Question 1

Which of the following by itself is consistent with the directions that the price level and real GDP changed at the onset of the Great Depression?

Accepted Answer

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

Question 2

Imagine the U.S. economy is in long-run equilibrium. Then suppose the value of the U.S. dollar decreases. At the same time, people in the U.S. revise their expectations so that the expected price level rises. We would expect that in the short-run

Accepted Answer

A)  real GDP will rise and the price level might rise, fall, or stay the same. 
B)  real GDP will fall and the price level might rise, fall, or stay the same. 
C)  the price level will rise, and real GDP might rise, fall, or stay the same. 
D)  the price level will fall, and real GDP might rise, fall, or stay the same. 
A)  real GDP will rise and the price level might rise, fall, or stay the same. 
B)  real GDP will fall and the price level might rise, fall, or stay the same. 
C)  the price level will rise, and real GDP might rise, fall, or stay the same. 
D)  the price level will fall, and real GDP might rise, fall, or stay the same.

Question 3

From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made people feel wealthier, then it would have shifted

Accepted Answer

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

Question 4

The initial impact of the repeal of an investment tax credit is to shift

Accepted Answer

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

Question 5

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 P3 and Y3 , 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 6

Other things the same, a decrease in the price level makes consumers feel

Accepted Answer

A)  less wealthy, so the quantity of goods and services demanded falls. 
B)  less wealthy, so the quantity of goods and services demanded rises. 
C)  more wealthy, so the quantity of goods and services demanded rises. 
D)  more wealthy, so the quantity of goods and services demanded falls. 
A)  less wealthy, so the quantity of goods and services demanded falls. 
B)  less wealthy, so the quantity of goods and services demanded rises. 
C)  more wealthy, so the quantity of goods and services demanded rises. 
D)  more wealthy, so the quantity of goods and services demanded falls.

Question 7

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

Accepted Answer

A)  both an increase in the capital stock and technological improvements 
B)  an increase in the capital stock but not technological improvements. 
C)  an increase in the capital stock but not technological improvements 
D)  neither an increase in the capital stock nor an technological improvements. 
A)  both an increase in the capital stock and technological improvements 
B)  an increase in the capital stock but not technological improvements. 
C)  an increase in the capital stock but not technological improvements 
D)  neither an increase in the capital stock nor an technological improvements.

Question 8

Figure 33-7.  
-Refer to Pessimism. 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 9

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

Accepted Answer

A)  both the money supply increase and the investment tax credit 
B)  the money supply increase but not the investment tax credit 
C)  the investment tax credit but not the money supply increase 
D)  neither the investment tax credit nor the money supply increase 
A)  both the money supply increase and the investment tax credit 
B)  the money supply increase but not the investment tax credit 
C)  the investment tax credit but not the money supply increase 
D)  neither the investment tax credit nor the money supply increase

Question 10

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Accepted Answer

A)  short-run fluctuations in the economy. 
B)  the effects of macroeconomic policy on the prices of individual goods. 
C)  the long-run effects of international trade policies. 
D)  productivity and economic growth. 
A)  short-run fluctuations in the economy. 
B)  the effects of macroeconomic policy on the prices of individual goods. 
C)  the long-run effects of international trade policies. 
D)  productivity and economic growth.

Question 11

Other things the same, if the price level falls, domestic interest rates

Accepted Answer

A)  rise, so domestic residents will want to hold more foreign bonds. 
B)  rise, so domestic residents will want to hold fewer foreign bonds. 
C)  fall, so domestic residents will want to hold more foreign bonds. 
D)  fall, so domestic residents will want to hold fewer foreign bonds. 
A)  rise, so domestic residents will want to hold more foreign bonds. 
B)  rise, so domestic residents will want to hold fewer foreign bonds. 
C)  fall, so domestic residents will want to hold more foreign bonds. 
D)  fall, so domestic residents will want to hold fewer foreign bonds.

Question 12

Figure 33-3.  
-Refer to Figure 33-3. The natural rate of output occurs at

Accepted Answer

A)  Y1. 
B)  Y2. 
C)  Y3. 
D)  both Y1 and Y3. 
A)  Y1. 
B)  Y2. 
C)  Y3. 
D)  both Y1 and Y3.

Question 13

The aggregate-demand curve shows the

Accepted Answer

A)  quantity of labor and other inputs that firms want to buy at each price level. 
B)  quantity of labor and other inputs that firms want to buy at each inflation rate. 
C)  quantity of domestically produced goods and services that households want to buy at each price level. 
D)  quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level. 
A)  quantity of labor and other inputs that firms want to buy at each price level. 
B)  quantity of labor and other inputs that firms want to buy at each inflation rate. 
C)  quantity of domestically produced goods and services that households want to buy at each price level. 
D)  quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Question 14

Although wages, incomes, and interest rates are most often discussed in nominal terms, what matters most are their real values.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)  foreign economies expand and government purchases rise. 
B)  foreign economies expand and government purchases fall. 
C)  foreign economies contract and government purchases fall. 
D)  foreign economies contract and government purchases rise. 
A)  foreign economies expand and government purchases rise. 
B)  foreign economies expand and government purchases fall. 
C)  foreign economies contract and government purchases fall. 
D)  foreign economies contract and government purchases rise.

Question 16

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Accepted Answer

A) True 
 B)False

Question 17

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major restrictions on logging removed. In the short run

Accepted Answer

A)  real GDP will rise and the price level might rise, fall, or stay the same. 
B)  real GDP will fall and the price level might rise, fall, or stay the same. 
C)  the price level will rise, and real GDP might rise, fall, or stay the same. 
D)  the price level will fall, and real GDP might rise, fall, or stay the same. 
A)  real GDP will rise and the price level might rise, fall, or stay the same. 
B)  real GDP will fall and the price level might rise, fall, or stay the same. 
C)  the price level will rise, and real GDP might rise, fall, or stay the same. 
D)  the price level will fall, and real GDP might rise, fall, or stay the same.

Question 18

As the price level falls

Accepted Answer

A)  people are more willing to lend, so interest rates rise. 
B)  people are more willing to lend, so interest rates fall. 
C)  people are less willing to lend, so interest rates fall. 
D)  people are less willing to lend, so interest rates rise. 
A)  people are more willing to lend, so interest rates rise. 
B)  people are more willing to lend, so interest rates fall. 
C)  people are less willing to lend, so interest rates fall. 
D)  people are less willing to lend, so interest rates rise.

Question 19

According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produce had

Accepted Answer

A)  increased, so it would increase production. 
B)  increased, so it would decrease production. 
C)  decreased, so it would increase production. 
D)  decreased, so it would decrease production. 
A)  increased, so it would increase production. 
B)  increased, so it would decrease production. 
C)  decreased, so it would increase production. 
D)  decreased, so it would decrease production.

Question 20

Recessions in Canada and Mexico would cause

Accepted Answer

A)  the U.S. price level and real GDP to rise. 
B)  the U.S. price level and real GDP to fall. 
C)  the U.S. price level to rise and real GDP to fall. 
D)  the U.S. price level to fall and real GDP to rise. 
A)  the U.S. price level and real GDP to rise. 
B)  the U.S. price level and real GDP to fall. 
C)  the U.S. price level to rise and real GDP to fall. 
D)  the U.S. price level to fall and real GDP to rise.

Exam 20: Aggregate Demand and Aggregate Supply

Which of the following by itself is consistent with the directions that the price level and real GDP changed at the onset of the Great Depression?

Imagine the U.S. economy is in long-run equilibrium. Then suppose the value of the U.S. dollar decreases. At the same time, people in the U.S. revise their expectations so that the expected price level rises. We would expect that in the short-run

From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made people feel wealthier, then it would have shifted

The initial impact of the repeal of an investment tax credit is to shift

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 P3 and Y3 , then it must be the case that

Other things the same, a decrease in the price level makes consumers feel

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

Figure 33-7. -Refer to Pessimism. In the short run what happens to the price level and real GDP?

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Other things the same, if the price level falls, domestic interest rates

Figure 33-3. -Refer to Figure 33-3. The natural rate of output occurs at

The aggregate-demand curve shows the

Although wages, incomes, and interest rates are most often discussed in nominal terms, what matters most are their real values.

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

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major restrictions on logging removed. In the short run

As the price level falls

According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produce had

Recessions in Canada and Mexico would cause

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

Filters