluctuations.

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

Most economists believe that in the short run

In the first few years of the Great Depression, unemployment rose to about

As the price level falls,

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

The recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

Which of the following is a lesson concerning shifts in aggregate demand?

Other things the same, a decrease in the price level motivates people to hold

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Make a list of things that would shift the aggregate demand curve to the right.

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

The average price level is measured by

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because

Stagflation exists when prices

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

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

An increase in the expected price level shifts the short-run aggregate supply curve to the right.

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

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