Question 1

The recessions of the 1970s are often attributed to

Accepted Answer

A)  declining inflation expectations. 
B)  an increase in oil prices. 
C)  declines in the price of stock. 
D)  decreases in the money supply. 
A)  declining inflation expectations. 
B)  an increase in oil prices. 
C)  declines in the price of stock. 
D)  decreases in the money supply.

Question 2

The aggregate demand and aggregate supply model implies monetary neutrality

Accepted Answer

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

Question 3

Which of the following would shift long-run aggregate supply to the right?

Accepted Answer

A)  increased immigration from abroad 
B)  a decrease in the price of an imported natural resource 
C)  opening the economy to international trade 
D)  All of the above are correct. 
A)  increased immigration from abroad 
B)  a decrease in the price of an imported natural resource 
C)  opening the economy to international trade 
D)  All of the above are correct.

Question 4

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

Accepted Answer

A)  the supply of dollars would shift right and the exchange rate would rise. 
B)  the supply of dollars would shift right and the exchange rate would fall. 
C)  the supply of dollars would shift left and the exchange rate would rise. 
D)  None of the above is correct. 
A)  the supply of dollars would shift right and the exchange rate would rise. 
B)  the supply of dollars would shift right and the exchange rate would fall. 
C)  the supply of dollars would shift left and the exchange rate would rise. 
D)  None of the above is correct.

Question 5

According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produce had

Accepted Answer

A)  increased, so it would increase production. 
B)  increased, so it would decrease production. 
C)  decreased, so it would increase production. 
D)  decreased, so it would decrease production. 
A)  increased, so it would increase production. 
B)  increased, so it would decrease production. 
C)  decreased, so it would increase production. 
D)  decreased, so it would decrease production.

Question 6

Explain how a recession differs from a depression.

Accepted Answer

Recessions are relatively mild

Question 7

Refer to Optimism. Which curve shifts and in which direction?

Accepted Answer

A)  aggregate demand shifts right 
B)  aggregate demand shifts left 
C)  aggregate supply shifts right. 
D)  aggregate supply shifts left. 
A)  aggregate demand shifts right 
B)  aggregate demand shifts left 
C)  aggregate supply shifts right. 
D)  aggregate supply shifts left.

Question 8

Other things the same, what happens in the short run to the price level and quantity of output when the aggregate demand curve shifts to the left?

Accepted Answer

The price

Question 9

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Accepted Answer

When people expect the price l

Question 10

Refer to Political Instability Abroad. What would the change in the interest rate created by foreigners wanting to buy more U.S. assets do to investment spending in the U.S.?

Accepted Answer

A)  make it rise which by itself would increase U.S. aggregate demand. 
B)  make it rise which by itself would decrease U.S. aggregate demand. 
C)  make it fall which by itself would increase U.S. aggregate demand. 
D)  make it fall which by itself would decrease U.S. aggregate demand. 
A)  make it rise which by itself would increase U.S. aggregate demand. 
B)  make it rise which by itself would decrease U.S. aggregate demand. 
C)  make it fall which by itself would increase U.S. aggregate demand. 
D)  make it fall which by itself would decrease U.S. aggregate demand.

Question 11

An increase in the money supply causes the interest rate to fall, investment spending to rise, and aggregate demand to shift right.

Accepted Answer

A) True 
 B)False

Question 12

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

Accepted Answer

A) True 
 B)False

Question 13

Real GDP

Accepted Answer

A)  moves in the opposite direction as unemployment. 
B)  increases as production falls. 
C)  falls when households save a smaller fraction of their income. 
D)  All of the above are correct. 
A)  moves in the opposite direction as unemployment. 
B)  increases as production falls. 
C)  falls when households save a smaller fraction of their income. 
D)  All of the above are correct.

Question 14

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

Accepted Answer

A)  the dollar would appreciate which would cause aggregate demand to shift right. 
B)  the dollar would appreciate which would cause aggregate demand to shift left. 
C)  the dollar would depreciate which would cause aggregate demand to shift right. 
D)  the dollar would depreciate which would cause aggregate demand to shift left. 
A)  the dollar would appreciate which would cause aggregate demand to shift right. 
B)  the dollar would appreciate which would cause aggregate demand to shift left. 
C)  the dollar would depreciate which would cause aggregate demand to shift right. 
D)  the dollar would depreciate which would cause aggregate demand to shift left.

Question 15

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 16

Other things the same, if prices fell when firms and workers were expecting them to rise, then

Accepted Answer

A)  employment and production would rise. 
B)  employment would rise and production would fall. 
C)  employment would fall and production would rise. 
D)  employment and production would fall. 
A)  employment and production would rise. 
B)  employment would rise and production would fall. 
C)  employment would fall and production would rise. 
D)  employment and production would fall.

Question 17

Other things the same, as the price level rises,

Accepted Answer

A)  the dollar depreciates. 
B)  the interest rate falls. 
C)  people feel less wealthy. 
D)  All of the above are correct. 
A)  the dollar depreciates. 
B)  the interest rate falls. 
C)  people feel less wealthy. 
D)  All of the above are correct.

Question 18

Aggregate demand shifts to the left if the money supply increases.

Accepted Answer

A) True 
 B)False

Question 19

If the price level falls, the real value of a dollar

Accepted Answer

A)  rises, so people will want to buy more. 
B)  rises, so people will want to buy less. 
C)  falls, so people will want to buy more. 
D)  falls, so people will want to buy less. 
A)  rises, so people will want to buy more. 
B)  rises, so people will want to buy less. 
C)  falls, so people will want to buy more. 
D)  falls, so people will want to buy less.

Question 20

Recessions occur at irregular intervals and are almost impossible to predict with much accuracy.

Accepted Answer

A) True 
 B)False

Exam 33: Aggregate Demand and Aggregate Supply

The recessions of the 1970s are often attributed to

The aggregate demand and aggregate supply model implies monetary neutrality

Which of the following would shift long-run aggregate supply to the right?

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produce had

Explain how a recession differs from a depression.

Refer to Optimism. Which curve shifts and in which direction?

Other things the same, what happens in the short run to the price level and quantity of output when the aggregate demand curve shifts to the left?

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Refer to Political Instability Abroad. What would the change in the interest rate created by foreigners wanting to buy more U.S. assets do to investment spending in the U.S.?

An increase in the money supply causes the interest rate to fall, investment spending to rise, and aggregate demand to shift right.

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

Real GDP

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Other things the same, if prices fell when firms and workers were expecting them to rise, then

Other things the same, as the price level rises,

Aggregate demand shifts to the left if the money supply increases.

If the price level falls, the real value of a dollar

Recessions occur at irregular intervals and are almost impossible to predict with much accuracy.

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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