Question 1

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 2

The curve that shows the quantity of goods and services that firms produce and sell

Accepted Answer

A)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-demand curve. 
B)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-supply curve. 
C)  as it relates to the overall price level is called the aggregate-demand curve. 
D)  as it relates to the overall price level is called the aggregate-supply curve. 
A)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-demand curve. 
B)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-supply curve. 
C)  as it relates to the overall price level is called the aggregate-demand curve. 
D)  as it relates to the overall price level is called the aggregate-supply curve.

Question 3

During a recession the economy experiences

Accepted Answer

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

Question 4

Which of the following correctly expresses why the short-run aggregate-supply curve slopes upward?

Accepted Answer

Question 5

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

Question 6

The long-run aggregate supply curve shifts right if

Accepted Answer

A)  the price level rises. 
B)  the price level falls. 
C)  the capital stock increases. 
D)  the capital stock decreases. 
A)  the price level rises. 
B)  the price level falls. 
C)  the capital stock increases. 
D)  the capital stock decreases.

Question 7

The saying "Money is a veil." means that

Accepted Answer

A)  while nominal variables are the first thing we may observe about an economy, what's important are the real variables and the forces that determine them. 
B)  money is the principal medium of exchange in most economies. 
C)  the primary determinant of short-run economic fluctuations is not real variables, but rather changes in the money supply. 
D)  in the long run money is of no importance to the determination of either real or nominal variables. 
A)  while nominal variables are the first thing we may observe about an economy, what's important are the real variables and the forces that determine them. 
B)  money is the principal medium of exchange in most economies. 
C)  the primary determinant of short-run economic fluctuations is not real variables, but rather changes in the money supply. 
D)  in the long run money is of no importance to the determination of either real or nominal variables.

Question 8

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

Accepted Answer

A)  rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve. 
B)  rises, so people will want to buy more. This response shifts aggregate demand to the right. 
C)  falls, so people will want to buy less. This response helps explain the slope of the aggregate demand curve. 
D)  falls, so people will want to buy less. This response shifts aggregate demand to the left. 
A)  rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve. 
B)  rises, so people will want to buy more. This response shifts aggregate demand to the right. 
C)  falls, so people will want to buy less. This response helps explain the slope of the aggregate demand curve. 
D)  falls, so people will want to buy less. This response shifts aggregate demand to the left.

Question 9

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the supply of labor, a major new discovery of oil, and new environmental regulations that raise the cost of electricity production. In the short run

Accepted Answer

A)  the price level will rise and real GDP will fall. 
B)  the price level will fall and real GDP will rise. 
C)  the price level and real GDP will both stay the same. 
D)  All of the above are possible. 
A)  the price level will rise and real GDP will fall. 
B)  the price level will fall and real GDP will rise. 
C)  the price level and real GDP will both stay the same. 
D)  All of the above are possible.

Question 10

When the price level falls

Accepted Answer

A)  households want to lend less. 
B)  the interest rate rises. 
C)  firms want to spend less on investment goods. 
D)  None of the above are correct. 
A)  households want to lend less. 
B)  the interest rate rises. 
C)  firms want to spend less on investment goods. 
D)  None of the above are correct.

Question 11

During recessions declines in investment account for about

Accepted Answer

A)  1/6 of the decline in real GDP. 
B)  1/7 of the decline in real GDP. 
C)  1/3 of the decline in real GDP. 
D)  2/3 of the decline in real GDP. 
A)  1/6 of the decline in real GDP. 
B)  1/7 of the decline in real GDP. 
C)  1/3 of the decline in real GDP. 
D)  2/3 of the decline in real GDP.

Question 12

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

Accepted Answer

A)  consumer wealth rises 
B)  borrowing rises 
C)  each dollar is worth more domestic goods 
D)  the dollar appreciates relative to other currencies 
A)  consumer wealth rises 
B)  borrowing rises 
C)  each dollar is worth more domestic goods 
D)  the dollar appreciates relative to other currencies

Question 13

In the long-run, an increase in aggregate demand increases the price level, but not real GDP.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)  nominal variables and real variables. 
B)  nominal variables, but not real variables. 
C)  real variables, but not nominal variables. 
D)  neither nominal nor real variables. 
A)  nominal variables and real variables. 
B)  nominal variables, but not real variables. 
C)  real variables, but not nominal variables. 
D)  neither nominal nor real variables.

Question 15

When the price level falls

Accepted Answer

A)  people want to hold more money. 
B)  the interest rate rises. 
C)  investment spending rises. 
D)  All of the above are correct. 
A)  people want to hold more money. 
B)  the interest rate rises. 
C)  investment spending rises. 
D)  All of the above are correct.

Question 16

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 17

If a central bank is independent,

Accepted Answer

A)  it has the ability to alter taxes. 
B)  it allocates savings to firms. 
C)  it restricts trade to increase domestic employment. 
D)  it operations are not controlled by the political process. 
A)  it has the ability to alter taxes. 
B)  it allocates savings to firms. 
C)  it restricts trade to increase domestic employment. 
D)  it operations are not controlled by the political process.

Question 18

Figure 33-13.  
-Refer to Figure 33-13. Identify the price and output levels consistent with long-run equilibrium.

Accepted Answer

The answer of Figure 33-13.  
-Refer to Figure 33-13....

Question 19

In the long run, an increase in the stock of human capital

Accepted Answer

A)  and increases in the money supply both make the price level rise. 
B)  and increases in the money supply both make the price level fall. 
C)  makes the price level rise, while increases in the money supply make prices fall. 
D)  makes the price level fall, while increases in the money supply make prices rise. 
A)  and increases in the money supply both make the price level rise. 
B)  and increases in the money supply both make the price level fall. 
C)  makes the price level rise, while increases in the money supply make prices fall. 
D)  makes the price level fall, while increases in the money supply make prices rise.

Question 20

The classical model is the appropriate model for analysis of the economy in the

Accepted Answer

A)  long run, because evidence indicates that money is not neutral in the long run. 
B)  long run, because real and nominal variables are essentially determined separately in the long run. 
C)  short run, because money is neutral in the short run. 
D)  short run, because real and nominal variables are not highly intertwined in the short run. 
A)  long run, because evidence indicates that money is not neutral in the long run. 
B)  long run, because real and nominal variables are essentially determined separately in the long run. 
C)  short run, because money is neutral in the short run. 
D)  short run, because real and nominal variables are not highly intertwined in the short run.

Exam 33: Aggregate Demand and Aggregate Supply

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

The curve that shows the quantity of goods and services that firms produce and sell

During a recession the economy experiences

Which of the following correctly expresses why the short-run aggregate-supply curve slopes upward?

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

The long-run aggregate supply curve shifts right if

The saying "Money is a veil." means that

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

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the supply of labor, a major new discovery of oil, and new environmental regulations that raise the cost of electricity production. In the short run

When the price level falls

During recessions declines in investment account for about

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

In the long-run, an increase in aggregate demand increases the price level, but not real GDP.

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

When the price level falls

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

If a central bank is independent,

Figure 33-13. -Refer to Figure 33-13. Identify the price and output levels consistent with long-run equilibrium.

In the long run, an increase in the stock of human capital

The classical model is the appropriate model for analysis of the economy in the

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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