Question 1

Most economists believe that in the short run

Accepted Answer

A)  real and nominal variables are determined independently and that money cannot move real GDP away from its long-run trend. 
B)  real and nominal variables are determined independently but that money can temporarily move real GDP away from its long-run trend. 
C)  real and nominal variables are highly intertwined but that money cannot move real GDP away from its long- run trend. 
D)  real and nominal variables are highly intertwined and that money can temporarily move real GDP away from its long-run trend. 
A)  real and nominal variables are determined independently and that money cannot move real GDP away from its long-run trend. 
B)  real and nominal variables are determined independently but that money can temporarily move real GDP away from its long-run trend. 
C)  real and nominal variables are highly intertwined but that money cannot move real GDP away from its long- run trend. 
D)  real and nominal variables are highly intertwined and that money can temporarily move real GDP away from its long-run trend.

Question 2

Figure 33-7.  
-Refer to Pessimism. In the long run, the change in price expectations created by pessimism shifts

Accepted Answer

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

Question 3

Figure 33-8.  
-Refer to Figure 33-8. Suppose the economy starts at Z. Stagflation would be consistent with the move to

Accepted Answer

A)  P1 and Y1 . 
B)  P1 and Y3 . 
C)  P3 and Y1 . 
D)  P3 and Y3 . 
A)  P1 and Y1 . 
B)  P1 and Y3 . 
C)  P3 and Y1 . 
D)  P3 and Y3 .

Question 4

Which of the following is correct?

Accepted Answer

A)  An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left. 
B)  An increase in stock prices reduces consumption spending so that aggregate demand shifts left. 
C)  An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left. 
D)  A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left. 
A)  An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left. 
B)  An increase in stock prices reduces consumption spending so that aggregate demand shifts left. 
C)  An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left. 
D)  A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left.

Question 5

Figure 33-4  
-Refer to Figure 33-4. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from

Accepted Answer

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

Question 6

Other things the same, if the price level is lower than expected, then some firms believe that the relative price of what they produce has

Accepted Answer

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

Question 7

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

Accepted Answer

A)  an increase in either technology or the human capital stock. 
B)  an increase in human capital but not technology. 
C)  an increase in technology, but not the human capital stock. 
D)  neither an increase in technology nor the human capital stock. 
A)  an increase in either technology or the human capital stock. 
B)  an increase in human capital but not technology. 
C)  an increase in technology, but not the human capital stock. 
D)  neither an increase in technology nor the human capital stock.

Question 8

Other things the same, an increase in the amount of capital firms wish to purchase would initially 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 9

Figure 33-14.  
-Refer to Figure 33-14. Identify which long run aggregate-supply curves) would be consistent with long-run equilibrium.

Accepted Answer

The answer of Figure 33-14.  
-Refer to Figure 33-14....

Question 10

Assuming that a is positive, theories of short-run aggregate supply are expressed mathematically as

Accepted Answer

A)  quantity of output supplied = natural rate of output + aactual price level - expected price level). 
B)  quantity of output supplied = natural rate of output + aexpected price level - actual price level). 
C)  quantity of output supplied = aactual price level -expected price level) - natural rate of output. 
D)  quantity of output supplied = aexpected price level - actual price level) - natural rate of output. 
A)  quantity of output supplied = natural rate of output + aactual price level - expected price level). 
B)  quantity of output supplied = natural rate of output + aexpected price level - actual price level). 
C)  quantity of output supplied = aactual price level -expected price level) - natural rate of output. 
D)  quantity of output supplied = aexpected price level - actual price level) - natural rate of output.

Question 11

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained

Accepted Answer

A)  only by technological progress. 
B)  only by money supply growth. 
C)  by technological progress and money supply growth. 
D)  None of the above is correct. 
A)  only by technological progress. 
B)  only by money supply growth. 
C)  by technological progress and money supply growth. 
D)  None of the above is correct.

Question 12

When interest rates fall

Accepted Answer

A)  firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding. 
B)  firms want to borrow more for new plants and equipment and households want to borrow less for homebuilding. 
C)  firms want to borrow less for new plants and equipment and households want to borrow more for homebuilding. 
D)  firms want to borrow less for new plants and equipment and households want to borrow less for homebuilding. 
A)  firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding. 
B)  firms want to borrow more for new plants and equipment and households want to borrow less for homebuilding. 
C)  firms want to borrow less for new plants and equipment and households want to borrow more for homebuilding. 
D)  firms want to borrow less for new plants and equipment and households want to borrow less for homebuilding.

Question 13

Figure 33-7.  
-Refer to Financial Crisis. Suppose the economy reaches long-run equilibrium without the Fed responding. Now suppose the financial crisis ends and the ability of banks to lend returns to normal. In which case is the price level lower compared to its value prior to the crisis?

Accepted Answer

A)  both after the economy reaches long-run equilibrium during the crisis and in the long-run equilibrium after the crisis is over 
B)  after the economy reaches long-run equilibrium during the crisis but not in the long-run equilibrium after the crisis is over 
C)  in the long-run equilibrium after the crisis is over but not after the economy reaches long-run equilibrium during the crisis 
D)  neither after the economy reaches long-run equilibrium during the crisis nor in the long-run equilibrium after the crisis is over 
A)  both after the economy reaches long-run equilibrium during the crisis and in the long-run equilibrium after the crisis is over 
B)  after the economy reaches long-run equilibrium during the crisis but not in the long-run equilibrium after the crisis is over 
C)  in the long-run equilibrium after the crisis is over but not after the economy reaches long-run equilibrium during the crisis 
D)  neither after the economy reaches long-run equilibrium during the crisis nor in the long-run equilibrium after the crisis is over

Question 14

From 1995 to 1999 there was a dramatic rise in stock prices. 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 15

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U.S. Which pair of GDP growth rates and unemployment rates is realistic?

Accepted Answer

A)  10 percent, 1 percent 
B)  2 percent, 12 percent 
C)  -1 percent, 8 percent 
D)  -2 percent, 2 percent 
A)  10 percent, 1 percent 
B)  2 percent, 12 percent 
C)  -1 percent, 8 percent 
D)  -2 percent, 2 percent

Question 16

Which of the following has been suggested as a cause of the Great Depression?

Accepted Answer

A)  a decline in the money supply 
B)  a decrease in stock prices 
C)  the collapse of the banking system 
D)  All of the above are correct. 
A)  a decline in the money supply 
B)  a decrease in stock prices 
C)  the collapse of the banking system 
D)  All of the above are correct.

Question 17

Suppose a boom in stock market prices helps make people feel wealthier. Using the model of aggregate demand and aggregate supply, identify the curves that are affected, and which way these curves would shift.

Accepted Answer

The aggregate demand

Question 18

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Accepted Answer

A) True 
 B)False

Question 19

As the price level falls,

Accepted Answer

A)  the exchange rate falls, so net exports fall. 
B)  the exchange rate falls, so net exports rise. 
C)  the exchange rate rises, so net exports fall. 
D)  the exchange rate rises, so net exports rise. 
A)  the exchange rate falls, so net exports fall. 
B)  the exchange rate falls, so net exports rise. 
C)  the exchange rate rises, so net exports fall. 
D)  the exchange rate rises, so net exports rise.

Question 20

An increase in the money supply

Accepted Answer

A)  and an investment tax credit both cause aggregate demand to shift right. 
B)  and an investment tax credit both cause aggregate demand to shift left. 
C)  causes aggregate demand to shift right, while an investment tax credit causes aggregate demand to shift left. 
D)  causes aggregate demand to shift left, while an investment tax credit causes aggregate demand to shift right. 
A)  and an investment tax credit both cause aggregate demand to shift right. 
B)  and an investment tax credit both cause aggregate demand to shift left. 
C)  causes aggregate demand to shift right, while an investment tax credit causes aggregate demand to shift left. 
D)  causes aggregate demand to shift left, while an investment tax credit causes aggregate demand to shift right.

Exam 20: Aggregate Demand and Aggregate Supply

Most economists believe that in the short run

Figure 33-7. -Refer to Pessimism. In the long run, the change in price expectations created by pessimism shifts

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. Stagflation would be consistent with the move to

Which of the following is correct?

Figure 33-4 -Refer to Figure 33-4. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from

Other things the same, if the price level is lower than expected, then some firms believe that the relative price of what they produce has

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

Other things the same, an increase in the amount of capital firms wish to purchase would initially shift

Figure 33-14. -Refer to Figure 33-14. Identify which long run aggregate-supply curves) would be consistent with long-run equilibrium.

Assuming that a is positive, theories of short-run aggregate supply are expressed mathematically as

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained

When interest rates fall

Figure 33-7. -Refer to Financial Crisis. Suppose the economy reaches long-run equilibrium without the Fed responding. Now suppose the financial crisis ends and the ability of banks to lend returns to normal. In which case is the price level lower compared to its value prior to the crisis?

From 1995 to 1999 there was a dramatic rise in stock prices. If this rise made people feel wealthier, then it would have shifted

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U.S. Which pair of GDP growth rates and unemployment rates is realistic?

Which of the following has been suggested as a cause of the Great Depression?

Suppose a boom in stock market prices helps make people feel wealthier. Using the model of aggregate demand and aggregate supply, identify the curves that are affected, and which way these curves would shift.

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

As the price level falls,

An increase in the money supply

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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