Question 1

Although wages, incomes, and interest rates are most often discussed in nominal terms, what matters most are their real values.

Accepted Answer

A) True 
 B)False

Question 2

The discovery of a large amount of previously-undiscovered oil in the U.S. would shift

Accepted Answer

A)  the long-run aggregate-supply curve to the right. 
B)  the long-run aggregate-supply curve to the left. 
C)  the aggregate-demand curve to the left. 
D)  None of the above is correct.

Question 3

Refer to Political Instability Abroad. What would happen to the dollar?

Accepted Answer

A)  It would appreciate in foreign exchange markets making U.S goods more expensive compared to foreign goods. 
B)  It would appreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods. 
C)  It would depreciate in foreign exchange markets making U.S. goods more expensive compared to foreign goods. 
D)  It would depreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods.

Question 4

Refer to Financial Crisis. How is the new long-run equilibrium different from the original one?

Accepted Answer

A)  both price and real GDP are higher. 
B)  both price and real GDP are lower. 
C)  the price level is the same and GDP is lower. 
D)  the price level is lower and real GDP is the same.

Question 5

Which of the following would cause prices and real GDP to rise in the short run?

Accepted Answer

A)  an increase in the expected price level 
B)  an increase in the money supply 
C)  a decrease in the capital stock 
D)  an increase in taxes.

Question 6

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Accepted Answer

A)  the price level is higher than expected making production more profitable. 
B)  the price level is higher than expected making production less profitable. 
C)  the price level is lower than expected making production more profitable. 
D)  the price level is higher than expected making production less profitable.

Question 7

Consider the exhibit below for the following questions.
Figure 33-4 
-Refer to Figure 33-4. A decrease in taxes would move the economy from C to

Accepted Answer

A)  B in the short run and the long run. 
B)  D in the short run and the long run. 
C)  B in the short run and A in the long run. 
D)  D in the short run and C in the long run.

Question 8

Who wrote the 1936 book titled The General Theory of Employment, Interest, and Money?

Accepted Answer

The answer of Who wrote the 1936 book titled The...

Question 9

Which of the following did not happen during the onset of the Great Depression?

Accepted Answer

A)  The money supply fell as households took money out of bank deposits. 
B)  The Fed conducted expansionary monetary policy. 
C)  Stock prices fell about 90 percent. 
D)  Disruption of the banking system made it difficult for some firms to obtain funds for investment.

Question 10

We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

Accepted Answer

A) True 
 B)False

Question 11

If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds

Accepted Answer

A)  the dollar would appreciate which would cause aggregate demand to shift right. 
B)  the dollar would appreciate which would cause aggregate demand to shift left. 
C)  the dollar would depreciate which would cause aggregate demand to shift right. 
D)  the dollar would depreciate which would cause aggregate demand to shift left.

Question 12

Suppose a country offers a new investment tax credit. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift?

Accepted Answer

The answer of Suppose a country offers a new investment...

Question 13

The average price level is measured by

Accepted Answer

A)  the price of oil. 
B)  the rate of inflation. 
C)  the nominal interest rate. 
D)  the GDP deflator.

Question 14

Figure 33-8. 
-Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P1 and Y1 , then it must be the case that

Accepted Answer

A)  short run aggregate supply has decreased. 
B)  short run aggregate supply has increased. 
C)  aggregate demand has increased. 
D)  aggregate demand has decreased.

Question 15

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 16

Other things the same, as the price level decreases it induces greater spending on

Accepted Answer

A)  both net exports and investment. 
B)  net exports but not investment. 
C)  investment but not net exports. 
D)  neither net exports nor investment.

Question 17

Keynes explained that recessions and depressions occur because of

Accepted Answer

A)  excess aggregate demand. 
B)  inadequate aggregate demand. 
C)  excess aggregate supply. 
D)  inadequate aggregate supply.

Question 18

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

Accepted Answer

The answer of What variables besides real GDP tend to...

Question 19

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 20

Figure 33-12. 
-Refer to Figure 33-12. Identify periods 1 and 2.

Accepted Answer

The answer of Figure 33-12. 
-Refer to Figure 33-12. Identify...

Exam 33: Aggregate Demand and Aggregate Supply

Although wages, incomes, and interest rates are most often discussed in nominal terms, what matters most are their real values.

The discovery of a large amount of previously-undiscovered oil in the U.S. would shift

Refer to Political Instability Abroad. What would happen to the dollar?

Refer to Financial Crisis. How is the new long-run equilibrium different from the original one?

Which of the following would cause prices and real GDP to rise in the short run?

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4. A decrease in taxes would move the economy from C to

Who wrote the 1936 book titled The General Theory of Employment, Interest, and Money?

Which of the following did not happen during the onset of the Great Depression?

We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds

Suppose a country offers a new investment tax credit. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift?

The average price level is measured by

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P1 and Y1 , then it must be the case that

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

Other things the same, as the price level decreases it induces greater spending on

Keynes explained that recessions and depressions occur because of

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

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.

Figure 33-12. -Refer to Figure 33-12. Identify periods 1 and 2.