Question 1

When taxes decrease, consumption

Accepted Answer

A)  decreases as shown by a movement to the left along a given aggregate-demand curve. 
B)  decreases as shown by a shift of the aggregate demand curve to the left. 
C)  increases as shown by a movement to the right along a given aggregate-demand curve. 
D)  increases as shown by a shift of the aggregate demand curve to the right. 
A)  decreases as shown by a movement to the left along a given aggregate-demand curve. 
B)  decreases as shown by a shift of the aggregate demand curve to the left. 
C)  increases as shown by a movement to the right along a given aggregate-demand curve. 
D)  increases as shown by a shift of the aggregate demand curve to the right.

Question 2

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

Accepted Answer

A decrease in aggregate demand causes th

Question 3

Other things the same, if the U.S. price level falls, then

Accepted Answer

A)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises. 
B)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls. 
C)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises. 
D)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls. 
A)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises. 
B)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls. 
C)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises. 
D)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.

Question 4

If aggregate demand shifts right, then eventually price level expectations rise. This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Accepted Answer

A) True 
 B)False

Question 5

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

Accepted Answer

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

Question 6

Historically, as recessions have ended the unemployment rate declined

Accepted Answer

A)  gradually to near zero. 
B)  rapidly to near zero. 
C)  gradually to a rate of about 5%-6%. 
D)  rapidly to a rate of about 5%-6%. 
A)  gradually to near zero. 
B)  rapidly to near zero. 
C)  gradually to a rate of about 5%-6%. 
D)  rapidly to a rate of about 5%-6%.

Question 7

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp decline in the stock market, a tax cut, an increase in the money supply and a decline in the value of the dollar. In the short run

Accepted Answer

A)  the price level and real GDP will both rise. 
B)  the price level and real GDP will both fall. 
C)  neither the price leave nor real GDP will change. 
D)  All of the above are possible. 
A)  the price level and real GDP will both rise. 
B)  the price level and real GDP will both fall. 
C)  neither the price leave nor real GDP will change. 
D)  All of the above are possible.

Question 8

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

Accepted Answer

A)  increased consumption, which shifts the aggregate-demand curve right. 
B)  increased consumption, which shifts the aggregate-demand curve left. 
C)  decreased consumption, which shifts the aggregate-demand curve right. 
D)  decreased consumption, which shifts the aggregate-demand curve left. 
A)  increased consumption, which shifts the aggregate-demand curve right. 
B)  increased consumption, which shifts the aggregate-demand curve left. 
C)  decreased consumption, which shifts the aggregate-demand curve right. 
D)  decreased consumption, which shifts the aggregate-demand curve left.

Question 9

Which of the following lists includes only changes that shift aggregate demand to the right?

Accepted Answer

A)  repeal of an investment tax credit, an increase in the money supply 
B)  repeal of an investment tax credit, a decrease in the money supply 
C)  passing of an investment tax credit, an increase in the money supply 
D)  passing of an investment tax credit, a decrease in the money supply 
A)  repeal of an investment tax credit, an increase in the money supply 
B)  repeal of an investment tax credit, a decrease in the money supply 
C)  passing of an investment tax credit, an increase in the money supply 
D)  passing of an investment tax credit, a decrease in the money supply

Question 10

Which of the following would cause stagflation?

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 11

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

Accepted Answer

A)  foreign economies expand and the money supply increases 
B)  foreign economies expand and the money supply decreases 
C)  foreign economies contract and the money supply decreases 
D)  None of the above are correct. 
A)  foreign economies expand and the money supply increases 
B)  foreign economies expand and the money supply decreases 
C)  foreign economies contract and the money supply decreases 
D)  None of the above are correct.

Question 12

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

Accepted Answer

A)  U.S. goods become more expensive relative to foreign goods so aggregate demand shifts right. 
B)  U.S. goods become less expensive relative to foreign goods so aggregate demand shifts right. 
C)  U.S. goods become more expensive relative to foreign goods so aggregate demand shifts left. 
D)  U.S. goods become less expensive relative to foreign goods so aggregate demand shifts left. 
A)  U.S. goods become more expensive relative to foreign goods so aggregate demand shifts right. 
B)  U.S. goods become less expensive relative to foreign goods so aggregate demand shifts right. 
C)  U.S. goods become more expensive relative to foreign goods so aggregate demand shifts left. 
D)  U.S. goods become less expensive relative to foreign goods so aggregate demand shifts left.

Question 13

Figure 15-2.
  
-Refer to Figure 15-2. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience

Accepted Answer

A)  a falling price level and a falling level of output. 
B)  a falling price level and a rising level of output. 
C)  a rising price level and a falling level of output. 
D)  a rising price level and a rising level of output. 
A)  a falling price level and a falling level of output. 
B)  a falling price level and a rising level of output. 
C)  a rising price level and a falling level of output. 
D)  a rising price level and a rising level of output.

Question 14

As the price level rises

Accepted Answer

A)  people will want to buy more bonds, so the interest rate rises. 
B)  people will want to buy fewer bonds, so the interest rate falls. 
C)  people will want to buy more bonds, so the interest rate falls. 
D)  people will want to buy fewer bonds, so the interest rate rises. 
A)  people will want to buy more bonds, so the interest rate rises. 
B)  people will want to buy fewer bonds, so the interest rate falls. 
C)  people will want to buy more bonds, so the interest rate falls. 
D)  people will want to buy fewer bonds, so the interest rate rises.

Question 15

During recessions declines in investment account for about

Accepted Answer

A)  1/6 of the decline in real GDP. 
B)  1/3 of the decline in real GDP. 
C)  1/2 of the decline in real GDP. 
D)  2/3 of the decline in real GDP. 
A)  1/6 of the decline in real GDP. 
B)  1/3 of the decline in real GDP. 
C)  1/2 of the decline in real GDP. 
D)  2/3 of the decline in real GDP.

Question 16

In 1936, John Maynard Keynes published a book, The General Theory, which attempted to explain

Accepted Answer

A)  stagflation. 
B)  the classical dichotomy. 
C)  short-run economic fluctuations. 
D)  how changes in the money supply had created the Great Depression. 
A)  stagflation. 
B)  the classical dichotomy. 
C)  short-run economic fluctuations. 
D)  how changes in the money supply had created the Great Depression.

Question 17

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is correct?

Accepted Answer

A)  The short-run, but not the long-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
B)  The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
C)  The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables. 
D)  Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables. 
A)  The short-run, but not the long-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
B)  The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
C)  The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables. 
D)  Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables.

Question 19

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in short-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 20

If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds

Accepted Answer

A)  the dollar would appreciate which would cause aggregate demand to shift right. 
B)  the dollar would appreciate which would cause aggregate demand to shift left. 
C)  the dollar would depreciate which would cause aggregate demand to shift right. 
D)  the dollar would depreciate which would cause aggregate demand to shift left. 
A)  the dollar would appreciate which would cause aggregate demand to shift right. 
B)  the dollar would appreciate which would cause aggregate demand to shift left. 
C)  the dollar would depreciate which would cause aggregate demand to shift right. 
D)  the dollar would depreciate which would cause aggregate demand to shift left.

When taxes decrease, consumption

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

Other things the same, if the U.S. price level falls, then

If aggregate demand shifts right, then eventually price level expectations rise. This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

Historically, as recessions have ended the unemployment rate declined

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp decline in the stock market, a tax cut, an increase in the money supply and a decline in the value of the dollar. In the short run

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

Which of the following lists includes only changes that shift aggregate demand to the right?

Which of the following would cause stagflation?

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

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

Figure 15-2. -Refer to Figure 15-2. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience

As the price level rises

During recessions declines in investment account for about

In 1936, John Maynard Keynes published a book, The General Theory, which attempted to explain

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

Which of the following is correct?

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in short-run aggregate supply.

If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds

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

When taxes decrease, consumption

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

Other things the same, if the U.S. price level falls, then

If aggregate demand shifts right, then eventually price level expectations rise. This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

Historically, as recessions have ended the unemployment rate declined

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp decline in the stock market, a tax cut, an increase in the money supply and a decline in the value of the dollar. In the short run

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

Which of the following lists includes only changes that shift aggregate demand to the right?

Which of the following would cause stagflation?

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

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

Figure 15-2. -Refer to Figure 15-2. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience

As the price level rises

During recessions declines in investment account for about

In 1936, John Maynard Keynes published a book, The General Theory, which attempted to explain

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

Which of the following is correct?

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in short-run aggregate supply.

If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds

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