Question 1

Aggregate demand includes

Accepted Answer

A)  the quantity of goods and services the government, households, firms, and customers abroad want to buy. 
B)  neither the quantity of goods and services the government, households, nor firms want to buy nor the quantity of goods and services customers abroad want to buy. 
C)  the quantity of goods and service the government wants to buy, but not the quantity of goods and services households, firms, or customers abroad want to buy. 
D)  the quantity of goods and services households and firms want to buy, but not the quantity of goods and services the government wants to buy. 
A)  the quantity of goods and services the government, households, firms, and customers abroad want to buy. 
B)  neither the quantity of goods and services the government, households, nor firms want to buy nor the quantity of goods and services customers abroad want to buy. 
C)  the quantity of goods and service the government wants to buy, but not the quantity of goods and services households, firms, or customers abroad want to buy. 
D)  the quantity of goods and services households and firms want to buy, but not the quantity of goods and services the government wants to buy.

Question 2

In the context of aggregate demand and aggregate supply, the wealth effect refers to the idea that, when the price level decreases, the real wealth of households

Accepted Answer

A)  increases and as a result consumption spending increases. This effect contributes to the downward slope of the aggregate-demand curve. 
B)  decreases and as a result consumption spending increases. This effect contributes to the upward slope of the aggregate-supply curve. 
C)  increases and as a result households increase their money holdings; in turn, interest rates increase and investment spending decreases. This effect contributes to the downward slope of the aggregate-demand curve. 
D)  decreases and as a result households increase their money holdings; in turn, interest rates increase and investment spending decreases. This effect contributes to the upward slope of the aggregate-supply curve. 
A)  increases and as a result consumption spending increases. This effect contributes to the downward slope of the aggregate-demand curve. 
B)  decreases and as a result consumption spending increases. This effect contributes to the upward slope of the aggregate-supply curve. 
C)  increases and as a result households increase their money holdings; in turn, interest rates increase and investment spending decreases. This effect contributes to the downward slope of the aggregate-demand curve. 
D)  decreases and as a result households increase their money holdings; in turn, interest rates increase and investment spending decreases. This effect contributes to the upward slope of the aggregate-supply curve.

Question 3

When the price level falls

Accepted Answer

A)  people want to hold less money. 
B)  the interest rate falls. 
C)  investment spending rises. 
D)  All of the above are correct. 
A)  people want to hold less money. 
B)  the interest rate falls. 
C)  investment spending rises. 
D)  All of the above are correct.

Question 4

People will buy more if the price level

Accepted Answer

A)  rises because rising prices increase the real value of a dollar. 
B)  rises because rising prices decrease the real value of a dollar. 
C)  falls because falling prices increase the real value of a dollar. 
D)  falls because falling prices decrease the real value of a dollar. 
A)  rises because rising prices increase the real value of a dollar. 
B)  rises because rising prices decrease the real value of a dollar. 
C)  falls because falling prices increase the real value of a dollar. 
D)  falls because falling prices decrease the real value of a dollar.

Question 5

Refer to Stock Market Boom 2015. In the long run, the change in price expectations created by the stock market boom shifts

Accepted Answer

A)  long-run aggregate supply right. 
B)  long-run aggregate supply left. 
C)  short-run aggregate supply right. 
D)  short-run aggregate supply left. 
A)  long-run aggregate supply right. 
B)  long-run aggregate supply left. 
C)  short-run aggregate supply right. 
D)  short-run aggregate supply left.

Question 6

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major restrictions on logging removed. In the short run

Accepted Answer

A)  real GDP will rise and the price level might rise, fall, or stay the same. 
B)  real GDP will fall and the price level might rise, fall, or stay the same. 
C)  the price level will rise, and real GDP might rise, fall, or stay the same. 
D)  the price level will fall, and real GDP might rise, fall, or stay the same. 
A)  real GDP will rise and the price level might rise, fall, or stay the same. 
B)  real GDP will fall and the price level might rise, fall, or stay the same. 
C)  the price level will rise, and real GDP might rise, fall, or stay the same. 
D)  the price level will fall, and real GDP might rise, fall, or stay the same.

Question 7

Figure 33-11.  
-Refer to Figure 33-11. A movement from P1 and Y2, to P2 and Y1 would be consistent with

Accepted Answer

A)  a decrease in consumption expenditures. 
B)  stagflation. 
C)  sticky-wages. 
D)  an increase in net exports. 
A)  a decrease in consumption expenditures. 
B)  stagflation. 
C)  sticky-wages. 
D)  an increase in net exports.

Question 8

Aggregate demand includes

Accepted Answer

A)  only the quantity of goods and services households want to buy. 
B)  only the quantity of goods and services households and firms want to buy. 
C)  only the quantity of goods and services households, firms, and the government want to buy. 
D)  the quantity of goods and services households, firms, the government, and customer abroad want to buy. 
A)  only the quantity of goods and services households want to buy. 
B)  only the quantity of goods and services households and firms want to buy. 
C)  only the quantity of goods and services households, firms, and the government want to buy. 
D)  the quantity of goods and services households, firms, the government, and customer abroad want to buy.

Question 9

Briefly state the three key facts about economic fluctuations.

Accepted Answer

(1) Economic fluctuations are

Question 10

When the price level falls

Accepted Answer

A)  the interest rate rises, so the quantity of goods and services demand rises. 
B)  the interest rate rises, so the quantity of goods and services demand falls. 
C)  the interest rate falls, so the quantity of goods and services demand rises. 
D)  the interest rate falls, so the quantity of goods and services demand falls. 
A)  the interest rate rises, so the quantity of goods and services demand rises. 
B)  the interest rate rises, so the quantity of goods and services demand falls. 
C)  the interest rate falls, so the quantity of goods and services demand rises. 
D)  the interest rate falls, so the quantity of goods and services demand falls.

Question 11

Which of the following is correct?

Accepted Answer

A)  The short-run, but not the long-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
B)  The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
C)  The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables. 
D)  Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables. 
A)  The short-run, but not the long-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
B)  The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
C)  The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables. 
D)  Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables.

Question 12

Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

Accepted Answer

The price level decr

Question 13

If wages are sticky, then a greater than expected increase in the price level

Accepted Answer

A)  raises the real costs of production, so the short-run aggregate supply curve shifts left. 
B)  raises the real costs of production, so the aggregate quantity of goods and services declines. 
C)  reduces the real costs of production, so the short-run aggregate supply curve shifts right. 
D)  reduces the real costs of production, so the aggregate quantity of goods and services rises. 
A)  raises the real costs of production, so the short-run aggregate supply curve shifts left. 
B)  raises the real costs of production, so the aggregate quantity of goods and services declines. 
C)  reduces the real costs of production, so the short-run aggregate supply curve shifts right. 
D)  reduces the real costs of production, so the aggregate quantity of goods and services rises.

Question 14

Changes in what four variables will shift the long run aggregate supply curve?

Accepted Answer

Labor, capital, natu

Question 15

Consider the exhibit below for the following questions.
Figure 33-4  
-Refer to Figure 33-4. If the economy is at A and there is a fall in aggregate demand, in the short run the economy

Accepted Answer

A)  stays at A. 
B)  moves to B. 
C)  moves to C. 
D)  moves to D. 
A)  stays at A. 
B)  moves to B. 
C)  moves to C. 
D)  moves to D.

Question 16

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

Accepted Answer

There are occasional short-lived periods

Question 17

If there are floods or droughts or a decrease in the availability of raw materials

Accepted Answer

A)  aggregate supply shifts right. 
B)  output falls in the short run. 
C)  prices fall in the short run. 
D)  None of the above is correct. 
A)  aggregate supply shifts right. 
B)  output falls in the short run. 
C)  prices fall in the short run. 
D)  None of the above is correct.

Question 18

The classical dichotomy refers to the separation of

Accepted Answer

A)  prices and nominal interest rates. 
B)  taxes and government spending. 
C)  decisions made by the public and decisions made by the government. 
D)  real and nominal variables. 
A)  prices and nominal interest rates. 
B)  taxes and government spending. 
C)  decisions made by the public and decisions made by the government. 
D)  real and nominal variables.

Question 19

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

Accepted Answer

A)  aggregate supply to the right. 
B)  aggregate supply to the left. 
C)  aggregate demand to the right. 
D)  aggregate demand to the left. 
A)  aggregate supply to the right. 
B)  aggregate supply to the left. 
C)  aggregate demand to the right. 
D)  aggregate demand to the left.

Question 20

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

Accepted Answer

A)  a decrease in the actual price level 
B)  a decrease in the expected price level 
C)  a decrease in the capital stock 
D)  a decrease in the money supply 
A)  a decrease in the actual price level 
B)  a decrease in the expected price level 
C)  a decrease in the capital stock 
D)  a decrease in the money supply

Exam 33: Aggregate Demand and Aggregate Supply

Aggregate demand includes

In the context of aggregate demand and aggregate supply, the wealth effect refers to the idea that, when the price level decreases, the real wealth of households

When the price level falls

People will buy more if the price level

Refer to Stock Market Boom 2015. In the long run, the change in price expectations created by the stock market boom shifts

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major restrictions on logging removed. In the short run

Figure 33-11. -Refer to Figure 33-11. A movement from P1 and Y2, to P2 and Y1 would be consistent with

Aggregate demand includes

Briefly state the three key facts about economic fluctuations.

When the price level falls

Which of the following is correct?

Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

If wages are sticky, then a greater than expected increase in the price level

Changes in what four variables will shift the long run aggregate supply curve?

Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4. If the economy is at A and there is a fall in aggregate demand, in the short run the economy

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

If there are floods or droughts or a decrease in the availability of raw materials

The classical dichotomy refers to the separation of

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

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

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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