Question 1

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

Accepted Answer

Expected price level changes w

Question 2

If aggregate demand shifts left, then in the short run

Accepted Answer

A)  the price level and real GDP both rise. 
B)  the price level rises and real GDP falls. 
C)  the price level falls and real GDP rises. 
D)  the price and real GDP both fall. 
A)  the price level and real GDP both rise. 
B)  the price level rises and real GDP falls. 
C)  the price level falls and real GDP rises. 
D)  the price and real GDP both fall.

Question 3

The aggregate demand and aggregate supply graph has the

Accepted Answer

A)  quantity of output on the horizontal axis. Output is best measured by real GDP. 
B)  quantity of output on the horizontal axis. Output is best measured by nominal GDP. 
C)  quantity of output on the vertical axis. Output is best measured by real GDP. 
D)  quantity of output on the vertical axis. Output is best measured by nominal GDP. 
A)  quantity of output on the horizontal axis. Output is best measured by real GDP. 
B)  quantity of output on the horizontal axis. Output is best measured by nominal GDP. 
C)  quantity of output on the vertical axis. Output is best measured by real GDP. 
D)  quantity of output on the vertical axis. Output is best measured by nominal GDP.

Question 4

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

Accepted Answer

A)  an increase in the money supply 
B)  an increase in the price level 
C)  a decrease in the expected price level 
D)  All of the above are correct. 
A)  an increase in the money supply 
B)  an increase in the price level 
C)  a decrease in the expected price level 
D)  All of the above are correct.

Question 5

Other things the same, if the price level is lower than expected, then some firms believe that the relative price of what they produce has

Accepted Answer

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

Question 6

Sticky nominal wages can result in

Accepted Answer

A)  lower profits for firms when the price level is lower than expected. 
B)  a decrease in real wages when the price level is lower than expected. 
C)  a short-run aggregate-supply curve that is vertical. 
D)  a long-run aggregate-supply curve that is upward-sloping. 
A)  lower profits for firms when the price level is lower than expected. 
B)  a decrease in real wages when the price level is lower than expected. 
C)  a short-run aggregate-supply curve that is vertical. 
D)  a long-run aggregate-supply curve that is upward-sloping.

Question 7

Figure 33-5.  
-Refer to Figure 33-5. The appearance of the long-run aggregate-supply (LRAS) curve

Accepted Answer

A)  is consistent with the concept of monetary neutrality. 
B)  is consistent with the idea that point A represents a long-run equilibrium and a short-run equilibrium when the relevant short-run aggregate-supply curve is SRAS1. 
C)  indicates that Y1 is the natural rate of output. 
D)  All of the above are correct. 
A)  is consistent with the concept of monetary neutrality. 
B)  is consistent with the idea that point A represents a long-run equilibrium and a short-run equilibrium when the relevant short-run aggregate-supply curve is SRAS1. 
C)  indicates that Y1 is the natural rate of output. 
D)  All of the above are correct.

Question 8

Most economists believe that classical theory describes the world in the short run but not in the long run.

Accepted Answer

A) True 
 B)False

Question 9

The exchange-rate effect helps explain what feature in the aggregate demand and aggregate supply model?

Accepted Answer

why the ag

Question 10

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Accepted Answer

A) True 
 B)False

Question 11

Most economists believe that classical macroeconomic theory is a good description of the economy

Accepted Answer

A)  in neither the short nor long run. 
B)  in the short run and in the long run. 
C)  in the short run, but not in the long run. 
D)  in the long run, but not in the short run. 
A)  in neither the short nor long run. 
B)  in the short run and in the long run. 
C)  in the short run, but not in the long run. 
D)  in the long run, but not in the short run.

Question 12

Figure 33-6.  
-Refer to Figure 33-6. Which of the long-run aggregate-supply curves is consistent with a recession?

Accepted Answer

A)  LRAS1 
B)  LRAS2 
C)  LRAS3 
D)  Both LRAS1 and LRAS3 
A)  LRAS1 
B)  LRAS2 
C)  LRAS3 
D)  Both LRAS1 and LRAS3

Question 13

When the money supply increases

Accepted Answer

A)  interest rates fall and so aggregate demand shifts right. 
B)  interest rates fall and so aggregate demand shifts left. 
C)  interest rates rise and so aggregate demand shifts right. 
D)  interest rates rise and so aggregate demand shifts left. 
A)  interest rates fall and so aggregate demand shifts right. 
B)  interest rates fall and so aggregate demand shifts left. 
C)  interest rates rise and so aggregate demand shifts right. 
D)  interest rates rise and so aggregate demand shifts left.

Question 14

Consider the exhibit below for the following questions.
Figure 33-4  
-Refer to Figure 33-4. The economy would be moving to long-run equilibrium if it started at

Accepted Answer

A)  A and moved to B. 
B)  C and moved to B. 
C)  D and moved to C. 
D)  None of the above is correct. 
A)  A and moved to B. 
B)  C and moved to B. 
C)  D and moved to C. 
D)  None of the above is correct.

Question 15

Which of the following will both make people buy more?

Accepted Answer

A)  wealth and interest rates rise. 
B)  wealth rises and interest rates fall. 
C)  wealth falls and interest rates rise. 
D)  wealth falls and interest rates fall. 
A)  wealth and interest rates rise. 
B)  wealth rises and interest rates fall. 
C)  wealth falls and interest rates rise. 
D)  wealth falls and interest rates fall.

Question 16

During recessions investment

Accepted Answer

A)  falls by a larger percentage than GDP. 
B)  falls by about the same percentage as GDP. 
C)  falls by a smaller percentage than GDP. 
D)  falls but the percentage change is sometimes much larger and sometimes much smaller. 
A)  falls by a larger percentage than GDP. 
B)  falls by about the same percentage as GDP. 
C)  falls by a smaller percentage than GDP. 
D)  falls but the percentage change is sometimes much larger and sometimes much smaller.

Question 17

As the price level rises

Accepted Answer

A)  people will want to buy more bonds, so the interest rate rises. 
B)  people will want to buy fewer bonds, so the interest rate falls. 
C)  people will want to buy more bonds, so the interest rate falls. 
D)  people will want to buy fewer bonds, so the interest rate rises. 
A)  people will want to buy more bonds, so the interest rate rises. 
B)  people will want to buy fewer bonds, so the interest rate falls. 
C)  people will want to buy more bonds, so the interest rate falls. 
D)  people will want to buy fewer bonds, so the interest rate rises.

Question 18

Historically, as recessions have ended the unemployment rate declined

Accepted Answer

A)  gradually to near zero. 
B)  rapidly to near zero. 
C)  gradually to a rate of about 5%-6%. 
D)  rapidly to a rate of about 5%-6%. 
A)  gradually to near zero. 
B)  rapidly to near zero. 
C)  gradually to a rate of about 5%-6%. 
D)  rapidly to a rate of about 5%-6%.

Question 19

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Accepted Answer

A)  as people revise their price-level expectations upward, firms and workers strike bargains for higher nominal wages. 
B)  as people revise their price-level expectations upward, firms and workers strike bargains for lower nominal wages. 
C)  as people revise their price-level expectations downward, firms and workers strike bargains for higher nominal wages. 
D)  as people revise their price-level expectations downward, firms and workers strike bargains for lower nominal wages. 
A)  as people revise their price-level expectations upward, firms and workers strike bargains for higher nominal wages. 
B)  as people revise their price-level expectations upward, firms and workers strike bargains for lower nominal wages. 
C)  as people revise their price-level expectations downward, firms and workers strike bargains for higher nominal wages. 
D)  as people revise their price-level expectations downward, firms and workers strike bargains for lower nominal wages.

Question 20

Refer to Optimism. What happens to the expected price level and what's the result for 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.

Exam 33: Aggregate Demand and Aggregate Supply

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

If aggregate demand shifts left, then in the short run

The aggregate demand and aggregate supply graph has the

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

Other things the same, if the price level is lower than expected, then some firms believe that the relative price of what they produce has

Sticky nominal wages can result in

Figure 33-5. -Refer to Figure 33-5. The appearance of the long-run aggregate-supply (LRAS) curve

Most economists believe that classical theory describes the world in the short run but not in the long run.

The exchange-rate effect helps explain what feature in the aggregate demand and aggregate supply model?

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Most economists believe that classical macroeconomic theory is a good description of the economy

Figure 33-6. -Refer to Figure 33-6. Which of the long-run aggregate-supply curves is consistent with a recession?

When the money supply increases

Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4. The economy would be moving to long-run equilibrium if it started at

Which of the following will both make people buy more?

During recessions investment

As the price level rises

Historically, as recessions have ended the unemployment rate declined

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

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

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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