Question 1

Figure 33-7.  
-Refer to Figure 33-7. Suppose the economy starts at Y. If there is a fall in aggregate demand, then the economy moves to

Accepted Answer

A)  V in the long run. 
B)  W in the long run. 
C)  X in the long run. 
D)  Z in the long run. 
A)  V in the long run. 
B)  W in the long run. 
C)  X in the long run. 
D)  Z in the long run.

Question 2

Aggregate demand shifts to the left if the money supply increases.

Accepted Answer

A) True 
 B)False

Question 3

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 4

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 5

The effect of an increase in the price level on the aggregate-demand curve is represented by a

Accepted Answer

A)  shift to the right of the aggregate-demand curve. 
B)  shift to the left of the aggregate-demand curve. 
C)  movement to the left along a given aggregate-demand curve. 
D)  movement to the right along a given aggregate-demand curve. 
A)  shift to the right of the aggregate-demand curve. 
B)  shift to the left of the aggregate-demand curve. 
C)  movement to the left along a given aggregate-demand curve. 
D)  movement to the right along a given aggregate-demand curve.

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

The curve that shows the quantity of goods and services that firms produce and sell

Accepted Answer

A)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-demand curve. 
B)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-supply curve. 
C)  as it relates to the overall price level is called the aggregate-demand curve. 
D)  as it relates to the overall price level is called the aggregate-supply curve. 
A)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-demand curve. 
B)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-supply curve. 
C)  as it relates to the overall price level is called the aggregate-demand curve. 
D)  as it relates to the overall price level is called the aggregate-supply curve.

Question 8

Which of the following is correct?

Accepted Answer

A)  Short run fluctuations in economic activity happen only in developing countries. 
B)  During economic contractions most firms experience rising profits. 
C)  Recessions come at irregular intervals and are easy to predict. 
D)  When real GDP falls, the rate of unemployment rises. 
A)  Short run fluctuations in economic activity happen only in developing countries. 
B)  During economic contractions most firms experience rising profits. 
C)  Recessions come at irregular intervals and are easy to predict. 
D)  When real GDP falls, the rate of unemployment rises.

Question 9

Suppose the economy is in long-run equilibrium. In a short span of time, there is an increase in the money supply, a tax decrease, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

Accepted Answer

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

Question 10

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

Accepted Answer

A)  an increase in the expected price level 
B)  an increase in the money supply 
C)  a decrease in the capital stock 
D)  an increase in taxes. 
A)  an increase in the expected price level 
B)  an increase in the money supply 
C)  a decrease in the capital stock 
D)  an increase in taxes.

Question 11

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 12

Aggregate demand shifts right when the government

Accepted Answer

A)  decreases taxes. 
B)  cuts military expenditures. 
C)  repeals an investment tax credit. 
D)  None of the above is correct. 
A)  decreases taxes. 
B)  cuts military expenditures. 
C)  repeals an investment tax credit. 
D)  None of the above is correct.

Question 13

Figure 33-7.  
-Refer to Pessimism. What happens to the expected price level and what's the result for wage bargaining?

Accepted Answer

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

Question 14

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 15

Real GDP

Accepted Answer

A)  is the current dollar value of all goods produced by the citizens of an economy within a given time. 
B)  measures economic activity and income. 
C)  is used primarily to measure long-run changes rather than short-run fluctuations. 
D)  All of the above are correct. 
A)  is the current dollar value of all goods produced by the citizens of an economy within a given time. 
B)  measures economic activity and income. 
C)  is used primarily to measure long-run changes rather than short-run fluctuations. 
D)  All of the above are correct.

Question 16

The quantity of aggregate goods and services demanded rises when the

Accepted Answer

A)  price level rises, because the interest rate rises. 
B)  price level rises, because the interest rate falls. 
C)  price level falls, because the interest rate rises. 
D)  price level falls, because the interest rate falls. 
A)  price level rises, because the interest rate rises. 
B)  price level rises, because the interest rate falls. 
C)  price level falls, because the interest rate rises. 
D)  price level falls, because the interest rate falls.

Question 17

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Accepted Answer

A)  in the price level and output. 
B)  in the price level, but not output. 
C)  in output, but not the price level. 
D)  in neither the price level nor output. 
A)  in the price level and output. 
B)  in the price level, but not output. 
C)  in output, but not the price level. 
D)  in neither the price level nor output.

Question 18

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because

Accepted Answer

A)  monetary neutrality would mean that neither prices nor production should have risen. 
B)  monetary neutrality would mean that production should have risen, but prices should not have. 
C)  monetary neutrality would mean the prices should have risen, but production should not have changed. 
D)  monetary neutrality would mean that prices and production should both have fallen. 
A)  monetary neutrality would mean that neither prices nor production should have risen. 
B)  monetary neutrality would mean that production should have risen, but prices should not have. 
C)  monetary neutrality would mean the prices should have risen, but production should not have changed. 
D)  monetary neutrality would mean that prices and production should both have fallen.

Question 19

The model of short-run economic fluctuations focuses on

Accepted Answer

A)  the price level and real GDP. 
B)  productivity and economic growth. 
C)  the neutrality of money and inflation. 
D)  None of the above is correct. 
A)  the price level and real GDP. 
B)  productivity and economic growth. 
C)  the neutrality of money and inflation. 
D)  None of the above is correct.

Question 20

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.

Exam 20: Aggregate Demand and Aggregate Supply

Figure 33-7. -Refer to Figure 33-7. Suppose the economy starts at Y. If there is a fall in aggregate demand, then the economy moves to

Aggregate demand shifts to the left if the money supply increases.

People will buy more if the price level

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?

The effect of an increase in the price level on the aggregate-demand curve is represented by a

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

The curve that shows the quantity of goods and services that firms produce and sell

Which of the following is correct?

Suppose the economy is in long-run equilibrium. In a short span of time, there is an increase in the money supply, a tax decrease, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

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

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Aggregate demand shifts right when the government

Figure 33-7. -Refer to Pessimism. What happens to the expected price level and what's the result for wage bargaining?

During recessions declines in investment account for about

Real GDP

The quantity of aggregate goods and services demanded rises when the

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because

The model of short-run economic fluctuations focuses on

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

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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