Question 1

Which of the following has been suggested as a cause of the Great Depression?

Accepted Answer

A)  a decline in the money supply 
B)  a decrease in stock prices 
C)  the collapse of the banking system 
D)  All of the above are correct. 
A)  a decline in the money supply 
B)  a decrease in stock prices 
C)  the collapse of the banking system 
D)  All of the above are correct.

Question 2

Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time.
-Refer to Optimism. 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 3

During World War II government expenditures increased almost five-fold and output almost doubled.

Accepted Answer

A) True 
 B)False

Question 4

If the price level falls, the real value of a dollar

Accepted Answer

A)  rises, so people will want to buy more. 
B)  rises, so people will want to buy less. 
C)  falls, so people will want to buy more. 
D)  falls, so people will want to buy less. 
A)  rises, so people will want to buy more. 
B)  rises, so people will want to buy less. 
C)  falls, so people will want to buy more. 
D)  falls, so people will want to buy less.

Question 5

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Accepted Answer

A)  employment and production rise. 
B)  employment rises and production falls. 
C)  employment falls and production rises. 
D)  employment and production fall. 
A)  employment and production rise. 
B)  employment rises and production falls. 
C)  employment falls and production rises. 
D)  employment and production fall.

Question 6

Other things the same, as the price level decreases it induces greater spending on

Accepted Answer

A)  both net exports and investment. 
B)  net exports but not investment. 
C)  investment but not net exports. 
D)  neither net exports nor investment. 
A)  both net exports and investment. 
B)  net exports but not investment. 
C)  investment but not net exports. 
D)  neither net exports nor investment.

Question 7

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 8

Other things the same, as the price level falls,

Accepted Answer

A)  the money supply falls. 
B)  interest rates rise. 
C)  a dollar buys more domestic goods. 
D)  the aggregate-demand curve shifts right. 
A)  the money supply falls. 
B)  interest rates rise. 
C)  a dollar buys more domestic goods. 
D)  the aggregate-demand curve shifts right.

Question 9

When the price level falls

Accepted Answer

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

Question 10

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 11

An economic expansion caused by a shift in aggregate demand causes prices to

Accepted Answer

A)  rise in the short run, and rise even more in the long run. 
B)  rise in the short run, and fall back to their original level in the long run. 
C)  fall in the short run, and fall even more in the long run. 
D)  fall in the short run, and rise back to their original level in the long run. 
A)  rise in the short run, and rise even more in the long run. 
B)  rise in the short run, and fall back to their original level in the long run. 
C)  fall in the short run, and fall even more in the long run. 
D)  fall in the short run, and rise back to their original level in the long run.

Question 12

Name two macroeconomic variables that decline when an economy goes into recession, and name one macroeconomic variable that rises.

Accepted Answer

Real GDP and investm

Question 13

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Accepted Answer

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

Question 14

The economic boom of the early 1940s resulted mostly from

Accepted Answer

A)  increased government expenditures. 
B)  falling prices of oil and other natural resources. 
C)  an increase in the growth rate of the money supply. 
D)  rapid developments in transportation, electronics, and communication. 
A)  increased government expenditures. 
B)  falling prices of oil and other natural resources. 
C)  an increase in the growth rate of the money supply. 
D)  rapid developments in transportation, electronics, and communication.

Question 15

Other things the same, a decrease in the price level causes real wealth to

Accepted Answer

A)  fall, interest rates to fall, and the dollar to appreciate. 
B)  fall, interest rates to rise, and the dollar to depreciate. 
C)  rise, interest rates to rise, and the dollar to appreciate. 
D)  rise, interest rates to fall, and the dollar to depreciate. 
A)  fall, interest rates to fall, and the dollar to appreciate. 
B)  fall, interest rates to rise, and the dollar to depreciate. 
C)  rise, interest rates to rise, and the dollar to appreciate. 
D)  rise, interest rates to fall, and the dollar to depreciate.

Question 16

Which of the following would cause stagflation?

Accepted Answer

A)  rising government expenditures 
B)  rising oil prices 
C)  a falling money supply 
D)  technical progress 
A)  rising government expenditures 
B)  rising oil prices 
C)  a falling money supply 
D)  technical progress

Question 17

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

Accepted Answer

A)  both sticky price theory and sticky wage theory 
B)  sticky price theory but not sticky wage theory 
C)  sticky wage theory but not sticky price theory 
D)  neither sticky wage theory nor sticky price theory 
A)  both sticky price theory and sticky wage theory 
B)  sticky price theory but not sticky wage theory 
C)  sticky wage theory but not sticky price theory 
D)  neither sticky wage theory nor sticky price theory

Question 18

The Stock Market Boom of 2015
Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time.
-Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

Accepted Answer

A)  The expected price level falls. Bargains are struck for higher wages. 
B)  The expected price level falls. Bargains are struck for lower wages. 
C)  The expected price level rises. Bargains are struck for higher wages. 
D)  The expected price level rises. Bargains are struck for lower wages. 
A)  The expected price level falls. Bargains are struck for higher wages. 
B)  The expected price level falls. Bargains are struck for lower wages. 
C)  The expected price level rises. Bargains are struck for higher wages. 
D)  The expected price level rises. Bargains are struck for lower wages.

Question 19

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases,

Accepted Answer

A)  the real value of money decreases; in turn, the real value of the dollar increases in foreign exchange markets, which decreases net exports. 
B)  the real value of money decreases; in turn, interest rates increase, which decreases net exports. 
C)  households increase their holdings of money; in turn, interest rates decrease, which reduces spending on investment goods. 
D)  households increase their holdings of money; in turn, interest rates increase, which reduces spending on investment goods. 
A)  the real value of money decreases; in turn, the real value of the dollar increases in foreign exchange markets, which decreases net exports. 
B)  the real value of money decreases; in turn, interest rates increase, which decreases net exports. 
C)  households increase their holdings of money; in turn, interest rates decrease, which reduces spending on investment goods. 
D)  households increase their holdings of money; in turn, interest rates increase, which reduces spending on investment goods.

Question 20

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Which of the following has been suggested as a cause of the Great Depression?

During World War II government expenditures increased almost five-fold and output almost doubled.

If the price level falls, the real value of a dollar

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Other things the same, as the price level decreases it induces greater spending on

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

Other things the same, as the price level falls,

When the price level falls

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

An economic expansion caused by a shift in aggregate demand causes prices to

Name two macroeconomic variables that decline when an economy goes into recession, and name one macroeconomic variable that rises.

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

The economic boom of the early 1940s resulted mostly from

Other things the same, a decrease in the price level causes real wealth to

Which of the following would cause stagflation?

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

The Stock Market Boom of 2015 Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. -Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases,

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

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

Which of the following has been suggested as a cause of the Great Depression?

During World War II government expenditures increased almost five-fold and output almost doubled.

If the price level falls, the real value of a dollar

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Other things the same, as the price level decreases it induces greater spending on

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

Other things the same, as the price level falls,

When the price level falls

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

An economic expansion caused by a shift in aggregate demand causes prices to

Name two macroeconomic variables that decline when an economy goes into recession, and name one macroeconomic variable that rises.

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

The economic boom of the early 1940s resulted mostly from

Other things the same, a decrease in the price level causes real wealth to

Which of the following would cause stagflation?

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

The Stock Market Boom of 2015 Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. -Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases,

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

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