Question 1

The investment component of GDP measures spending on

Accepted Answer

A)  financial assets such as stocks and bonds. During recessions it declines by a relatively large amount 
B)  residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively large amount 
C)  financial assets such as stocks and bonds. During recessions it declines by a relatively small amount. 
D)  residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively large amount.

Question 2

Suppose that the economy is at long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then 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.

Question 3

As the price level rises, the interest rate

Accepted Answer

A)  falls, so the supply of dollars in the market for foreign currency exchange shifts left. 
B)  falls, so the supply of dollars in the market for foreign currency exchange shifts right. 
C)  rises, so the supply of dollars in the market for foreign currency exchange shifts left. 
D)  rises, so the supply of dollars in the market for foreign currency exchange shifts right.

Question 4

Other things the same, as the price level rises, exchange rates

Accepted Answer

A)  and interest rates rise. 
B)  and interest rates fall. 
C)  fall and interest rates rise. 
D)  rise and interest rates fall.

Question 5

When taxes increase, consumption

Accepted Answer

A)  decreases as shown by a movement to the left along a given aggregate-demand curve. 
B)  decreases as shown by a shift of the aggregate demand curve to the left. 
C)  increases as shown by a movement to the right along a given aggregate-demand curve. 
D)  increases as shown by a shift of the aggregate demand curve to the right.

Question 6

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

Accepted Answer

The answer of What do most economists believe concerning the...

Question 7

Figure 15-1
 
-Refer to Figure 15-1. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from

Accepted Answer

A)  A to B. 
B)  C to D. 
C)  B to A. 
D)  D to C.

Question 8

Other things the same, the aggregate quantity of goods demanded decreases if

Accepted Answer

A)  real wealth falls. 
B)  the interest rate rises. 
C)  the dollar appreciates. 
D)  All of the above are correct.

Question 9

If aggregate demand shifts right then in the short run

Accepted Answer

A)  firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the right. 
B)  firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the left. 
C)  firms will decrease production. In the long run increased price expectations shift the short-run aggregate supply curve to the right. 
D)  firms will decrease production. In the long run increased price expectations shift the short-run aggregate supply curve to the left.

Question 10

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 11

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

Accepted Answer

A) True 
 B)False

Question 12

A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run: 1. reduce immigration from abroad 2. make trade more open between the US and other countries:

Accepted Answer

A)  1 and 2 both shift long-run aggregate supply right. 
B)  1 and 2 both shift long-run aggregate supply left. 
C)  1 shifts long-run aggregate supply right, 2 shifts long-run aggregate supply left. 
D)  1 shifts long-run aggregate supply left, 2 shifts long-run aggregate supply right.

Question 13

In 1986, OPEC countries increased their production of oil. This caused

Accepted Answer

A)  the price level to rise. 
B)  aggregate supply to shift right. 
C)  unemployment to rise. 
D)  None of the above is correct.

Question 14

A decrease in the expected price level shifts short-run aggregate supply to the

Accepted Answer

A)  right, and an increase in the actual price level shifts short-run aggregate supply to the right. 
B)  right, and an increase in the actual price level does not shift short-run aggregate supply. 
C)  left, and an increase in the actual price level shifts short-run aggregate supply to the left. 
D)  left, and an increase in the actual price level does not shift short-run aggregate supply.

Question 15

The effect of an increase in the price level on the aggregate-demand curve is represented by a

Accepted Answer

A)  shift to the right of the aggregate-demand curve. 
B)  shift to the left of the aggregate-demand curve. 
C)  movement to the left along a given aggregate-demand curve. 
D)  movement to the right along a given aggregate-demand curve.

Question 16

Aggregate demand shifts right if at a given price level

Accepted Answer

A)  net exports rise and shifts left if the money supply increases. 
B)  net exports rise and shifts right if the money supply increases. 
C)  net exports fall and shifts left if the money supply increases. 
D)  net exports fall and shifts right if the money supply increases.

Question 17

An increase in the money supply causes output to rise in the long run.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

A relatively mild period of falling incomes and rising unemployment is called a(n)

Accepted Answer

A)  depression. 
B)  recession. 
C)  expansion. 
D)  business cycle.

Question 20

The effect of a change in the value of the dollar in the foreign exchange market due to a change in the price level helps explain the slope of aggregate demand, but does not shift it. The effects of a change in the value of the dollar in the foreign exchange market due to speculation is shown by shifting the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Exam 15: Aggregate Demand and Aggregate Supply

The investment component of GDP measures spending on

Suppose that the economy is at long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run

As the price level rises, the interest rate

Other things the same, as the price level rises, exchange rates

When taxes increase, consumption

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

Figure 15-1 -Refer to Figure 15-1. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from

Other things the same, the aggregate quantity of goods demanded decreases if

If aggregate demand shifts right then in the short run

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

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run: 1. reduce immigration from abroad 2. make trade more open between the US and other countries:

In 1986, OPEC countries increased their production of oil. This caused

A decrease in the expected price level shifts short-run aggregate supply to the

The effect of an increase in the price level on the aggregate-demand curve is represented by a

Aggregate demand shifts right if at a given price level

An increase in the money supply causes output to rise in the long run.

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

A relatively mild period of falling incomes and rising unemployment is called a(n)