Question 1

Most economists believe that classical macroeconomic theory is a good description of the economy

Accepted Answer

A)  in neither the short nor long run. 
B)  in the short run and in the long run. 
C)  in the short run, but not in the long run. 
D)  in the long run, but not in the short run. 
A)  in neither the short nor long run. 
B)  in the short run and in the long run. 
C)  in the short run, but not in the long run. 
D)  in the long run, but not in the short run.

Question 2

Which of the following would help explain why the aggregate demand curve slopes downward?

Accepted Answer

A)  An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services. 
B)  A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports. 
C)  A higher price level increases real wealth, which stimulates spending on consumption. 
D)  A lower price level reduces the interest rate, which encourages greater spending on investment goods. 
A)  An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services. 
B)  A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports. 
C)  A higher price level increases real wealth, which stimulates spending on consumption. 
D)  A lower price level reduces the interest rate, which encourages greater spending on investment goods.

Question 3

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 4

Other things the same, an increase in the price level induces people to hold

Accepted Answer

A)  less money, so they lend less, and the interest rate rises. 
B)  less money, so they lend more, and the interest rate falls. 
C)  more money, so they lend more, and the interest rate falls. 
D)  more money, so they lend less, and the interest rate rises. 
A)  less money, so they lend less, and the interest rate rises. 
B)  less money, so they lend more, and the interest rate falls. 
C)  more money, so they lend more, and the interest rate falls. 
D)  more money, so they lend less, and the interest rate rises.

Question 5

Other things the same, if the U.S. price level rises, then

Accepted Answer

A)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises. 
B)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls. 
C)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises. 
D)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls. 
A)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises. 
B)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls. 
C)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises. 
D)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.

Question 6

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

Accepted Answer

Expected price level changes w

Question 7

Other things the same, if technology increases, then in the long run

Accepted Answer

A)  both output and prices are higher. 
B)  output is higher and prices are lower. 
C)  output is lower and prices are higher. 
D)  both output and prices are lower. 
A)  both output and prices are higher. 
B)  output is higher and prices are lower. 
C)  output is lower and prices are higher. 
D)  both output and prices are lower.

Question 8

Figure 33-17.  
-Refer to Figure 33-17. Suppose the economy starts at P3 and Y2. Explain how government purchases would need to change to move the economy to P2 and Y1. What about taxes?

Accepted Answer

decrease in governme

Question 9

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

Accepted Answer

A)  both the short run and the long run. 
B)  the short run, but not the long run. 
C)  the long run, but not the short run. 
D)  neither the long run nor the short run. 
A)  both the short run and the long run. 
B)  the short run, but not the long run. 
C)  the long run, but not the short run. 
D)  neither the long run nor the short run.

Question 10

Technological progress shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 11

Figure 33-4  
-Refer to Figure 33-4. A decrease in taxes would move the economy from C to

Accepted Answer

A)  B in the short run and the long run. 
B)  D in the short run and the long run. 
C)  B in the short run and A in the long run. 
D)  D in the short run and C in the long run. 
A)  B in the short run and the long run. 
B)  D in the short run and the long run. 
C)  B in the short run and A in the long run. 
D)  D in the short run and C in the long run.

Question 12

The aggregate quantity of goods and services demanded changes as the price level rises because

Accepted Answer

A)  real wealth falls, interest rates rise, and the dollar appreciates. 
B)  real wealth falls, interest rates rise, and the dollar depreciates. 
C)  real wealth rises, interest rates fall, and the dollar appreciates. 
D)  real wealth rises, interest rates fall, and the dollar depreciates. 
A)  real wealth falls, interest rates rise, and the dollar appreciates. 
B)  real wealth falls, interest rates rise, and the dollar depreciates. 
C)  real wealth rises, interest rates fall, and the dollar appreciates. 
D)  real wealth rises, interest rates fall, and the dollar depreciates.

Question 13

During recessions employment typically

Accepted Answer

A)  falls substantially. As the recession ends, employment rises rapidly. 
B)  rises substantially. As the recession ends, employment declines gradually. 
C)  falls substantially. As the recession ends, employment rises gradually. 
D)  rises substantially. As the recession ends, employment declines rapidly. 
A)  falls substantially. As the recession ends, employment rises rapidly. 
B)  rises substantially. As the recession ends, employment declines gradually. 
C)  falls substantially. As the recession ends, employment rises gradually. 
D)  rises substantially. As the recession ends, employment declines rapidly.

Question 14

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that during World War II the long-run aggregate supply curve shifted right. In order for price and output to have changed in the direction they did, what would have to have happened to aggregate demand?

Accepted Answer

A)  It would have to have shifted left by less than aggregate supply shifted 
B)  It would have to have to shifted left by more than aggregate supply shifted. 
C)  It would have to have shifted right by less than aggregate supply shifted 
D)  It would have to have to shifted right by more than aggregate supply shifted. 
A)  It would have to have shifted left by less than aggregate supply shifted 
B)  It would have to have to shifted left by more than aggregate supply shifted. 
C)  It would have to have shifted right by less than aggregate supply shifted 
D)  It would have to have to shifted right by more than aggregate supply shifted.

Question 16

When the price level falls

Accepted Answer

A)  households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. 
B)  households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. 
C)  households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. 
D)  None of the above are correct. 
A)  households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. 
B)  households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. 
C)  households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. 
D)  None of the above are correct.

Question 17

Economic expansions in Europe and China 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.

Question 18

Figure 33-10.  
-Refer to Figure 33-10. If the economy starts at point C, stagflation would be consistent with point

Accepted Answer

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

Question 19

If aggregate demand shifts right, then eventually price level expectations rise. This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Accepted Answer

A) True 
 B)False

Question 20

When the price level falls

Accepted Answer

A)  the interest rate rises, so the quantity of goods and services demand rises. 
B)  the interest rate rises, so the quantity of goods and services demand falls. 
C)  the interest rate falls, so the quantity of goods and services demand rises. 
D)  the interest rate falls, so the quantity of goods and services demand falls. 
A)  the interest rate rises, so the quantity of goods and services demand rises. 
B)  the interest rate rises, so the quantity of goods and services demand falls. 
C)  the interest rate falls, so the quantity of goods and services demand rises. 
D)  the interest rate falls, so the quantity of goods and services demand falls.

Exam 20: Aggregate Demand and Aggregate Supply

Most economists believe that classical macroeconomic theory is a good description of the economy

Which of the following would help explain why the aggregate demand curve slopes downward?

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

Other things the same, an increase in the price level induces people to hold

Other things the same, if the U.S. price level rises, then

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

Other things the same, if technology increases, then in the long run

Figure 33-17. -Refer to Figure 33-17. Suppose the economy starts at P3 and Y2. Explain how government purchases would need to change to move the economy to P2 and Y1. What about taxes?

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

Technological progress shifts the long-run aggregate supply curve to the right.

Figure 33-4 -Refer to Figure 33-4. A decrease in taxes would move the economy from C to

The aggregate quantity of goods and services demanded changes as the price level rises because

During recessions employment typically

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Suppose that during World War II the long-run aggregate supply curve shifted right. In order for price and output to have changed in the direction they did, what would have to have happened to aggregate demand?

When the price level falls

Economic expansions in Europe and China would cause

Figure 33-10. -Refer to Figure 33-10. If the economy starts at point C, stagflation would be consistent with point

If aggregate demand shifts right, then eventually price level expectations rise. This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

When the price level falls

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