Question 1

Which of the following is correct?

Accepted Answer

A)  Real GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations can be predicted with some accuracy. 
B)  Real GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy. 
C)  Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations can be predicted with some accuracy. 
D)  Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy. 
A)  Real GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations can be predicted with some accuracy. 
B)  Real GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy. 
C)  Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations can be predicted with some accuracy. 
D)  Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy.

Question 2

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

Accepted Answer

A)  both the money supply increase and the investment tax credit 
B)  the money supply increase but not the investment tax credit 
C)  the investment tax credit but not the money supply increase 
D)  neither the investment tax credit nor the money supply increase 
A)  both the money supply increase and the investment tax credit 
B)  the money supply increase but not the investment tax credit 
C)  the investment tax credit but not the money supply increase 
D)  neither the investment tax credit nor the money supply increase

Question 3

Investment is a

Accepted Answer

A)  small part of real GDP, so it accounts for a small share of the fluctuation in real GDP. 
B)  small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. 
C)  large part of real GDP, so it accounts for a large share of the fluctuation in real GDP. 
D)  large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP. 
A)  small part of real GDP, so it accounts for a small share of the fluctuation in real GDP. 
B)  small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. 
C)  large part of real GDP, so it accounts for a large share of the fluctuation in real GDP. 
D)  large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.

Question 4

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

Accepted Answer

A)  variables measured in terms of money and variables measured in terms of quantities or relative prices 
B)  variables measured in terms of money but not variables measured in terms of quantities or relative prices 
C)  variables measured in terms of quantities or relative prices, but not variables measured in terms of money 
D)  neither variables measured in terms of money nor variables measured in terms of quantities or relative prices 
A)  variables measured in terms of money and variables measured in terms of quantities or relative prices 
B)  variables measured in terms of money but not variables measured in terms of quantities or relative prices 
C)  variables measured in terms of quantities or relative prices, but not variables measured in terms of money 
D)  neither variables measured in terms of money nor variables measured in terms of quantities or relative prices

Question 5

Refer to Pessimism. How is the new long-run equilibrium different from the original one?

Accepted Answer

A)  both price and real GDP are higher. 
B)  both price and real GDP are lower. 
C)  the price level is the same and GDP is lower. 
D)  the price level is lower and real GDP is the same. 
A)  both price and real GDP are higher. 
B)  both price and real GDP are lower. 
C)  the price level is the same and GDP is lower. 
D)  the price level is lower and real GDP is the same.

Question 6

Which of the following explains why production rises in most years?

Accepted Answer

A)  increases in the labor force 
B)  increases in the capital stock 
C)  advances in technological knowledge 
D)  All of the above are correct. 
A)  increases in the labor force 
B)  increases in the capital stock 
C)  advances in technological knowledge 
D)  All of the above are correct.

Question 7

Figure 33-14.  
-Refer to Figure 33-14. Identify which long run aggregate-supply curve(s) would be consistent with long-run equilibrium.

Accepted Answer

The answer of Figure 33-14.  
-Refer to Figure 33-14....

Question 8

Aggregate demand shifts right if

Accepted Answer

A)  government purchases increase and shifts left if stock prices rise. 
B)  government purchases increase and shifts left if stock prices fall. 
C)  government purchases decrease and shifts left if stock prices rise. 
D)  government purchases decrease and shifts left is stock prices fall. 
A)  government purchases increase and shifts left if stock prices rise. 
B)  government purchases increase and shifts left if stock prices fall. 
C)  government purchases decrease and shifts left if stock prices rise. 
D)  government purchases decrease and shifts left is stock prices fall.

Question 9

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Accepted Answer

A)  because unemployment is low, wages will be bid up and short-run aggregate supply will shift right. 
B)  because unemployment is low, wages will be bid down and short-run aggregate supply will shift right. 
C)  because unemployment is high, wages will be bid up and short-run aggregate supply will shift right. 
D)  because unemployment is high, wages will be bid down and short-run aggregate supply will shift right. 
A)  because unemployment is low, wages will be bid up and short-run aggregate supply will shift right. 
B)  because unemployment is low, wages will be bid down and short-run aggregate supply will shift right. 
C)  because unemployment is high, wages will be bid up and short-run aggregate supply will shift right. 
D)  because unemployment is high, wages will be bid down and short-run aggregate supply will shift right.

Question 10

In 1936, John Maynard Keynes published a book, The General Theory, which attempted to explain

Accepted Answer

A)  stagflation. 
B)  the classical dichotomy. 
C)  short-run economic fluctuations. 
D)  how changes in the money supply had created the Great Depression. 
A)  stagflation. 
B)  the classical dichotomy. 
C)  short-run economic fluctuations. 
D)  how changes in the money supply had created the Great Depression.

Question 11

From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made people feel wealthier, then it would have shifted

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 12

Other things the same, an increase in the price level makes consumers feel

Accepted Answer

A)  less wealthy, so the quantity of goods and services demanded falls. 
B)  less wealthy, so the quantity of goods and services demanded rises. 
C)  more wealthy, so the quantity of goods and services demanded rises. 
D)  more wealthy, so the quantity of goods and services demanded falls. 
A)  less wealthy, so the quantity of goods and services demanded falls. 
B)  less wealthy, so the quantity of goods and services demanded rises. 
C)  more wealthy, so the quantity of goods and services demanded rises. 
D)  more wealthy, so the quantity of goods and services demanded falls.

Question 13

The recession of 2008-2009 was preceded by

Accepted Answer

A)  a sharp decline in housing prices. 
B)  large losses among financial institutions that owned mortgage-backed securities. 
C)  rises in mortgage defaults and home foreclosures. 
D)  all of the above 
A)  a sharp decline in housing prices. 
B)  large losses among financial institutions that owned mortgage-backed securities. 
C)  rises in mortgage defaults and home foreclosures. 
D)  all of the above

Question 14

The mathematical equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level), expresses

Accepted Answer

A)  how the long run equilibrium adjusts to changes in money supply. 
B)  how output deviates in the short run from its long run natural rate. 
C)  how the short run aggregate supply curve shifts. 
D)  how adverse shifts in aggregate supply can cause stagflation. 
A)  how the long run equilibrium adjusts to changes in money supply. 
B)  how output deviates in the short run from its long run natural rate. 
C)  how the short run aggregate supply curve shifts. 
D)  how adverse shifts in aggregate supply can cause stagflation.

Question 15

Other things the same, if the price level rises by 2% and people were expecting it to rise by 5%, then some firms have

Accepted Answer

A)  higher than desired prices, which increases their sales. 
B)  higher than desired prices, which depresses their sales. 
C)  lower than desired prices, which increases their sales. 
D)  lower than desired prices, which depresses their sales. 
A)  higher than desired prices, which increases their sales. 
B)  higher than desired prices, which depresses their sales. 
C)  lower than desired prices, which increases their sales. 
D)  lower than desired prices, which depresses their sales.

Question 16

Keynes believed that economies experiencing high unemployment should adopt policies to

Accepted Answer

A)  reduce the money supply. 
B)  reduce government expenditures. 
C)  increase aggregate demand. 
D)  increase aggregate supply. 
A)  reduce the money supply. 
B)  reduce government expenditures. 
C)  increase aggregate demand. 
D)  increase aggregate supply.

Question 17

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Accepted Answer

A) True 
 B)False

Question 18

In the short-run an increase in the costs of production makes

Accepted Answer

A)  output and prices rise. 
B)  output rise and prices fall. 
C)  output fall and prices rise. 
D)  output and prices fall. 
A)  output and prices rise. 
B)  output rise and prices fall. 
C)  output fall and prices rise. 
D)  output and prices fall.

Question 19

Other things the same, if the U.S. price level falls, then

Accepted Answer

A)  U.S. residents want to buy more foreign bonds. The real exchange rate rises. 
B)  U.S. residents want to buy more foreign bonds. The real exchange rate falls. 
C)  U.S. residents want to buy fewer foreign bonds. The real exchange rate rises. 
D)  U.S. residents want to buy fewer foreign bonds. The real exchange rate falls. 
A)  U.S. residents want to buy more foreign bonds. The real exchange rate rises. 
B)  U.S. residents want to buy more foreign bonds. The real exchange rate falls. 
C)  U.S. residents want to buy fewer foreign bonds. The real exchange rate rises. 
D)  U.S. residents want to buy fewer foreign bonds. The real exchange rate falls.

Question 20

As the price level rises

Accepted Answer

A)  people will want to hold more money, so the interest rate rises. 
B)  people will want to hold more money, so the interest rate falls. 
C)  people will want to hold less money, so the interest rate falls. 
D)  people will want to hold less money, so the interest rate rises. 
A)  people will want to hold more money, so the interest rate rises. 
B)  people will want to hold more money, so the interest rate falls. 
C)  people will want to hold less money, so the interest rate falls. 
D)  people will want to hold less money, so the interest rate rises.

Exam 33: Aggregate Demand and Aggregate Supply

Which of the following is correct?

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

Investment is a

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

Refer to Pessimism. How is the new long-run equilibrium different from the original one?

Which of the following explains why production rises in most years?

Figure 33-14. -Refer to Figure 33-14. Identify which long run aggregate-supply curve(s) would be consistent with long-run equilibrium.

Aggregate demand shifts right if

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

In 1936, John Maynard Keynes published a book, The General Theory, which attempted to explain

From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made people feel wealthier, then it would have shifted

Other things the same, an increase in the price level makes consumers feel

The recession of 2008-2009 was preceded by

The mathematical equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level), expresses

Other things the same, if the price level rises by 2% and people were expecting it to rise by 5%, then some firms have

Keynes believed that economies experiencing high unemployment should adopt policies to

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

In the short-run an increase in the costs of production makes

Other things the same, if the U.S. price level falls, then

As the price level rises

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

Filters