Question 1

Aggregate demand shifts right when the Federal Reserve

Accepted Answer

A)  raises personal income taxes. 
B)  increases the money supply. 
C)  institutes an investment tax credit. 
D)  All of the above are correct. 
A)  raises personal income taxes. 
B)  increases the money supply. 
C)  institutes an investment tax credit. 
D)  All of the above are correct.

Question 2

As the price level rises, the exchange rate

Accepted Answer

A)  falls, so exports rise and imports fall. 
B)  falls, so exports fall and imports rise. 
C)  rises, so exports rise and imports fall. 
D)  rises, so exports fall and imports rise. 
A)  falls, so exports rise and imports fall. 
B)  falls, so exports fall and imports rise. 
C)  rises, so exports rise and imports fall. 
D)  rises, so exports fall and imports rise.

Question 3

When the price level rises unexpectedly, some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

Accepted Answer

A) True 
 B)False

Question 4

In 1986, OPEC countries increased their production of oil. This caused

Accepted Answer

A)  the price level to rise. 
B)  aggregate supply to shift right. 
C)  unemployment to rise. 
D)  None of the above is correct. 
A)  the price level to rise. 
B)  aggregate supply to shift right. 
C)  unemployment to rise. 
D)  None of the above is correct.

Question 5

Figure 33-9.  
-Refer to Figure 33-9. Suppose the economy starts where LRAS = AD1 = SRAS1. A decrease in short-run aggregate supply would be consistent with the movement to

Accepted Answer

A)  P1, Y1. 
B)  P2, Y1. 
C)  P1, Y2. 
D)  P3, Y2. 
A)  P1, Y1. 
B)  P2, Y1. 
C)  P1, Y2. 
D)  P3, Y2.

Question 6

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

Accepted Answer

There are occasional short-lived periods

Question 7

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Accepted Answer

A)  the relationship between output and unemployment is erratic and difficult to characterize. 
B)  when one macroeconomic variable that measures income or spending is falling, other macroeconomic variables that measure income or spending are likely to be rising. 
C)  recessions do not occur at regular intervals. 
D)  All of the above are correct. 
A)  the relationship between output and unemployment is erratic and difficult to characterize. 
B)  when one macroeconomic variable that measures income or spending is falling, other macroeconomic variables that measure income or spending are likely to be rising. 
C)  recessions do not occur at regular intervals. 
D)  All of the above are correct.

Question 8

Figure 33-4  
-Refer to Figure 33-4. In the short run, a favorable shift in aggregate supply would move the economy from

Accepted Answer

A)  A to B. 
B)  B to C. 
C)  C to D. 
D)  D to A. 
A)  A to B. 
B)  B to C. 
C)  C to D. 
D)  D to A.

Question 9

The mathematical equation: quantity of output supplied = natural rate of output + aactual price level - expected price level), expresses

Accepted Answer

A)  how the long run equilibrium adjusts to changes in money supply. 
B)  how output deviates in the short run from its long run natural rate. 
C)  how the short run aggregate supply curve shifts. 
D)  how adverse shifts in aggregate supply can cause stagflation. 
A)  how the long run equilibrium adjusts to changes in money supply. 
B)  how output deviates in the short run from its long run natural rate. 
C)  how the short run aggregate supply curve shifts. 
D)  how adverse shifts in aggregate supply can cause stagflation.

Question 10

Identify the direction of the change during a recession in each of the following: consumption expenditures, investment expenditures, and unemployment.

Accepted Answer

Consumption expendit

Question 11

A decrease in the price level

Accepted Answer

A)  increases the quantity of goods and services supplied in the short run. 
B)  decreases the quantity of goods and services supplied in the long run. 
C)  decreases the quantity of goods and services demanded. 
D)  increases the quantity of goods and services demanded. 
A)  increases the quantity of goods and services supplied in the short run. 
B)  decreases the quantity of goods and services supplied in the long run. 
C)  decreases the quantity of goods and services demanded. 
D)  increases the quantity of goods and services demanded.

Question 12

Which of the following would shift long-run aggregate supply to the right?

Accepted Answer

A)  increased immigration from abroad 
B)  a decrease in the price of an imported natural resource 
C)  opening the economy to international trade 
D)  All of the above are correct. 
A)  increased immigration from abroad 
B)  a decrease in the price of an imported natural resource 
C)  opening the economy to international trade 
D)  All of the above are correct.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Figure 33-7.  
-Refer to Figure 33-7. Suppose the economy starts at Y. If aggregate demand increases from AD2 to AD3, then the economy moves to

Accepted Answer

A)  V. 
B)  W. 
C)  X. 
D)  Z. 
A)  V. 
B)  W. 
C)  X. 
D)  Z.

Question 15

The aggregate demand curve shifts left if either

Accepted Answer

A)  speculators gain confidence in U.S. assets or foreign countries enter into recession. 
B)  speculators gain confidence in U.S. assets or recessions in foreign countries end. 
C)  speculators lose confidence in U.S. assets or foreign countries enter into recession. 
D)  speculators lose confidence in U.S. assets or recessions in foreign countries end. 
A)  speculators gain confidence in U.S. assets or foreign countries enter into recession. 
B)  speculators gain confidence in U.S. assets or recessions in foreign countries end. 
C)  speculators lose confidence in U.S. assets or foreign countries enter into recession. 
D)  speculators lose confidence in U.S. assets or recessions in foreign countries end.

Question 16

Which of the following would cause prices and real GDP to rise in the short run?

Accepted Answer

A)  short-run aggregate supply shifts right 
B)  short-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left 
A)  short-run aggregate supply shifts right 
B)  short-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left

Question 17

Write the mathematical expression that summarizes the three alternative explanations for the upward slope of the short run aggregate supply curve.

Accepted Answer

Quantity of output s

Question 18

Which of the following will reduce the price level and real output in the short run?

Accepted Answer

A)  an increase in government purchases. 
B)  an decrease in oil prices 
C)  a decrease in the money supply 
D)  technical progress 
A)  an increase in government purchases. 
B)  an decrease in oil prices 
C)  a decrease in the money supply 
D)  technical progress

Question 19

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following shifts the long-run aggregate supply curve to the left?

Accepted Answer

A)  either an increase in the price of imported natural resources or a reduction in trade restrictions. 
B)  neither an increase in the price of imported natural resources or a reduction in trade restrictions. 
C)  an increase in the price of imported natural resources and an increase in trade restrictions. 
D)  an increase in trade restrictions and a decrease in the price of imported natural resources. 
A)  either an increase in the price of imported natural resources or a reduction in trade restrictions. 
B)  neither an increase in the price of imported natural resources or a reduction in trade restrictions. 
C)  an increase in the price of imported natural resources and an increase in trade restrictions. 
D)  an increase in trade restrictions and a decrease in the price of imported natural resources.

Exam 20: Aggregate Demand and Aggregate Supply

Aggregate demand shifts right when the Federal Reserve

As the price level rises, the exchange rate

When the price level rises unexpectedly, some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

In 1986, OPEC countries increased their production of oil. This caused

Figure 33-9. -Refer to Figure 33-9. Suppose the economy starts where LRAS = AD1 = SRAS1. A decrease in short-run aggregate supply would be consistent with the movement to

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Figure 33-4 -Refer to Figure 33-4. In the short run, a favorable shift in aggregate supply would move the economy from

The mathematical equation: quantity of output supplied = natural rate of output + aactual price level - expected price level), expresses

Identify the direction of the change during a recession in each of the following: consumption expenditures, investment expenditures, and unemployment.

A decrease in the price level

Which of the following would shift long-run aggregate supply to the right?

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

Figure 33-7. -Refer to Figure 33-7. Suppose the economy starts at Y. If aggregate demand increases from AD2 to AD3, then the economy moves to

The aggregate demand curve shifts left if either

Which of the following would cause prices and real GDP to rise in the short run?

Write the mathematical expression that summarizes the three alternative explanations for the upward slope of the short run aggregate supply curve.

Which of the following will reduce the price level and real output in the short run?

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

Which of the following shifts the long-run aggregate supply curve to the left?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

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 Macroeconomics: Basic Concepts

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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