Question 1

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Accepted Answer

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

Question 2

The recessions associated with the business cycle come at regular intervals.

Accepted Answer

A) True 
 B)False

Question 3

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

Accepted Answer

A)  both the short run and the long run. 
B)  the short run, but not the long run. 
C)  the long run, but not the short run. 
D)  neither the long run nor the short run. 
A)  both the short run and the long run. 
B)  the short run, but not the long run. 
C)  the long run, but not the short run. 
D)  neither the long run nor the short run.

Question 4

Which of the following would raise the price level in both the short and long run?

Accepted Answer

A)  an increase in taxes 
B)  an increase in government expenditures 
C)  a decrease in the minimum wage 
D)  an increase in the capital stock 
A)  an increase in taxes 
B)  an increase in government expenditures 
C)  a decrease in the minimum wage 
D)  an increase in the capital stock

Question 5

Using the aggregate demand and aggregate supply model, a decrease of what curve is by itself consistent with the changes in prices and output that occurred during the onset of the Great Depression?

Accepted Answer

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

Question 6

The long-run aggregate supply curve shifts right if

Accepted Answer

A)  technology improves. 
B)  the price level decreases. 
C)  the money supply increases. 
D)  All of the above are correct. 
A)  technology improves. 
B)  the price level decreases. 
C)  the money supply increases. 
D)  All of the above are correct.

Question 7

Other things the same, if the price level falls, domestic interest rates

Accepted Answer

A)  rise, so domestic residents will want to hold more foreign bonds. 
B)  rise, so domestic residents will want to hold fewer foreign bonds. 
C)  fall, so domestic residents will want to hold more foreign bonds. 
D)  fall, so domestic residents will want to hold fewer foreign bonds. 
A)  rise, so domestic residents will want to hold more foreign bonds. 
B)  rise, so domestic residents will want to hold fewer foreign bonds. 
C)  fall, so domestic residents will want to hold more foreign bonds. 
D)  fall, so domestic residents will want to hold fewer foreign bonds.

Question 8

Other things the same, the aggregate quantity of output supplied will decrease if the price level

Accepted Answer

A)  is lower than expected so that firms believe the relative price of their output has increased. 
B)  is lower than expected so that firms believe the relative price of their output has decreased. 
C)  is higher than expected so that firms believe the relative price of their output has increased. 
D)  is higher than expected so that firms believe the relative price of their output has decreased. 
A)  is lower than expected so that firms believe the relative price of their output has increased. 
B)  is lower than expected so that firms believe the relative price of their output has decreased. 
C)  is higher than expected so that firms believe the relative price of their output has increased. 
D)  is higher than expected so that firms believe the relative price of their output has decreased.

Question 9

If the government repeals an investment tax credit and increases income taxes,

Accepted Answer

A)  real GDP rises, and the price level could rise, fall, or stay the same. 
B)  real GDP falls, and the price level could rise, fall, or stay the same. 
C)  real GDP and the price level rise. 
D)  real GDP and the price level fall. 
A)  real GDP rises, and the price level could rise, fall, or stay the same. 
B)  real GDP falls, and the price level could rise, fall, or stay the same. 
C)  real GDP and the price level rise. 
D)  real GDP and the price level fall.

Question 10

The long-run aggregate supply curve would shift left if the amount of labor available

Accepted Answer

A)  increased or Congress made a substantial increase in the minimum wage. 
B)  decreased or Congress abolished the minimum wage. 
C)  increased or Congress abolished the minimum wage. 
D)  decreased or Congress made a substantial increase in the minimum wage. 
A)  increased or Congress made a substantial increase in the minimum wage. 
B)  decreased or Congress abolished the minimum wage. 
C)  increased or Congress abolished the minimum wage. 
D)  decreased or Congress made a substantial increase in the minimum wage.

Question 11

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

Accepted Answer

A)  increased consumption, which shifts the aggregate-demand curve right. 
B)  increased consumption, which shifts the aggregate-demand curve left. 
C)  decreased consumption, which shifts the aggregate-demand curve right. 
D)  decreased consumption, which shifts the aggregate-demand curve left. 
A)  increased consumption, which shifts the aggregate-demand curve right. 
B)  increased consumption, which shifts the aggregate-demand curve left. 
C)  decreased consumption, which shifts the aggregate-demand curve right. 
D)  decreased consumption, which shifts the aggregate-demand curve left.

Question 12

Which of the following did the Fed do during the recession of 2008-2009?

Accepted Answer

A)  lowered the federal funds rate and sold securities and loans 
B)  lowered the federal funds rate and purchased securities and loans 
C)  raised the federal funds rate and sold securities and loans 
D)  raised the federal funds rate and purchased securities and loans 
A)  lowered the federal funds rate and sold securities and loans 
B)  lowered the federal funds rate and purchased securities and loans 
C)  raised the federal funds rate and sold securities and loans 
D)  raised the federal funds rate and purchased securities and loans

Question 13

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

Accepted Answer

A)  U.S. goods become more expensive relative to foreign goods so aggregate demand shifts right. 
B)  U.S. goods become less expensive relative to foreign goods so aggregate demand shifts right. 
C)  U.S. goods become more expensive relative to foreign goods so aggregate demand shifts left. 
D)  U.S. goods become less expensive relative to foreign goods so aggregate demand shifts left. 
A)  U.S. goods become more expensive relative to foreign goods so aggregate demand shifts right. 
B)  U.S. goods become less expensive relative to foreign goods so aggregate demand shifts right. 
C)  U.S. goods become more expensive relative to foreign goods so aggregate demand shifts left. 
D)  U.S. goods become less expensive relative to foreign goods so aggregate demand shifts left.

Question 14

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants increases the number of workers it employs. What could explain this?

Accepted Answer

A)  both sticky price theory and sticky wage theory 
B)  sticky price theory but not sticky wage theory 
C)  sticky wage theory but not sticky price theory 
D)  neither sticky wage theory nor sticky price theory 
A)  both sticky price theory and sticky wage theory 
B)  sticky price theory but not sticky wage theory 
C)  sticky wage theory but not sticky price theory 
D)  neither sticky wage theory nor sticky price theory

Question 15

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U.S. Which pair of GDP growth rates and unemployment rates is realistic?

Accepted Answer

A)  10 percent, 1 percent 
B)  2 percent, 12 percent 
C)  -1 percent, 8 percent 
D)  -2 percent, 2 percent 
A)  10 percent, 1 percent 
B)  2 percent, 12 percent 
C)  -1 percent, 8 percent 
D)  -2 percent, 2 percent

Question 16

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 17

Other things the same, a decrease in the price level causes real wealth to

Accepted Answer

A)  fall, interest rates to fall, and the dollar to appreciate. 
B)  fall, interest rates to rise, and the dollar to depreciate. 
C)  rise, interest rates to rise, and the dollar to appreciate. 
D)  rise, interest rates to fall, and the dollar to depreciate. 
A)  fall, interest rates to fall, and the dollar to appreciate. 
B)  fall, interest rates to rise, and the dollar to depreciate. 
C)  rise, interest rates to rise, and the dollar to appreciate. 
D)  rise, interest rates to fall, and the dollar to depreciate.

Question 18

When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is

Accepted Answer

A)  less than it desires and increase its production. 
B)  less than it desires and decrease its production. 
C)  more than it desires and increase its production. 
D)  less than it desires and decrease its production. 
A)  less than it desires and increase its production. 
B)  less than it desires and decrease its production. 
C)  more than it desires and increase its production. 
D)  less than it desires and decrease its production.

Question 19

When taxes increase, 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 20

When the price level falls

Accepted Answer

A)  households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. 
B)  households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. 
C)  households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. 
D)  None of the above are correct. 
A)  households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. 
B)  households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. 
C)  households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. 
D)  None of the above are correct.

Exam 33: Aggregate Demand and Aggregate Supply

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

The recessions associated with the business cycle come at regular intervals.

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

Which of the following would raise the price level in both the short and long run?

Using the aggregate demand and aggregate supply model, a decrease of what curve is by itself consistent with the changes in prices and output that occurred during the onset of the Great Depression?

The long-run aggregate supply curve shifts right if

Other things the same, if the price level falls, domestic interest rates

Other things the same, the aggregate quantity of output supplied will decrease if the price level

If the government repeals an investment tax credit and increases income taxes,

The long-run aggregate supply curve would shift left if the amount of labor available

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

Which of the following did the Fed do during the recession of 2008-2009?

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants increases the number of workers it employs. What could explain this?

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U.S. Which pair of GDP growth rates and unemployment rates is realistic?

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Other things the same, a decrease in the price level causes real wealth to

When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is

When taxes increase, consumption

When the price level falls

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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