Question 1

People will buy more if the price level

Accepted Answer

A)  rises because rising prices increase the real value of a dollar. 
B)  rises because rising prices decrease the real value of a dollar. 
C)  falls because falling prices increase the real value of a dollar. 
D)  falls because falling prices decrease the real value of a dollar. 
A)  rises because rising prices increase the real value of a dollar. 
B)  rises because rising prices decrease the real value of a dollar. 
C)  falls because falling prices increase the real value of a dollar. 
D)  falls because falling prices decrease the real value of a dollar.

Question 2

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

Accepted Answer

A) True 
 B)False

Question 3

When the price level falls

Accepted Answer

A)  households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. 
B)  households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. 
C)  households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. 
D)  None of the above are correct. 
A)  households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. 
B)  households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. 
C)  households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. 
D)  None of the above are correct.

Question 4

During recessions declines in investment account for about

Accepted Answer

A)  1/6 of the decline in real GDP. 
B)  1/7 of the decline in real GDP. 
C)  1/3 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)  1/7 of the decline in real GDP. 
C)  1/3 of the decline in real GDP. 
D)  2/3 of the decline in real GDP.

Question 5

Changes in the price level affect which components of aggregate demand?

Accepted Answer

A)  only consumption and investment 
B)  only consumption and net exports 
C)  only investment 
D)  consumption, investment, and net exports 
A)  only consumption and investment 
B)  only consumption and net exports 
C)  only investment 
D)  consumption, investment, and net exports

Question 6

The classical model is the appropriate model for analysis of the economy in the

Accepted Answer

A)  long run, because evidence indicates that money is not neutral in the long run. 
B)  long run, because real and nominal variables are essentially determined separately in the long run. 
C)  short run, because money is neutral in the short run. 
D)  short run, because real and nominal variables are not highly intertwined in the short run. 
A)  long run, because evidence indicates that money is not neutral in the long run. 
B)  long run, because real and nominal variables are essentially determined separately in the long run. 
C)  short run, because money is neutral in the short run. 
D)  short run, because real and nominal variables are not highly intertwined in the short run.

Question 7

When the price level falls

Accepted Answer

A)  households want to lend less. 
B)  the interest rate rises. 
C)  firms want to spend less on investment goods. 
D)  None of the above are correct. 
A)  households want to lend less. 
B)  the interest rate rises. 
C)  firms want to spend less on investment goods. 
D)  None of the above are correct.

Question 8

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 9

When the price level falls

Accepted Answer

A)  people want to hold less money. 
B)  the interest rate falls. 
C)  investment spending rises. 
D)  All of the above are correct. 
A)  people want to hold less money. 
B)  the interest rate falls. 
C)  investment spending rises. 
D)  All of the above are correct.

Question 10

Which of the following would help explain why the aggregate demand curve slopes downward?

Accepted Answer

A)  An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services. 
B)  A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports. 
C)  A higher price level increases real wealth, which stimulates spending on consumption. 
D)  A lower price level reduces the interest rate, which encourages greater spending on investment goods. 
A)  An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services. 
B)  A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports. 
C)  A higher price level increases real wealth, which stimulates spending on consumption. 
D)  A lower price level reduces the interest rate, which encourages greater spending on investment goods.

Question 11

The aggregate demand and aggregate supply graph has

Accepted Answer

A)  quantity of output on the horizontal axis. Output can be measured by the GDP deflator. 
B)  quantity of output on the horizontal axis. Output can be measured by real GDP. 
C)  quantity of output on the vertical axis. Output can be measured by the GDP deflator. 
D)  quantity of output on the vertical axis. Output can be measured by real GDP. 
A)  quantity of output on the horizontal axis. Output can be measured by the GDP deflator. 
B)  quantity of output on the horizontal axis. Output can be measured by real GDP. 
C)  quantity of output on the vertical axis. Output can be measured by the GDP deflator. 
D)  quantity of output on the vertical axis. Output can be measured by real GDP.

Question 12

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Accepted Answer

A) True 
 B)False

Question 13

When the money supply increases

Accepted Answer

A)  interest rates fall and so aggregate demand shifts right. 
B)  interest rates fall and so aggregate demand shifts left. 
C)  interest rates rise and so aggregate demand shifts right. 
D)  interest rates rise and so aggregate demand shifts left. 
A)  interest rates fall and so aggregate demand shifts right. 
B)  interest rates fall and so aggregate demand shifts left. 
C)  interest rates rise and so aggregate demand shifts right. 
D)  interest rates rise and so aggregate demand shifts left.

Question 14

Figure 33-8.  
-Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P1 and Y1 , then it must be the case that

Accepted Answer

A)  short run aggregate supply has decreased. 
B)  short run aggregate supply has increased. 
C)  aggregate demand has increased. 
D)  aggregate demand has decreased. 
A)  short run aggregate supply has decreased. 
B)  short run aggregate supply has increased. 
C)  aggregate demand has increased. 
D)  aggregate demand has decreased.

Question 15

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 16

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.
-Refer to Pessimism. 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 17

Using the aggregate demand and aggregate supply model, an increase in what curve is by itself consistent with the changes in prices and output that occurred during World War II?

Accepted Answer

The answer of Using the aggregate demand and aggregate supply...

Question 18

Aggregate demand shifts right if

Accepted Answer

A)  government purchases increase and shifts left if stock prices rise. 
B)  government purchases increase and shifts left if stock prices fall. 
C)  government purchases decrease and shifts left if stock prices rise. 
D)  government purchases decrease and shifts left is stock prices fall. 
A)  government purchases increase and shifts left if stock prices rise. 
B)  government purchases increase and shifts left if stock prices fall. 
C)  government purchases decrease and shifts left if stock prices rise. 
D)  government purchases decrease and shifts left is stock prices fall.

Question 19

A decrease in the availability of an important major resource such as oil shifts

Accepted Answer

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

Question 20

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.

People will buy more if the price level

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

When the price level falls

During recessions declines in investment account for about

Changes in the price level affect which components of aggregate demand?

The classical model is the appropriate model for analysis of the economy in the

When the price level falls

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

When the price level falls

Which of the following would help explain why the aggregate demand curve slopes downward?

The aggregate demand and aggregate supply graph has

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

When the money supply increases

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P1 and Y1 , then it must be the case that

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Using the aggregate demand and aggregate supply model, an increase in what curve is by itself consistent with the changes in prices and output that occurred during World War II?

Aggregate demand shifts right if

A decrease in the availability of an important major resource such as oil shifts

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

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 and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 15: Aggregate Demand and Aggregate Supply

People will buy more if the price level

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

When the price level falls

During recessions declines in investment account for about

Changes in the price level affect which components of aggregate demand?

The classical model is the appropriate model for analysis of the economy in the

When the price level falls

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

When the price level falls

Which of the following would help explain why the aggregate demand curve slopes downward?

The aggregate demand and aggregate supply graph has

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

When the money supply increases

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P1 and Y1 , then it must be the case that

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Using the aggregate demand and aggregate supply model, an increase in what curve is by itself consistent with the changes in prices and output that occurred during World War II?

Aggregate demand shifts right if

A decrease in the availability of an important major resource such as oil shifts

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

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 and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters