Question 1

Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time.
-Refer to Pessimism.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.

Question 2

Which of the following adjust to bring aggregate supply and demand into balance?

Accepted Answer

A)  the price level and real output 
B)  the real rate of interest and the money supply 
C)  government expenditures and taxes 
D)  the saving rate and net exports

Question 3

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  a decrease in the money supply 
B)  increases in the profitability of capital due perhaps to technological progress. 
C)  the repeal of an investment tax credit 
D)  a decrease in the price level

Question 4

Which of the following is not included in aggregate demand?

Accepted Answer

A)  purchases of stock and bonds 
B)  purchases of services such as visits to the doctor 
C)  purchases of capital goods such as equipment in a factory 
D)  purchases by foreigners of consumer goods produced in the United States

Question 5

The long-run aggregate supply curve shifts right if

Accepted Answer

A)  the price level rises. 
B)  the price level falls. 
C)  the capital stock increases. 
D)  the capital stock decreases.

Question 6

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

Accepted Answer

A)  an increase in the price level 
B)  an increase in the minimum wage 
C)  a decrease in the price of oil 
D)  more people migrate abroad than immigrate from abroad

Question 7

In the mid-1970s the price of oil rose dramatically.This

Accepted Answer

A)  shifted aggregate supply left. 
B)  caused U.S.prices to fall. 
C)  was the consequence of OPEC increasing oil production. 
D)  All of the above are correct.

Question 8

Other things the same,when the government spends more,the initial effect is that

Accepted Answer

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

Question 9

Which of the following typically rises during a recession?

Accepted Answer

A)  garbage collection 
B)  unemployment 
C)  corporate profits 
D)  automobile sales

Question 10

Other things the same,when the price level rises,interest rates

Accepted Answer

A)  rise,so firms increase investment. 
B)  rise,so firms decrease investment. 
C)  fall,so firms increase investment. 
D)  fall,so firms decrease investment.

Question 11

Technological progress shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  an increase in price expectations 
B)  an increase in the actual price level 
C)  a decrease in the money supply 
D)  a decrease in the price of oil

Question 13

Tax cuts shift aggregate demand

Accepted Answer

A)  right as do increases in government spending. 
B)  right while increases in government spending shift aggregate demand left. 
C)  left as do increases in government spending. 
D)  left while increases in government spending shift aggregate demand right.

Question 14

In the long run,technological progress

Accepted Answer

A)  and increases in the money supply both make the price level rise. 
B)  and increases in the money supply both make the price level fall. 
C)  makes the price level rise,while increases in the money supply make prices fall. 
D)  makes the price level fall,while increases in the money supply make prices rise.

Question 15

An increase in the money supply

Accepted Answer

A)  and an investment tax credit both cause aggregate demand to shift right. 
B)  and an investment tax credit both cause aggregate demand to shift left. 
C)  causes aggregate demand to shift right,while an investment tax credit causes aggregate demand to shift left. 
D)  causes aggregate demand to shift left,while an investment tax credit causes aggregate demand to shift right.

Question 16

Which of the following would increase the price level?

Accepted Answer

A)  an increase in the money supply. 
B)  an increase in taxes. 
C)  a decrease in the expected price level. 
D)  a decrease in the natural rate of unemployment.

Question 17

The exchange-rate effect is the idea that a higher U.S.price level causes the value of the dollar to increase in foreign exchange markets,and this effect contributes to the downward slope of the aggregate-demand curve.

Accepted Answer

A) True 
 B)False

Question 18

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.

Question 19

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.

Question 20

In the last half of 1999,the U.S.unemployment rate was about 4 percent.Historical experience suggests that this is

Accepted Answer

A)  above the natural rate,so real GDP growth was likely low. 
B)  above the natural rate,so real GDP growth was likely high. 
C)  below the natural rate,so real GDP growth was likely low. 
D)  below the natural rate,so real GDP growth was likely high.

Exam 33: Aggregate Demand and Aggregate Supply

Which of the following adjust to bring aggregate supply and demand into balance?

Which of the following shifts aggregate demand to the right?

Which of the following is not included in aggregate demand?

The long-run aggregate supply curve shifts right if

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

In the mid-1970s the price of oil rose dramatically.This

Other things the same,when the government spends more,the initial effect is that

Which of the following typically rises during a recession?

Other things the same,when the price level rises,interest rates

Technological progress shifts the long-run aggregate supply curve to the right.

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

Tax cuts shift aggregate demand

In the long run,technological progress

An increase in the money supply

Which of the following would increase the price level?

The exchange-rate effect is the idea that a higher U.S.price level causes the value of the dollar to increase in foreign exchange markets,and this effect contributes to the downward slope of the aggregate-demand curve.

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

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

In the last half of 1999,the U.S.unemployment rate was about 4 percent.Historical experience suggests that this is