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

Figure 33-5.  
-Refer to Figure 33-5. The shift of the short-run aggregate-supply curve from SRAS1 to SRAS2

Accepted Answer

A)  could be caused by an outbreak of war in the Middle East. 
B)  could be caused by a decrease in the expected price level. 
C)  causes the economy to experience an increase in the unemployment rate. 
D)  causes the economy to experience stagflation. 
A)  could be caused by an outbreak of war in the Middle East. 
B)  could be caused by a decrease in the expected price level. 
C)  causes the economy to experience an increase in the unemployment rate. 
D)  causes the economy to experience stagflation.

Question 3

An increase in the interest rate causes investment to

Accepted Answer

A)  rise and the exchange rate to appreciate. 
B)  fall and the exchange rate to depreciate. 
C)  rise and the exchange rate to depreciate. 
D)  fall and the exchange rate to appreciate. 
A)  rise and the exchange rate to appreciate. 
B)  fall and the exchange rate to depreciate. 
C)  rise and the exchange rate to depreciate. 
D)  fall and the exchange rate to appreciate.

Question 4

Most economist agree that money changes real GDP in both the short and long run.

Accepted Answer

A) True 
 B)False

Question 5

The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Accepted Answer

A) True 
 B)False

Question 6

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Accepted Answer

A)  production is more profitable and employment rises. 
B)  production is more profitable and employment falls. 
C)  production is less profitable and employment rises. 
D)  production is less profitable and employment falls. 
A)  production is more profitable and employment rises. 
B)  production is more profitable and employment falls. 
C)  production is less profitable and employment rises. 
D)  production is less profitable and employment falls.

Question 7

Other things the same, an increase in the expected price level shifts

Accepted Answer

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

Question 8

Most economists believe that classical theory describes the world

Accepted Answer

A)  in the short run. 
B)  in the long run. 
C)  in both the short run and the long run. 
D)  in neither the short run nor the long run. 
A)  in the short run. 
B)  in the long run. 
C)  in both the short run and the long run. 
D)  in neither the short run nor the long run.

Question 9

When taxes decrease, consumption

Accepted Answer

A)  decreases as shown by a movement to the left along a given aggregate-demand curve. 
B)  decreases as shown by a shift of the aggregate demand curve to the left. 
C)  increases as shown by a movement to the right along a given aggregate-demand curve. 
D)  increases as shown by a shift of the aggregate demand curve to the right. 
A)  decreases as shown by a movement to the left along a given aggregate-demand curve. 
B)  decreases as shown by a shift of the aggregate demand curve to the left. 
C)  increases as shown by a movement to the right along a given aggregate-demand curve. 
D)  increases as shown by a shift of the aggregate demand curve to the right.

Question 10

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because

Accepted Answer

A)  monetary neutrality would mean that neither prices nor production should have risen. 
B)  monetary neutrality would mean that production should have risen, but prices should not have. 
C)  monetary neutrality would mean the prices should have risen, but production should not have changed. 
D)  monetary neutrality would mean that prices and production should both have fallen. 
A)  monetary neutrality would mean that neither prices nor production should have risen. 
B)  monetary neutrality would mean that production should have risen, but prices should not have. 
C)  monetary neutrality would mean the prices should have risen, but production should not have changed. 
D)  monetary neutrality would mean that prices and production should both have fallen.

Question 11

Which of the following shifts the short-run aggregate supply curve right?

Accepted Answer

A)  both an increase in the price level that is greater than expected and an increase in the expected price level. 
B)  an increase in the price level that is greater than expected, but not an increase in the expected price level. 
C)  an increase in the expected price level, but not an increase in the price level that is greater than expected. 
D)  neither an increase in the price level that is greater than expected nor an increase in the expected price level. 
A)  both an increase in the price level that is greater than expected and an increase in the expected price level. 
B)  an increase in the price level that is greater than expected, but not an increase in the expected price level. 
C)  an increase in the expected price level, but not an increase in the price level that is greater than expected. 
D)  neither an increase in the price level that is greater than expected nor an increase in the expected price level.

Question 12

Menu costs help explain

Accepted Answer

A)  sticky-price theory. 
B)  misperceptions theory. 
C)  sticky-wage theory. 
D)  All of the above are correct. 
A)  sticky-price theory. 
B)  misperceptions theory. 
C)  sticky-wage theory. 
D)  All of the above are correct.

Question 13

Figure 33-7.  
-Refer to Figure 33-7. If the economy starts at Y, then a recession occurs at

Accepted Answer

A)  V. 
B)  W. 
C)  X. 
D)  Z. 
A)  V. 
B)  W. 
C)  X. 
D)  Z.

Question 14

The short-run effects of an increase in the expected price level include

Accepted Answer

A)  a lower level of output and a lower price level. 
B)  a lower level of output and a higher price level. 
C)  a higher level of output and a lower price level. 
D)  a higher level of output and a higher price level. 
A)  a lower level of output and a lower price level. 
B)  a lower level of output and a higher price level. 
C)  a higher level of output and a lower price level. 
D)  a higher level of output and a higher price level.

Question 15

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 16

The sticky-price theory implies that

Accepted Answer

A)  the short-run aggregate-supply curve is upward-sloping. 
B)  an unexpected fall in the price level induces firms to reduce the quantity of goods and services they produce. 
C)  menu costs influence the speed of adjustment of prices. 
D)  All of the above are correct. 
A)  the short-run aggregate-supply curve is upward-sloping. 
B)  an unexpected fall in the price level induces firms to reduce the quantity of goods and services they produce. 
C)  menu costs influence the speed of adjustment of prices. 
D)  All of the above are correct.

Question 17

Using the aggregate demand and aggregate supply model, an increase in what curve is by itself consistent with the changes in prices and output that occurred during World War II?

Accepted Answer

The answer of Using the aggregate demand and aggregate supply...

Question 18

Other things the same, as the price level rises, exchange rates

Accepted Answer

A)  and interest rates rise. 
B)  and interest rates fall. 
C)  fall and interest rates rise. 
D)  rise and interest rates fall. 
A)  and interest rates rise. 
B)  and interest rates fall. 
C)  fall and interest rates rise. 
D)  rise and interest rates fall.

Question 19

An increase in the expected price level shifts the

Accepted Answer

A)  short-run and long-run aggregate supply curves left. 
B)  the short-run but not the long-run aggregate supply curve left. 
C)  the long-run but not the short-run aggregate supply curve left. 
D)  neither the long-run nor the short-run aggregate supply curve left. 
A)  short-run and long-run aggregate supply curves left. 
B)  the short-run but not the long-run aggregate supply curve left. 
C)  the long-run but not the short-run aggregate supply curve left. 
D)  neither the long-run nor the short-run aggregate supply curve left.

Question 20

Other things the same, an increase in the price level causes the interest rate to

Accepted Answer

A)  increase, the dollar to depreciate, and net exports to increase. 
B)  increase, the dollar to appreciate, and net exports to decrease. 
C)  decrease, the dollar to depreciate, and net exports to increase. 
D)  decrease, the dollar to appreciate, and net exports to decrease. 
A)  increase, the dollar to depreciate, and net exports to increase. 
B)  increase, the dollar to appreciate, and net exports to decrease. 
C)  decrease, the dollar to depreciate, and net exports to increase. 
D)  decrease, the dollar to appreciate, and net exports to decrease.

Exam 33: Aggregate Demand and Aggregate Supply

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

Figure 33-5. -Refer to Figure 33-5. The shift of the short-run aggregate-supply curve from SRAS1 to SRAS2

An increase in the interest rate causes investment to

Most economist agree that money changes real GDP in both the short and long run.

The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level.

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Other things the same, an increase in the expected price level shifts

Most economists believe that classical theory describes the world

When taxes decrease, consumption

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because

Which of the following shifts the short-run aggregate supply curve right?

Menu costs help explain

Figure 33-7. -Refer to Figure 33-7. If the economy starts at Y, then a recession occurs at

The short-run effects of an increase in the expected price level include

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

The sticky-price theory implies that

Using the aggregate demand and aggregate supply model, an increase in what curve is by itself consistent with the changes in prices and output that occurred during World War II?

Other things the same, as the price level rises, exchange rates

An increase in the expected price level shifts the

Other things the same, an increase in the price level causes the interest rate 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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