Question 1

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Accepted Answer

A)  employment and production rise. 
B)  employment rises and production falls. 
C)  employment falls and production rises. 
D)  employment and production fall. 
A)  employment and production rise. 
B)  employment rises and production falls. 
C)  employment falls and production rises. 
D)  employment and production fall.

Question 2

Other things the same, if the price level falls, people

Accepted Answer

A)  increase foreign bond purchases, so the dollar appreciates. 
B)  increase foreign bond purchases, so the dollar depreciates. 
C)  increase domestic bond purchases, so the dollar appreciates. 
D)  increase domestic bond purchases, so the dollar depreciates. 
A)  increase foreign bond purchases, so the dollar appreciates. 
B)  increase foreign bond purchases, so the dollar depreciates. 
C)  increase domestic bond purchases, so the dollar appreciates. 
D)  increase domestic bond purchases, so the dollar depreciates.

Question 3

Figure 33-7.  
-Refer to Financial Crisis. In the long run, if the Fed does not respond, the change in price expectations created by the crisis shifts

Accepted Answer

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

Question 4

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following rises when the U.S. price level falls?

Accepted Answer

A)  interest rates 
B)  the value of the dollar in the market for foreign-currency exchange 
C)  real wealth 
D)  All of the above are correct. 
A)  interest rates 
B)  the value of the dollar in the market for foreign-currency exchange 
C)  real wealth 
D)  All of the above are correct.

Question 6

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

Accepted Answer

A)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. 
B)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. 
C)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower. 
D)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower. 
A)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. 
B)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. 
C)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower. 
D)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.

Question 7

During a recession the economy experiences

Accepted Answer

A)  rising income and unemployment. 
B)  rising income and falling unemployment. 
C)  falling income and rising unemployment. 
D)  falling income and unemployment. 
A)  rising income and unemployment. 
B)  rising income and falling unemployment. 
C)  falling income and rising unemployment. 
D)  falling income and unemployment.

Question 8

If the price level falls, the real value of a dollar

Accepted Answer

A)  rises, so people will want to buy more. 
B)  rises, so people will want to buy less. 
C)  falls, so people will want to buy more. 
D)  falls, so people will want to buy less. 
A)  rises, so people will want to buy more. 
B)  rises, so people will want to buy less. 
C)  falls, so people will want to buy more. 
D)  falls, so people will want to buy less.

Question 9

When the price level falls

Accepted Answer

A)  The interest rate falls because people will want to hold more money and so sell bonds. 
B)  Firms will want to spend more on new business buildings and business equipment and households will want to spend more building new homes. 
C)  Both A and B are correct. 
D)  None of the above are correct. 
A)  The interest rate falls because people will want to hold more money and so sell bonds. 
B)  Firms will want to spend more on new business buildings and business equipment and households will want to spend more building new homes. 
C)  Both A and B are correct. 
D)  None of the above are correct.

Question 10

As the price level falls

Accepted Answer

A)  people will want to hold more money, so the interest rate rises. 
B)  people will want to hold more money, so the interest rate falls. 
C)  people will want to hold less money, so the interest rate falls. 
D)  people will want to hold less money, so the interest rate rises. 
A)  people will want to hold more money, so the interest rate rises. 
B)  people will want to hold more money, so the interest rate falls. 
C)  people will want to hold less money, so the interest rate falls. 
D)  people will want to hold less money, so the interest rate rises.

Question 11

When the dollar depreciates, U.S.

Accepted Answer

A)  exports and imports increase. 
B)  exports increase, while imports decrease. 
C)  exports decrease, while imports increase. 
D)  exports and imports decrease. 
A)  exports and imports increase. 
B)  exports increase, while imports decrease. 
C)  exports decrease, while imports increase. 
D)  exports and imports decrease.

Question 12

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 13

The equation: quantity of output supplied = natural rate of output + aactual price level - expected price level), where a is a positive number, represents

Accepted Answer

A)  an upward-sloping short-run aggregate supply curve 
B)  a vertical short-run aggregate supply curve 
C)  a downward-sloping aggregate demand curve 
D)  None of the above is correct. 
A)  an upward-sloping short-run aggregate supply curve 
B)  a vertical short-run aggregate supply curve 
C)  a downward-sloping aggregate demand curve 
D)  None of the above is correct.

Question 14

Figure 33-4  
-Refer to Figure 33-4. If the economy is at A and there is a fall in aggregate demand, in the short run the economy

Accepted Answer

A)  stays at A. 
B)  moves to B. 
C)  moves to C. 
D)  moves to D. 
A)  stays at A. 
B)  moves to B. 
C)  moves to C. 
D)  moves to D.

Question 15

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Accepted Answer

A) True 
 B)False

Question 16

Who is credited for the original development of the model of aggregate demand and aggregate supply?

Accepted Answer

The answer of Who is credited for the original development...

Question 17

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp rise in the stock market, an increase in government purchases, an increase in the money supply and a decline in the value of the dollar. In the short run

Accepted Answer

A)  the price level and real GDP will both rise. 
B)  the price level and real GDP will both fall. 
C)  neither the price leave nor real GDP will change. 
D)  All of the above are possible. 
A)  the price level and real GDP will both rise. 
B)  the price level and real GDP will both fall. 
C)  neither the price leave nor real GDP will change. 
D)  All of the above are possible.

Question 18

According to the aggregate demand and aggregate supply model, in the long run a decrease in the money supply leads to

Accepted Answer

A)  decreases in both the price level and real GDP. 
B)  an increase in real GDP and an increase in the price level. 
C)  a decrease in the price level but does not change real GDP. 
D)  an increase in the price level but does not change real GDP. 
A)  decreases in both the price level and real GDP. 
B)  an increase in real GDP and an increase in the price level. 
C)  a decrease in the price level but does not change real GDP. 
D)  an increase in the price level but does not change real GDP.

Question 19

Other things the same, a decrease in the price level makes the dollars people hold worth

Accepted Answer

A)  more, so they can buy more. 
B)  more, so they can buy less. 
C)  less, so they can buy more. 
D)  less, so they can buy less. 
A)  more, so they can buy more. 
B)  more, so they can buy less. 
C)  less, so they can buy more. 
D)  less, so they can buy less.

Question 20

Which part of real GDP fluctuates most over the course of the business cycle?

Accepted Answer

A)  consumption expenditures 
B)  government expenditures 
C)  investment expenditures 
D)  net exports 
A)  consumption expenditures 
B)  government expenditures 
C)  investment expenditures 
D)  net exports

Exam 20: Aggregate Demand and Aggregate Supply

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Other things the same, if the price level falls, people

Figure 33-7. -Refer to Financial Crisis. In the long run, if the Fed does not respond, the change in price expectations created by the crisis shifts

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Which of the following rises when the U.S. price level falls?

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

During a recession the economy experiences

If the price level falls, the real value of a dollar

When the price level falls

As the price level falls

When the dollar depreciates, U.S.

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

The equation: quantity of output supplied = natural rate of output + aactual price level - expected price level), where a is a positive number, represents

Figure 33-4 -Refer to Figure 33-4. If the economy is at A and there is a fall in aggregate demand, in the short run the economy

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Who is credited for the original development of the model of aggregate demand and aggregate supply?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp rise in the stock market, an increase in government purchases, an increase in the money supply and a decline in the value of the dollar. In the short run

According to the aggregate demand and aggregate supply model, in the long run a decrease in the money supply leads to

Other things the same, a decrease in the price level makes the dollars people hold worth

Which part of real GDP fluctuates most over the course of the business cycle?

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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