Question 1

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Accepted Answer

A)  prices and output both increased immediately. 
B)  prices increased immediately while output remained unchanged. 
C)  it took time for prices to rise; in the meantime output was lower. 
D)  it took time for prices to rise; in the meantime output was higher. 
A)  prices and output both increased immediately. 
B)  prices increased immediately while output remained unchanged. 
C)  it took time for prices to rise; in the meantime output was lower. 
D)  it took time for prices to rise; in the meantime output was higher.

Question 2

Suppose technology advances within a nation. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Accepted Answer

The short run and lo

Question 3

If money is neutral, then changes in the quantity of money

Accepted Answer

A)  do not affect real output. 
B)  affect both nominal and real output 
C)  do not affect nominal output. 
D)  affect neither nominal nor real output. 
A)  do not affect real output. 
B)  affect both nominal and real output 
C)  do not affect nominal output. 
D)  affect neither nominal nor real output.

Question 4

Keynes believed that economies experiencing high unemployment should adopt policies to

Accepted Answer

A)  reduce the money supply. 
B)  reduce government expenditures. 
C)  increase aggregate demand. 
D)  increase aggregate supply. 
A)  reduce the money supply. 
B)  reduce government expenditures. 
C)  increase aggregate demand. 
D)  increase aggregate supply.

Question 5

Wages tend to be sticky

Accepted Answer

A)  because of contracts, social norms, and notions of fairness. 
B)  because of contracts, but not social norms or notions of fairness. 
C)  because of social norms and notions of fairness, but not contracts. 
D)  None of the above are correct. 
A)  because of contracts, social norms, and notions of fairness. 
B)  because of contracts, but not social norms or notions of fairness. 
C)  because of social norms and notions of fairness, but not contracts. 
D)  None of the above are correct.

Question 6

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 7

Which of the following accounts for about two-thirds of the decline in output during a recession?

Accepted Answer

A)  the decline in government purchases. 
B)  the decline in total consumption spending. 
C)  the decline in investment spending. 
D)  the decline in net exports. 
A)  the decline in government purchases. 
B)  the decline in total consumption spending. 
C)  the decline in investment spending. 
D)  the decline in net exports.

Question 8

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 9

The saying "Money is a veil." means that

Accepted Answer

A)  while nominal variables are the first thing we may observe about an economy, what's important are the real variables and the forces that determine them. 
B)  money is the principal medium of exchange in most economies. 
C)  the primary determinant of short-run economic fluctuations is not real variables, but rather changes in the money supply. 
D)  in the long run money is of no importance to the determination of either real or nominal variables. 
A)  while nominal variables are the first thing we may observe about an economy, what's important are the real variables and the forces that determine them. 
B)  money is the principal medium of exchange in most economies. 
C)  the primary determinant of short-run economic fluctuations is not real variables, but rather changes in the money supply. 
D)  in the long run money is of no importance to the determination of either real or nominal variables.

Question 10

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 11

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Accepted Answer

A)  as people revise their price-level expectations upward, firms and workers strike bargains for higher nominal wages. 
B)  as people revise their price-level expectations upward, firms and workers strike bargains for lower nominal wages. 
C)  as people revise their price-level expectations downward, firms and workers strike bargains for higher nominal wages. 
D)  as people revise their price-level expectations downward, firms and workers strike bargains for lower nominal wages. 
A)  as people revise their price-level expectations upward, firms and workers strike bargains for higher nominal wages. 
B)  as people revise their price-level expectations upward, firms and workers strike bargains for lower nominal wages. 
C)  as people revise their price-level expectations downward, firms and workers strike bargains for higher nominal wages. 
D)  as people revise their price-level expectations downward, firms and workers strike bargains for lower nominal wages.

Question 12

A decrease in the expected price level shifts short-run aggregate supply to the

Accepted Answer

A)  right, and an increase in the actual price level shifts short-run aggregate supply to the right. 
B)  right, and an increase in the actual price level does not shift short-run aggregate supply. 
C)  left, and an increase in the actual price level shifts short-run aggregate supply to the left. 
D)  left, and an increase in the actual price level does not shift short-run aggregate supply. 
A)  right, and an increase in the actual price level shifts short-run aggregate supply to the right. 
B)  right, and an increase in the actual price level does not shift short-run aggregate supply. 
C)  left, and an increase in the actual price level shifts short-run aggregate supply to the left. 
D)  left, and an increase in the actual price level does not shift short-run aggregate supply.

Question 13

If the government repeals an investment tax credit and increases income taxes,

Accepted Answer

A)  real GDP rises, and the price level could rise, fall, or stay the same. 
B)  real GDP falls, and the price level could rise, fall, or stay the same. 
C)  real GDP and the price level rise. 
D)  real GDP and the price level fall. 
A)  real GDP rises, and the price level could rise, fall, or stay the same. 
B)  real GDP falls, and the price level could rise, fall, or stay the same. 
C)  real GDP and the price level rise. 
D)  real GDP and the price level fall.

Question 14

Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

Accepted Answer

A)  Reducing either the minimum wage or the time and cost to open a business would have no effect on the long- run aggregate supply curve. 
B)  Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right. 
C)  Reducing the minimum wage would shift long-run aggregate supply to the right. Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve. 
D)  Reducing the minimum wage would have no affect on the long-run aggregate supply curve. Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right. 
A)  Reducing either the minimum wage or the time and cost to open a business would have no effect on the long- run aggregate supply curve. 
B)  Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right. 
C)  Reducing the minimum wage would shift long-run aggregate supply to the right. Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve. 
D)  Reducing the minimum wage would have no affect on the long-run aggregate supply curve. Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right.

Question 15

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level

Accepted Answer

A)  and output are higher than in the original long-run equilibrium. 
B)  and output are lower than in the original long-run equilibrium. 
C)  is lower and output is the same as the original long-run equilibrium. 
D)  is the same and output is lower than in the original long-run equilibrium. 
A)  and output are higher than in the original long-run equilibrium. 
B)  and output are lower than in the original long-run equilibrium. 
C)  is lower and output is the same as the original long-run equilibrium. 
D)  is the same and output is lower than in the original long-run equilibrium.

Question 16

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

Accepted Answer

A)  both an increase in the capital stock and an increase in the price level 
B)  an increase in the capital stock, but not an increase in the price level 
C)  an increase in the money supply, but not an increase in the capital stock 
D)  neither an increase in the money supply nor an increase in the capital stock 
A)  both an increase in the capital stock and an increase in the price level 
B)  an increase in the capital stock, but not an increase in the price level 
C)  an increase in the money supply, but not an increase in the capital stock 
D)  neither an increase in the money supply nor an increase in the capital stock

Question 17

An increase in the interest rate causes investment to

Accepted Answer

A)  rise and the exchange rate to appreciate. 
B)  fall and the exchange rate to depreciate. 
C)  rise and the exchange rate to depreciate. 
D)  fall and the exchange rate to appreciate. 
A)  rise and the exchange rate to appreciate. 
B)  fall and the exchange rate to depreciate. 
C)  rise and the exchange rate to depreciate. 
D)  fall and the exchange rate to appreciate.

Question 18

The wealth effect helps explain what feature in the aggregate demand and aggregate supply model?

Accepted Answer

why the ag

Question 19

Figure 33-12.  
-Refer to Figure 33-12. Identify periods 1 and 2.

Accepted Answer

Period 1 is the Grea

Question 20

Other things the same, the aggregate quantity of goods demanded in the U.S. increases if

Accepted Answer

A)  real wealth rises. 
B)  the interest rate rises. 
C)  the dollar appreciates. 
D)  All of the above are correct. 
A)  real wealth rises. 
B)  the interest rate rises. 
C)  the dollar appreciates. 
D)  All of the above are correct.

Exam 20: Aggregate Demand and Aggregate Supply

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Suppose technology advances within a nation. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

If money is neutral, then changes in the quantity of money

Keynes believed that economies experiencing high unemployment should adopt policies to

Wages tend to be sticky

As the price level rises

Which of the following accounts for about two-thirds of the decline in output during a recession?

When taxes decrease, consumption

The saying "Money is a veil." means that

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

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

A decrease in the expected price level shifts short-run aggregate supply to the

If the government repeals an investment tax credit and increases income taxes,

Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level

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

An increase in the interest rate causes investment to

The wealth effect helps explain what feature in the aggregate demand and aggregate supply model?

Figure 33-12. -Refer to Figure 33-12. Identify periods 1 and 2.

Other things the same, the aggregate quantity of goods demanded in the U.S. increases if

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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