Question 1

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Accepted Answer

A)  long-run aggregate supply shifts right 
B)  long-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left 
A)  long-run aggregate supply shifts right 
B)  long-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left

Question 2

When the dollar depreciates, U.S.

Accepted Answer

A)  net exports rise, which increases the aggregate quantity of goods and services demanded. 
B)  net exports rise, which decreases the aggregate quantity of goods and services demanded. 
C)  net exports fall, which increases the aggregate quantity of goods and services demanded. 
D)  net exports fall, which decreases the aggregate quantity of goods and services demanded. 
A)  net exports rise, which increases the aggregate quantity of goods and services demanded. 
B)  net exports rise, which decreases the aggregate quantity of goods and services demanded. 
C)  net exports fall, which increases the aggregate quantity of goods and services demanded. 
D)  net exports fall, which decreases the aggregate quantity of goods and services demanded.

Question 3

Other things the same, when the price level falls, interest rates

Accepted Answer

A)  rise, so firms increase investment. 
B)  rise, so firms decrease investment. 
C)  fall, so firms increase investment. 
D)  fall, so firms decrease investment. 
A)  rise, so firms increase investment. 
B)  rise, so firms decrease investment. 
C)  fall, so firms increase investment. 
D)  fall, so firms decrease investment.

Question 4

If there are floods or droughts or a decrease in the availability of raw materials

Accepted Answer

A)  aggregate supply shifts right. 
B)  output falls in the short run. 
C)  prices fall in the short run. 
D)  None of the above is correct. 
A)  aggregate supply shifts right. 
B)  output falls in the short run. 
C)  prices fall in the short run. 
D)  None of the above is correct.

Question 5

In the aggregate demand and aggregate supply model, sticky wages, sticky prices, and misperceptions about relative prices

Accepted Answer

A)  have temporary effects. 
B)  explain why the short run aggregate supply curve might shift. 
C)  explain why the aggregate demand curve is downward sloping. 
D)  explain monetary neutrality. 
A)  have temporary effects. 
B)  explain why the short run aggregate supply curve might shift. 
C)  explain why the aggregate demand curve is downward sloping. 
D)  explain monetary neutrality.

Question 6

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 P1 and Y1 , 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 7

The misperceptions theory of the short-run aggregate supply curve says that if the price level is higher than people 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 8

Other things the same, as the price level falls, which of the following increases?

Accepted Answer

A)  lending and investment spending 
B)  lending, but not investment spending 
C)  investment spending, but not lending 
D)  neither investment spending nor lending 
A)  lending and investment spending 
B)  lending, but not investment spending 
C)  investment spending, but not lending 
D)  neither investment spending nor lending

Question 9

Suppose a country experiences an increase in its capital stock. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Accepted Answer

The short-run and lo

Question 10

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

Accepted Answer

A decrease in aggregate demand causes th

Question 11

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 12

Figure 33-7.  
-Refer to Financial Crisis. If nominal wages are sticky, which of the following helps explains the change in output?

Accepted Answer

A)  real wages fall, so firms choose to produce less 
B)  real wages fall, so firms choose to produce more 
C)  real wages rise, so firms choose to produce less 
D)  real wages rise, so firms choose to produce more 
A)  real wages fall, so firms choose to produce less 
B)  real wages fall, so firms choose to produce more 
C)  real wages rise, so firms choose to produce less 
D)  real wages rise, so firms choose to produce more

Question 13

A decrease in U.S. interest rates leads to

Accepted Answer

A)  a depreciation of the dollar that leads to greater net exports. 
B)  a depreciation of the dollar that leads to smaller net exports. 
C)  an appreciation of the dollar that leads to greater net exports. 
D)  an appreciation of the dollar that leads to smaller net exports. 
A)  a depreciation of the dollar that leads to greater net exports. 
B)  a depreciation of the dollar that leads to smaller net exports. 
C)  an appreciation of the dollar that leads to greater net exports. 
D)  an appreciation of the dollar that leads to smaller net exports.

Question 14

Figure 33-12.  
-Refer to Figure 33-12. Explain how the aggregate demand and aggregate supply model changed during periods 1 and 2.

Accepted Answer

The aggregate-demand

Question 15

According to classical macroeconomic theory, changes in the money supply affect

Accepted Answer

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

Question 16

The recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

Accepted Answer

A) True 
 B)False

Question 17

The aggregate quantity of goods and services demanded changes as the price level falls 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 18

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Accepted Answer

A) True 
 B)False

Question 19

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

Accepted Answer

A)  real GDP and the price level are lower in country B. 
B)  real GDP, but not the price level, is lower in country B. 
C)  the price level, but not real GDP is lower in country B. 
D)  neither the price level or real GDP is lower in country B. 
A)  real GDP and the price level are lower in country B. 
B)  real GDP, but not the price level, is lower in country B. 
C)  the price level, but not real GDP is lower in country B. 
D)  neither the price level or real GDP is lower in country B.

Question 20

Stagflation results from continued decreases in aggregate demand.

Accepted Answer

A) True 
 B)False

Exam 20: Aggregate Demand and Aggregate Supply

Which of the following, other things the same, would make the price level decrease and real GDP increase?

When the dollar depreciates, U.S.

Other things the same, when the price level falls, interest rates

If there are floods or droughts or a decrease in the availability of raw materials

In the aggregate demand and aggregate supply model, sticky wages, sticky prices, and misperceptions about relative prices

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 P1 and Y1 , then it must be the case that

The misperceptions theory of the short-run aggregate supply curve says that if the price level is higher than people expected, then some firms believe that the relative price of what they produce has

Other things the same, as the price level falls, which of the following increases?

Suppose a country experiences an increase in its capital stock. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Figure 33-7. -Refer to Financial Crisis. If nominal wages are sticky, which of the following helps explains the change in output?

A decrease in U.S. interest rates leads to

Figure 33-12. -Refer to Figure 33-12. Explain how the aggregate demand and aggregate supply model changed during periods 1 and 2.

According to classical macroeconomic theory, changes in the money supply affect

The recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

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

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

Stagflation results from continued decreases in aggregate demand.

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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