Question 1

Which of the following would cause stagflation?

Accepted Answer

A)  rising government expenditures 
B)  rising oil prices 
C)  a falling money supply 
D)  technical progress 
A)  rising government expenditures 
B)  rising oil prices 
C)  a falling money supply 
D)  technical progress

Question 2

The division of variables into real and nominal is a dichotomy assumed by

Accepted Answer

A)  classical economists. 
B)  John Maynard Keynes. 
C)  the wealth effect. 
D)  short-run macroeconomic theory. 
A)  classical economists. 
B)  John Maynard Keynes. 
C)  the wealth effect. 
D)  short-run macroeconomic theory.

Question 3

Figure 33-9.  
-Refer to Figure 33-9. Suppose the economy starts where LRAS = AD1 = SRAS1. A decrease in short-run aggregate supply would be consistent with the movement to

Accepted Answer

A)  P1, Y1. 
B)  P2, Y1. 
C)  P1, Y2. 
D)  P3, Y2. 
A)  P1, Y1. 
B)  P2, Y1. 
C)  P1, Y2. 
D)  P3, Y2.

Question 4

Figure 33-8.  
-Refer to Figure 33-8. Suppose the economy starts at Z. Stagflation would be consistent with the move to

Accepted Answer

A)  P1 and Y1 . 
B)  P1 and Y3 . 
C)  P3 and Y1 . 
D)  P3 and Y3 . 
A)  P1 and Y1 . 
B)  P1 and Y3 . 
C)  P3 and Y1 . 
D)  P3 and Y3 .

Question 5

Which of the following would cause investment spending to decrease and aggregate demand to shift left?

Accepted Answer

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

Question 6

Stagflation results from continued decreases in aggregate demand.

Accepted Answer

A) True 
 B)False

Question 7

The classical dichotomy and monetary neutrality are represented graphically by

Accepted Answer

A)  an upward-sloping long-run aggregate-supply curve. 
B)  a vertical long-run aggregate-supply curve. 
C)  an upward-sloping short-run aggregate-curve. 
D)  a downward-sloping aggregate-demand curve. 
A)  an upward-sloping long-run aggregate-supply curve. 
B)  a vertical long-run aggregate-supply curve. 
C)  an upward-sloping short-run aggregate-curve. 
D)  a downward-sloping aggregate-demand curve.

Question 8

When the price level increases, the real value of people's money holdings

Accepted Answer

A)  falls, so they buy more. 
B)  falls, so they buy less. 
C)  rises, so they buy more. 
D)  rises, so they buy less. 
A)  falls, so they buy more. 
B)  falls, so they buy less. 
C)  rises, so they buy more. 
D)  rises, so they buy less.

Question 9

Which of the following by itself is consistent with the directions that the price level and real GDP changed at the onset of the Great Depression?

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 10

Other things the same, if the price level rises, then 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 11

Economic expansions in Europe and China would cause

Accepted Answer

A)  the U.S. price level and real GDP to rise. 
B)  the U.S. price level and real GDP to fall. 
C)  the U.S. price level to rise and real GDP to fall. 
D)  the U.S. price level to fall and real GDP to rise. 
A)  the U.S. price level and real GDP to rise. 
B)  the U.S. price level and real GDP to fall. 
C)  the U.S. price level to rise and real GDP to fall. 
D)  the U.S. price level to fall and real GDP to rise.

Question 12

A recession with inflation is known by what term?

Accepted Answer

The answer of A recession with inflation is known by...

Question 13

The logic of the exchange-rate effect begins with a change in the price level changing the interest rate.

Accepted Answer

A) True 
 B)False

Question 14

In order to understand how the economy works in the short run, we need to

Accepted Answer

A)  study the classical model. 
B)  study a model in which real and nominal variables interact. 
C)  understand that "money is a veil." 
D)  understand that money is neutral in the short run. 
A)  study the classical model. 
B)  study a model in which real and nominal variables interact. 
C)  understand that "money is a veil." 
D)  understand that money is neutral in the short run.

Question 15

According to the aggregate demand and aggregate supply model, in the long run a decrease in the money supply leads to

Accepted Answer

A)  decreases in both the price level and real GDP. 
B)  an increase in real GDP and an increase in the price level. 
C)  a decrease in the price level but does not change real GDP. 
D)  an increase in the price level but does not change real GDP. 
A)  decreases in both the price level and real GDP. 
B)  an increase in real GDP and an increase in the price level. 
C)  a decrease in the price level but does not change real GDP. 
D)  an increase in the price level but does not change real GDP.

Question 16

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in short-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 17

The long-run aggregate supply curve would shift right if the government were to

Accepted Answer

A)  reduce the minimum-wage. 
B)  make unemployment benefits more generous. 
C)  raise taxes on investment spending. 
D)  All of the above are correct. 
A)  reduce the minimum-wage. 
B)  make unemployment benefits more generous. 
C)  raise taxes on investment spending. 
D)  All of the above are correct.

Question 18

Other things the same, if the money supply 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 19

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

Accepted Answer

A)  higher than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied. 
B)  higher than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied. 
C)  lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied. 
D)  lower than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied. 
A)  higher than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied. 
B)  higher than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied. 
C)  lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied. 
D)  lower than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied.

Question 20

What do most economists believe concerning the relation between the price level and real output?

Accepted Answer

Most economists believe that in the long

Exam 33: Aggregate Demand and Aggregate Supply

Which of the following would cause stagflation?

The division of variables into real and nominal is a dichotomy assumed by

Figure 33-9. -Refer to Figure 33-9. Suppose the economy starts where LRAS = AD1 = SRAS1. A decrease in short-run aggregate supply would be consistent with the movement to

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. Stagflation would be consistent with the move to

Which of the following would cause investment spending to decrease and aggregate demand to shift left?

Stagflation results from continued decreases in aggregate demand.

The classical dichotomy and monetary neutrality are represented graphically by

When the price level increases, the real value of people's money holdings

Which of the following by itself is consistent with the directions that the price level and real GDP changed at the onset of the Great Depression?

Other things the same, if the price level rises, then domestic interest rates

Economic expansions in Europe and China would cause

A recession with inflation is known by what term?

The logic of the exchange-rate effect begins with a change in the price level changing the interest rate.

In order to understand how the economy works in the short run, we need to

According to the aggregate demand and aggregate supply model, in the long run a decrease in the money supply leads to

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in short-run aggregate supply.

The long-run aggregate supply curve would shift right if the government were to

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

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

What do most economists believe concerning the relation between the price level and real output?

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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