Question 1

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. C

Question 2

Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

Accepted Answer

A)  Reducing either the minimum wage or the time and cost to open a business would have no effect on the long- run aggregate supply curve. 
B)  Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right. 
C)  Reducing the minimum wage would shift long-run aggregate supply to the right. Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve. 
D)  Reducing the minimum wage would have no affect on the long-run aggregate supply curve. Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right. 
A)  Reducing either the minimum wage or the time and cost to open a business would have no effect on the long- run aggregate supply curve. 
B)  Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right. 
C)  Reducing the minimum wage would shift long-run aggregate supply to the right. Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve. 
D)  Reducing the minimum wage would have no affect on the long-run aggregate supply curve. Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right. B

Question 3

In which case can we be sure real GDP rises in the short run?

Accepted Answer

A)  foreign economies expand and government purchases rise. 
B)  foreign economies expand and government purchases fall. 
C)  foreign economies contract and government purchases fall. 
D)  foreign economies contract and government purchases rise. 
A)  foreign economies expand and government purchases rise. 
B)  foreign economies expand and government purchases fall. 
C)  foreign economies contract and government purchases fall. 
D)  foreign economies contract and government purchases rise. A

Question 4

Aggregate demand shifts right when the Federal Reserve

Accepted Answer

A)  raises personal income taxes. 
B)  increases the money supply. 
C)  institutes an investment tax credit. 
D)  All of the above are correct. 
A)  raises personal income taxes. 
B)  increases the money supply. 
C)  institutes an investment tax credit. 
D)  All of the above are correct.

Question 5

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 6

During recessions which type of spending falls?

Accepted Answer

A)  consumption and investment 
B)  investment but not consumption 
C)  consumption but not investment 
D)  neither consumption nor investment 
A)  consumption and investment 
B)  investment but not consumption 
C)  consumption but not investment 
D)  neither consumption nor investment

Question 7

Refer to U.S. Financial Crisis. U.S. net exports would

Accepted Answer

A)  rise which by itself would increase aggregate demand. 
B)  rise which by itself would decrease aggregate demand. 
C)  fall which by itself would increase aggregate demand. 
D)  fall which by itself would decrease aggregate demand. 
A)  rise which by itself would increase aggregate demand. 
B)  rise which by itself would decrease aggregate demand. 
C)  fall which by itself would increase aggregate demand. 
D)  fall which by itself would decrease aggregate demand.

Question 8

The aggregate demand curve shifts left if either

Accepted Answer

A)  speculators gain confidence in U.S. assets or foreign countries enter into recession. 
B)  speculators gain confidence in U.S. assets or recessions in foreign countries end. 
C)  speculators lose confidence in U.S. assets or foreign countries enter into recession. 
D)  speculators lose confidence in U.S. assets or recessions in foreign countries end. 
A)  speculators gain confidence in U.S. assets or foreign countries enter into recession. 
B)  speculators gain confidence in U.S. assets or recessions in foreign countries end. 
C)  speculators lose confidence in U.S. assets or foreign countries enter into recession. 
D)  speculators lose confidence in U.S. assets or recessions in foreign countries end.

Question 9

Which of the following both shift aggregate demand left?

Accepted Answer

A)  a decrease in taxes and at a given price level consumers feel more wealthy 
B)  a decrease in taxes and at a given price level consumers feel less wealthy 
C)  an increase in taxes and at a given price level consumers feel more wealthy 
D)  an increase in taxes and at a given price level consumers feel less wealthy 
A)  a decrease in taxes and at a given price level consumers feel more wealthy 
B)  a decrease in taxes and at a given price level consumers feel less wealthy 
C)  an increase in taxes and at a given price level consumers feel more wealthy 
D)  an increase in taxes and at a given price level consumers feel less wealthy

Question 10

When the price level falls, people want to

Accepted Answer

A)  hold more money and the quantity of aggregate goods and services demanded increases. 
B)  hold more money and the quantity of aggregate goods and services demanded decreases. 
C)  hold less money and the quantity of aggregate goods and services demanded increases. 
D)  hold less money and the quantity of aggregate goods and services demanded decreases. 
A)  hold more money and the quantity of aggregate goods and services demanded increases. 
B)  hold more money and the quantity of aggregate goods and services demanded decreases. 
C)  hold less money and the quantity of aggregate goods and services demanded increases. 
D)  hold less money and the quantity of aggregate goods and services demanded decreases.

Question 11

Other things the same, what happens to the price level and quantity of output when an adverse shift in the short run aggregate supply curve occurs?

Accepted Answer

Price leve

Question 12

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 13

During World War II government expenditures increased almost five-fold and output almost doubled.

Accepted Answer

A) True 
 B)False

Question 14

Recession come at

Accepted Answer

A)  regular intervals. During recessions consumption spending falls relatively more than investment spending. 
B)  regular intervals. During recessions investment spending falls relatively more than consumption spending. 
C)  irregular intervals. During recessions consumption spending falls relatively more than investment spending. 
D)  irregular intervals. During recessions investment spending falls relatively more than consumption spending. 
A)  regular intervals. During recessions consumption spending falls relatively more than investment spending. 
B)  regular intervals. During recessions investment spending falls relatively more than consumption spending. 
C)  irregular intervals. During recessions consumption spending falls relatively more than investment spending. 
D)  irregular intervals. During recessions investment spending falls relatively more than consumption spending.

Question 15

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  both an investment tax credit and a decrease in income tax rates 
B)  an investment tax credit but not a decrease in income tax rates 
C)  a decrease in income tax rates but not an investment tax credit 
D)  neither an investment tax credit nor a decrease in income tax rates 
A)  both an investment tax credit and a decrease in income tax rates 
B)  an investment tax credit but not a decrease in income tax rates 
C)  a decrease in income tax rates but not an investment tax credit 
D)  neither an investment tax credit nor a decrease in income tax rates

Question 16

Figure 33-3.  
-Refer to Figure 33-3. The natural rate of output occurs at

Accepted Answer

A)  Y1. 
B)  Y2. 
C)  Y3. 
D)  both Y1 and Y3. 
A)  Y1. 
B)  Y2. 
C)  Y3. 
D)  both Y1 and Y3.

Question 17

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases,

Accepted Answer

A)  the real value of money decreases; in turn, the real value of the dollar increases in foreign exchange markets, which decreases net exports. 
B)  the real value of money decreases; in turn, interest rates increase, which decreases net exports. 
C)  households increase their holdings of money; in turn, interest rates decrease, which reduces spending on investment goods. 
D)  households increase their holdings of money; in turn, interest rates increase, which reduces spending on investment goods. 
A)  the real value of money decreases; in turn, the real value of the dollar increases in foreign exchange markets, which decreases net exports. 
B)  the real value of money decreases; in turn, interest rates increase, which decreases net exports. 
C)  households increase their holdings of money; in turn, interest rates decrease, which reduces spending on investment goods. 
D)  households increase their holdings of money; in turn, interest rates increase, which reduces spending on investment goods.

Question 18

Figure 33-16.  
-Refer to Figure 33-16. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Accepted Answer

The answer of Figure 33-16.  
-Refer to Figure 33-16....

Question 19

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

Accepted Answer

A) True 
 B)False

Question 20

Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to

Accepted Answer

A)  rise. This rise in price expectations shifts the short-run aggregate supply curve to the right. 
B)  rise. This rise in price expectations shifts the short-run aggregate supply curve to the left. 
C)  fall. This fall in price expectations shifts the short-run aggregate supply curve to the right. 
D)  fall. This fall in price expectations shifts the short-run aggregate supply curve to the left. 
A)  rise. This rise in price expectations shifts the short-run aggregate supply curve to the right. 
B)  rise. This rise in price expectations shifts the short-run aggregate supply curve to the left. 
C)  fall. This fall in price expectations shifts the short-run aggregate supply curve to the right. 
D)  fall. This fall in price expectations shifts the short-run aggregate supply curve to the left.

Exam 33: Aggregate Demand and Aggregate Supply

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

Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

In which case can we be sure real GDP rises in the short run?

Aggregate demand shifts right when the Federal Reserve

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?

During recessions which type of spending falls?

Refer to U.S. Financial Crisis. U.S. net exports would

The aggregate demand curve shifts left if either

Which of the following both shift aggregate demand left?

When the price level falls, people want to

Other things the same, what happens to the price level and quantity of output when an adverse shift in the short run aggregate supply curve occurs?

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

During World War II government expenditures increased almost five-fold and output almost doubled.

Recession come at

Which of the following shifts aggregate demand to the right?

Figure 33-3. -Refer to Figure 33-3. The natural rate of output occurs at

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases,

Figure 33-16. -Refer to Figure 33-16. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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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