Question 1

Most economists believe that money neutrality

Accepted Answer

A)  does not hold in the short run.
B)  does not hold in the long run.
C)  does not hold in either the short run or long run.
D)  holds in the short run and the long run. A

Question 2

The saying "Money is a veil." means that

Accepted Answer

A)  while nominal variables are the first thing we may observe about an economy,what's important are the real variables and the forces that determine them.
B)  money is the principal medium of exchange in most economies.
C)  the primary determinant of short-run economic fluctuations is not real variables,but rather changes in the money supply.
D)  in the long run money is of no importance to the determination of either real or nominal variables. A

Question 3

According to classical macroeconomic theory,changes in the money supply affect

Accepted Answer

A)  real GDP and the price level.
B)  real GDP but not the price level.
C)  the price level,but not real GDP.
D)  neither the price level nor real GDP. C

Question 4

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production.This is inconsistent with monetary neutrality because

Accepted Answer

A)  monetary neutrality would mean that neither prices nor production should have risen.
B)  monetary neutrality would mean that production should have risen,but prices should not have.
C)  monetary neutrality would mean the prices should have risen,but production should not have changed.
D)  monetary neutrality would mean that prices and production should both have fallen.

Question 5

Economic variables we are most interested in are

Accepted Answer

A)  real variables,but we usually observe nominal variables.
B)  nominal variables,but we usually observe real variables.
C)  real variables,which we usually observe.
D)  nominal variables,which we usually observe.

Question 6

According to the classical model,which of the following would double if the quantity of money doubled?

Accepted Answer

A)  prices but not nominal income
B)  nominal income but not prices
C)  both prices and nominal income
D)  neither prices nor nominal income

Question 7

If money is neutral,then changes in the quantity of money

Accepted Answer

A)  do not affect real output.
B)  affect both nominal and real output
C)  do not affect nominal output.
D)  affect neither nominal nor real output.

Question 8

Real and nominal variables are highly intertwined,and changes in the money supply change real GDP.Most economists would agree that this statement accurately describes

Accepted Answer

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

Question 9

We depart from the assumptions of classical economics when we focus on the relationship between

Accepted Answer

A)  the quantity of output and the price level.
B)  the quantity of output and the unemployment rate.
C)  the price level and the inflation rate.
D)  inflation and the nominal interest rate.

Question 10

The aggregate-demand curve shows the

Accepted Answer

A)  quantity of labor and other inputs that firms want to buy at each price level.
B)  quantity of labor and other inputs that firms want to buy at each inflation rate.
C)  quantity of domestically produced goods and services that households want to buy at each price level.
D)  quantity of domestically produced goods and services that households,firms,the government,and customers abroad want to buy at each price level.

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.

Question 12

The model of aggregate demand and aggregate supply

Accepted Answer

A)  is different from the model of supply and demand for a particular market,in that we cannot focus on the substitution of resources between markets to explain aggregate relationships.
B)  is different from the model of supply and demand for a particular market,in that we have to separate real and nominal variables in the aggregate model.
C)  is a straightforward extension of the model of supply and demand for a particular market,in which substitution of resources between markets is highlighted.
D)  is a straightforward extension of the model of supply and demand for a particular market,in which the interaction between real and nominal variables is highlighted.

Question 13

When looking at a graph of aggregate demand,which of the following is correct?

Accepted Answer

A)  There are nominal variables on both the vertical and the horizontal axes.
B)  There are real variables on both the vertical and horizontal axes.
C)  The variable on the vertical axis is nominal;the variable on the horizontal axis is real
D)  The variable on the vertical axis is real;the variable on the horizontal axis is nominal

Question 14

The quantity of money has no real impact on things people really care about like whether or not they have a job.Most economists would agree that this statement is appropriate concerning

Accepted Answer

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

Question 15

According to the classical model,an increase in the money supply causes

Accepted Answer

A)  output to increase in the long run.
B)  the unemployment rate to fall in the long run.
C)  prices to rise in the long run.
D)  interest rates to fall in the long run.

Question 16

Most economists believe that the classical model is the appropriate model for analysis of the economy in the

Accepted Answer

A)  long run,because evidence indicates that money is not neutral in the long run.
B)  long run,because real and nominal variables are essentially determined separately in the long run.
C)  short run,because money is neutral in the short run.
D)  short run,because real and nominal variables are not highly intertwined in the short run.

Question 17

According to classical macroeconomic theory,changes in the money supply affect

Accepted Answer

A)  nominal variables and real variables.
B)  nominal variables,but not real variables.
C)  real variables,but not nominal variables.
D)  neither nominal nor real variables.

Question 18

Most economists believe that in the long run,changes in the money supply

Accepted Answer

A)  affect nominal but not real variables.This view that money is ultimately neutral is consistent with classical theory.
B)  affect nominal but not real variables.This view that money is ultimately neutral is inconsistent with classical theory.
C)  affect real but not nominal variables.This view that money is ultimately neutral is consistent with classical theory.
D)  affect real but not nominal variables.This view that money is ultimately neutral is inconsistent with classical theory.

Question 19

Most economists believe that classical theory describes the world

Accepted Answer

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

Question 20

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.

Exam 20: Aggregate Demand and Aggregate Supply: Explaining Short-Run Economic Fluctuations

Most economists believe that money neutrality

The saying "Money is a veil." means that

According to classical macroeconomic theory,changes in the money supply affect

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production.This is inconsistent with monetary neutrality because

Economic variables we are most interested in are

According to the classical model,which of the following would double if the quantity of money doubled?

If money is neutral,then changes in the quantity of money

Real and nominal variables are highly intertwined,and changes in the money supply change real GDP.Most economists would agree that this statement accurately describes

We depart from the assumptions of classical economics when we focus on the relationship between

The aggregate-demand curve shows the

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

The model of aggregate demand and aggregate supply

When looking at a graph of aggregate demand,which of the following is correct?

The quantity of money has no real impact on things people really care about like whether or not they have a job.Most economists would agree that this statement is appropriate concerning

According to the classical model,an increase in the money supply causes

Most economists believe that the classical model is the appropriate model for analysis of the economy in the

According to classical macroeconomic theory,changes in the money supply affect

Most economists believe that in the long run,changes in the money supply

Most economists believe that classical theory describes the world

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