Question 1

Changes in the price level affect which components of aggregate demand?

Accepted Answer

A)  only consumption and investment 
B)  only consumption and net exports 
C)  only investment 
D)  consumption, investment, and net exports 
A)  only consumption and investment 
B)  only consumption and net exports 
C)  only investment 
D)  consumption, investment, and net exports

Question 2

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 3

Aggregate demand shifts right if at a given price level

Accepted Answer

A)  taxes rise and shifts left if the money supply increases. 
B)  taxes rise and shifts right if the money supply increases. 
C)  taxes fall and shifts left if the money supply increases. 
D)  taxes fall and shifts right if the money supply increases. 
A)  taxes rise and shifts left if the money supply increases. 
B)  taxes rise and shifts right if the money supply increases. 
C)  taxes fall and shifts left if the money supply increases. 
D)  taxes fall and shifts right if the money supply increases.

Question 4

Compare changes in the price level for a recession resulting from a shift in aggregate demand to that of a recession resulting from a shift in short run aggregate supply.

Accepted Answer

the price level decreases when

Question 5

Which of the following lists includes only changes that shift aggregate demand to the right?

Accepted Answer

A)  repeal of an investment tax credit, an increase in the money supply 
B)  repeal of an investment tax credit, a decrease in the money supply 
C)  passing of an investment tax credit, an increase in the money supply 
D)  passing of an investment tax credit, a decrease in the money supply 
A)  repeal of an investment tax credit, an increase in the money supply 
B)  repeal of an investment tax credit, a decrease in the money supply 
C)  passing of an investment tax credit, an increase in the money supply 
D)  passing of an investment tax credit, a decrease in the money supply

Question 6

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

Accepted Answer

A)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. 
B)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. 
C)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower. 
D)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower. 
A)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. 
B)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. 
C)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower. 
D)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.

Question 7

According to the classical model, an increase in the money supply causes

Accepted Answer

A)  output to increase in the long run. 
B)  the unemployment rate to fall in the long run. 
C)  prices to rise in the long run. 
D)  interest rates to fall in the long run. 
A)  output to increase in the long run. 
B)  the unemployment rate to fall in the long run. 
C)  prices to rise in the long run. 
D)  interest rates to fall in the long run.

Question 8

Which of the following both shift aggregate demand right?

Accepted Answer

A)  net exports rise for some reason other than a price change and government purchases rise. 
B)  net exports rise for some reason other than a price change and taxes increase. 
C)  net exports fall for some reason other than a price change and government purchases fall. 
D)  net exports fall for some reason other than a price change and taxes fall. 
A)  net exports rise for some reason other than a price change and government purchases rise. 
B)  net exports rise for some reason other than a price change and taxes increase. 
C)  net exports fall for some reason other than a price change and government purchases fall. 
D)  net exports fall for some reason other than a price change and taxes fall.

Question 9

Which of the following affected aggregate demand during the recession of 2008-2009?

Accepted Answer

A)  a decline in residential construction and a decrease in lending 
B)  a decline in residential construction but not a decrease in lending 
C)  a decrease in lending but not a decline in residential construction 
D)  neither a decrease in residential construction nor a decrease in lending 
A)  a decline in residential construction and a decrease in lending 
B)  a decline in residential construction but not a decrease in lending 
C)  a decrease in lending but not a decline in residential construction 
D)  neither a decrease in residential construction nor a decrease in lending

Question 10

Explain how an increase in the price level changes interest rates. How does this change in interest rates lead to changes in investment and net exports?

Accepted Answer

When the price level increases, the purc

Question 11

Refer to Pessimism. In the short run what happens to the price level and real GDP?

Accepted Answer

A)  Both the price level and real GDP rise. 
B)  Both the price level and real GDP fall. 
C)  The price level rises and real GDP falls. 
D)  The price level falls and real GDP rises. 
A)  Both the price level and real GDP rise. 
B)  Both the price level and real GDP fall. 
C)  The price level rises and real GDP falls. 
D)  The price level falls and real GDP rises.

Question 12

In which case can we be sure aggregate demand shifts left overall?

Accepted Answer

A)  people want to save more for retirement and the Fed increases the money supply. 
B)  people want to save more for retirement and the Fed decreases the money supply. 
C)  people want to save less for retirement and the Fed increases the money supply. 
D)  people want to save less for retirement and the Fed decreases the money supply. 
A)  people want to save more for retirement and the Fed increases the money supply. 
B)  people want to save more for retirement and the Fed decreases the money supply. 
C)  people want to save less for retirement and the Fed increases the money supply. 
D)  people want to save less for retirement and the Fed decreases the money supply.

Question 13

Which of the following alone can explain the change in the price level and output during World War II?

Accepted Answer

A)  aggregate demand shifted right 
B)  aggregate demand shifted left 
C)  aggregate supply shifted right 
D)  aggregate supply shifted left 
A)  aggregate demand shifted right 
B)  aggregate demand shifted left 
C)  aggregate supply shifted right 
D)  aggregate supply shifted left

Question 14

Most economists believe that in the long run, changes in the money supply

Accepted Answer

A)  affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory. 
B)  affect nominal but not real variables. This view that money is ultimately neutral is inconsistent with classical theory. 
C)  affect real but not nominal variables. This view that money is ultimately neutral is consistent with classical theory. 
D)  affect real but not nominal variables. This view that money is ultimately neutral is inconsistent with classical theory. 
A)  affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory. 
B)  affect nominal but not real variables. This view that money is ultimately neutral is inconsistent with classical theory. 
C)  affect real but not nominal variables. This view that money is ultimately neutral is consistent with classical theory. 
D)  affect real but not nominal variables. This view that money is ultimately neutral is inconsistent with classical theory.

Question 15

According to classical macroeconomic theory, changes in the money supply change real GDP but not the price level.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Other things the same, as the price level rises, the real value of a dollar

Accepted Answer

A)  rises, and interest rates rise. 
B)  rises, and interest rates fall. 
C)  falls, and interest rates rise. 
D)  falls, and interest rates fall. 
A)  rises, and interest rates rise. 
B)  rises, and interest rates fall. 
C)  falls, and interest rates rise. 
D)  falls, and interest rates fall.

Question 18

Which of the following rises during recessions?

Accepted Answer

A)  layoffs and consumer spending 
B)  layoffs but not consumer spending 
C)  consumer spending but not layoffs 
D)  neither layoffs nor consumer spending 
A)  layoffs and consumer spending 
B)  layoffs but not consumer spending 
C)  consumer spending but not layoffs 
D)  neither layoffs nor consumer spending

Question 19

List the three reasons for why the aggregate-demand curve slopes downward.

Accepted Answer

The wealth effect, t

Question 20

When taxes decrease, consumption

Accepted Answer

A)  increases, so aggregate demand shifts right. 
B)  increases, so aggregate supply shifts right. 
C)  decreases, so aggregate demand shifts left. 
D)  decreases, so aggregate supply shifts left. 
A)  increases, so aggregate demand shifts right. 
B)  increases, so aggregate supply shifts right. 
C)  decreases, so aggregate demand shifts left. 
D)  decreases, so aggregate supply shifts left.

Exam 33: Aggregate Demand and Aggregate Supply

Changes in the price level affect which components of aggregate demand?

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

Aggregate demand shifts right if at a given price level

Compare changes in the price level for a recession resulting from a shift in aggregate demand to that of a recession resulting from a shift in short run aggregate supply.

Which of the following lists includes only changes that shift aggregate demand to the right?

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

According to the classical model, an increase in the money supply causes

Which of the following both shift aggregate demand right?

Which of the following affected aggregate demand during the recession of 2008-2009?

Explain how an increase in the price level changes interest rates. How does this change in interest rates lead to changes in investment and net exports?

Refer to Pessimism. In the short run what happens to the price level and real GDP?

In which case can we be sure aggregate demand shifts left overall?

Which of the following alone can explain the change in the price level and output during World War II?

Most economists believe that in the long run, changes in the money supply

According to classical macroeconomic theory, changes in the money supply change real GDP but not the price level.

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

Other things the same, as the price level rises, the real value of a dollar

Which of the following rises during recessions?

List the three reasons for why the aggregate-demand curve slopes downward.

When taxes decrease, consumption

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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