Question 1

Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

Accepted Answer

A)  decrease consumption, shown as a movement to the left along a given aggregate-demand curve. 
B)  increase consumption, shown as a movement to the right along a given aggregate-demand curve. 
C)  decrease consumption, shown by shifting the aggregate-demand curve to the left. 
D)  increase consumption, shown by shifting the aggregate-demand curve to the right. 
A)  decrease consumption, shown as a movement to the left along a given aggregate-demand curve. 
B)  increase consumption, shown as a movement to the right along a given aggregate-demand curve. 
C)  decrease consumption, shown by shifting the aggregate-demand curve to the left. 
D)  increase consumption, shown by shifting the aggregate-demand curve to the right.

Question 2

Refer to Pessimism. What happens to the expected price level and what's the result for wage bargaining?

Accepted Answer

A)  The expected price level rises. Bargains are struck for higher wages. 
B)  The expected price level rises. Bargains are struck for lower wages. 
C)  The expected price level falls. Bargains are struck for higher wages. 
D)  The expected price level falls. Bargains are struck for lower wages. 
A)  The expected price level rises. Bargains are struck for higher wages. 
B)  The expected price level rises. Bargains are struck for lower wages. 
C)  The expected price level falls. Bargains are struck for higher wages. 
D)  The expected price level falls. Bargains are struck for lower wages.

Question 3

Which of the following would cause prices to fall and output to rise in the short run?

Accepted Answer

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

Question 4

The aggregate-demand curve

Accepted Answer

A)  has a slope that is explained in the same way as the slope of the demand curve for a particular product. 
B)  is vertical in the long run. 
C)  shows an inverse relation between the price level and the quantity of all goods and services demanded. 
D)  All of the above are correct. 
A)  has a slope that is explained in the same way as the slope of the demand curve for a particular product. 
B)  is vertical in the long run. 
C)  shows an inverse relation between the price level and the quantity of all goods and services demanded. 
D)  All of the above are correct.

Question 5

Figure 33-2.  
-Refer to Figure 33-2. Line X is

Accepted Answer

A)  investment spending. 
B)  real GDP. 
C)  unemployment rate. 
D)  CPI. 
A)  investment spending. 
B)  real GDP. 
C)  unemployment rate. 
D)  CPI.

Question 6

Identify the direction of the change during a recession in each of the following: consumption expenditures, investment expenditures, and unemployment.

Accepted Answer

Consumption expendit

Question 7

Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

Accepted Answer

A)  The expected price level falls. Bargains are struck for higher wages. 
B)  The expected price level falls. Bargains are struck for lower wages. 
C)  The expected price level rises. Bargains are struck for higher wages. 
D)  The expected price level rises. Bargains are struck for lower wages. 
A)  The expected price level falls. Bargains are struck for higher wages. 
B)  The expected price level falls. Bargains are struck for lower wages. 
C)  The expected price level rises. Bargains are struck for higher wages. 
D)  The expected price level rises. Bargains are struck for lower wages.

Question 8

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following shifts short-run aggregate supply left?

Accepted Answer

A)  an increase in the actual price level 
B)  an increase in the expected price level 
C)  an increase in the capital stock 
D)  None of the above is correct. 
A)  an increase in the actual price level 
B)  an increase in the expected price level 
C)  an increase in the capital stock 
D)  None of the above is correct.

Question 10

The aggregate demand and aggregate supply model helps us to understand both short-run economic fluctuations and how the economy moves from the short to the long run.

Accepted Answer

A) True 
 B)False

Question 11

A decrease in the expected price level shifts

Accepted Answer

A)  only the long-run aggregate supply curve right. 
B)  only the short-run aggregate supply curve right. 
C)  both the short-run and the long-run aggregate supply curve right. 
D)  Neither the short-run nor the long-run aggregate supply curve right. 
A)  only the long-run aggregate supply curve right. 
B)  only the short-run aggregate supply curve right. 
C)  both the short-run and the long-run aggregate supply curve right. 
D)  Neither the short-run nor the long-run aggregate supply curve right.

Question 12

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

Accepted Answer

A)  relative to prices wages are higher and employment rise. 
B)  relative to prices wages are higher and employment falls. 
C)  relative to prices wages are lower and employment rises. 
D)  relative to prices wages are lower and employment falls. 
A)  relative to prices wages are higher and employment rise. 
B)  relative to prices wages are higher and employment falls. 
C)  relative to prices wages are lower and employment rises. 
D)  relative to prices wages are lower and employment falls.

Question 13

Explain the effect on output and price level from an increase in the short-run aggregate-supply curve.

Accepted Answer

The price level woul

Question 14

If the price level is higher than expected, firms might raise their production in the short run if

Accepted Answer

A)  the nominal wage they pay their employees was set based on the expected price level. 
B)  prices are costly to adjust and they have set their price at some time in the past but are not ready to change it. 
C)  they believe that the price of their product has risen relative to the price of other products, when in fact the rise in the price of their product reflects an increase in the general price level. 
D)  All of the above are correct. 
A)  the nominal wage they pay their employees was set based on the expected price level. 
B)  prices are costly to adjust and they have set their price at some time in the past but are not ready to change it. 
C)  they believe that the price of their product has risen relative to the price of other products, when in fact the rise in the price of their product reflects an increase in the general price level. 
D)  All of the above are correct.

Question 15

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

Accepted Answer

A)  an increase in the minimum wage 
B)  an increase in immigration from abroad 
C)  an increase in the price of oil 
D)  an increase in the actual price level 
A)  an increase in the minimum wage 
B)  an increase in immigration from abroad 
C)  an increase in the price of oil 
D)  an increase in the actual price level

Question 16

Which of the following would cause prices to rise and real GDP to fall in the short run?

Accepted Answer

A)  an increase in the expected price level. 
B)  an increase in the capital stock. 
C)  an increase in the money supply. 
D)  an increase in taxes. 
A)  an increase in the expected price level. 
B)  an increase in the capital stock. 
C)  an increase in the money supply. 
D)  an increase in taxes.

Question 17

An increase in the price level and a reduction in output would result from

Accepted Answer

A)  an increase in the money supply. 
B)  an increase in government expenditures. 
C)  a fall in stock prices. 
D)  bad weather in farm states. 
A)  an increase in the money supply. 
B)  an increase in government expenditures. 
C)  a fall in stock prices. 
D)  bad weather in farm states.

Question 18

Which of the following would both shift aggregate demand right?

Accepted Answer

A)  the price level decreases and government expenditures increase. 
B)  the price level decreases and the government repeals an investment tax credit. 
C)  taxes decrease and government expenditures increase. 
D)  None of the above are correct. 
A)  the price level decreases and government expenditures increase. 
B)  the price level decreases and the government repeals an investment tax credit. 
C)  taxes decrease and government expenditures increase. 
D)  None of the above are correct.

Question 19

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

Accepted Answer

A)  increases by less than expected so that firms believe the relative price of their output has increased. 
B)  increases by less than expected so that firms believe the relative price of their output has decreased. 
C)  increases by more than expected so that firms believe the relative price of their output has increased. 
D)  increases by more than expected so that firms believe the relative price of their output has decreased. 
A)  increases by less than expected so that firms believe the relative price of their output has increased. 
B)  increases by less than expected so that firms believe the relative price of their output has decreased. 
C)  increases by more than expected so that firms believe the relative price of their output has increased. 
D)  increases by more than expected so that firms believe the relative price of their output has decreased.

Question 20

If output is above its natural rate, then according to sticky-wage theory

Accepted Answer

A)  workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce less at any given price level. 
B)  workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce more at any given price level. 
C)  will strike bargains for higher wages. In response to the higher wages firms will produce less at any given price level. 
D)  workers and firms will strike bargains for higher wages. In response to the higher wages firms will produce more at any given price level. 
A)  workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce less at any given price level. 
B)  workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce more at any given price level. 
C)  will strike bargains for higher wages. In response to the higher wages firms will produce less at any given price level. 
D)  workers and firms will strike bargains for higher wages. In response to the higher wages firms will produce more at any given price level.

Exam 33: Aggregate Demand and Aggregate Supply

Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

Refer to Pessimism. What happens to the expected price level and what's the result for wage bargaining?

Which of the following would cause prices to fall and output to rise in the short run?

The aggregate-demand curve

Figure 33-2. -Refer to Figure 33-2. Line X is

Identify the direction of the change during a recession in each of the following: consumption expenditures, investment expenditures, and unemployment.

Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

Which of the following shifts short-run aggregate supply left?

The aggregate demand and aggregate supply model helps us to understand both short-run economic fluctuations and how the economy moves from the short to the long run.

A decrease in the expected price level shifts

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

Explain the effect on output and price level from an increase in the short-run aggregate-supply curve.

If the price level is higher than expected, firms might raise their production in the short run if

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

Which of the following would cause prices to rise and real GDP to fall in the short run?

An increase in the price level and a reduction in output would result from

Which of the following would both shift aggregate demand right?

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

If output is above its natural rate, then according to sticky-wage theory

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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