Question 1

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Accepted Answer

A)   relative to prices wages are higher and employment rise.
B)   relative to prices wages are higher and employment falls.
C)   relative to prices wages are lower and employment rises.
D)   relative to prices wages are lower and employment falls.E) C) and D)
F) None of the above

Question 2

An economic expansion caused by a shift in aggregate demand remedies itself over time as the expected price level

Accepted Answer

A)   falls, shifting aggregate demand right.
B)   rises, shifting aggregate demand left.
C)   falls, shifting aggregate supply right.
D)   rises, shifting aggregate supply left.E) All of the above
F) C) and D)

Question 3

During periods of stagflation, what happens to output and prices in the economy?

Accepted Answer

Output fal...

Question 4

Aggregate demand includes

Accepted Answer

A)   only the quantity of goods and services households want to buy.
B)   only the quantity of goods and services households and firms want to buy.
C)   only the quantity of goods and services households, firms, and the government want to buy.
D)   the quantity of goods and services households, firms, the government, and customer abroad want to buy.E) C) and D)
F) B) and C)

Question 5

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   both an investment tax credit and a decrease in income tax rates
B)   an investment tax credit but not a decrease in income tax rates
C)   a decrease in income tax rates but not an investment tax credit
D)   neither an investment tax credit nor a decrease in income tax ratesE) B) and D)
F) All of the above

Question 6

A decrease in what variable will raise the quantity of goods and services supplied, and shift only the short run aggregate supply curve to the right?

Accepted Answer

The expect...

Question 7

Other things the same, an unexpected fall in the price level results in some firms having

Accepted Answer

A)   lower than desired prices, which increases their sales.
B)   lower than desired prices, which depresses their sales.
C)   higher than desired prices, which increases their sales.
D)   higher than desired prices, which depresses their sales.E) B) and C)
F) A) and D)

Question 8

If aggregate demand shifts right, then eventually price level expectations rise. The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.

Accepted Answer

A) True 
 B)False

Question 9

In the early 1930s in the United States, there was a

Accepted Answer

A)   large increase in output. In the early 1940s there was also a large increase in output.
B)   large increase in output. In the early 1940s there was a large decrease in output.
C)   large decrease in output. In the early 1940s there was a large increase in output.
D)   large decrease in output. In the early 1940s there was also a large decrease in output.E) A) and B)
F) A) and C)

Question 10

From 2006 to 2008 there was a dramatic fall in the price of houses. If this fall made people feel less wealthy, then it would have shifted

Accepted Answer

A)   aggregate demand right.
B)   aggregate demand left.
C)   aggregate supply right.
D)   aggregate supply left.E) None of the above
F) A) and C)

Question 11

In the short-run an increase in the costs of production makes

Accepted Answer

A)   output and prices rise.
B)   output rise and prices fall.
C)   output fall and prices rise.
D)   output and prices fall.E) A) and D)
F) B) and D)

Question 12

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.E) B) and D)
F) None of the above

Question 13

When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is

Accepted Answer

A)   less than it desires and increase its production.
B)   less than it desires and decrease its production
C)   more than it desires and increase its production.
D)   less than it desires and decrease its production.E) All of the above
F) None of the above

Question 14

Other things the same, the aggregate quantity of output supplied will increase if the price level

Accepted Answer

A)   is lower than expected so that firms believe the relative price of their output has increased.
B)   is lower than expected so that firms believe the relative price of their output has decreased.
C)   is higher than expected so that firms believe the relative price of their output has increased.
D)   is higher than expected so that firms believe the relative price of their output has decreased.E) C) and D)
F) B) and C)

Question 15

During the 2008-2009 recession real GDP fell by about

Accepted Answer

A)   2%
B)   4%
C)   6%
D)   8%E) B) and C)
F) A) and D)

Question 16

The long-run aggregate supply curve shifts right if

Accepted Answer

A)   technology improves.
B)   the price level decreases.
C)   the money supply increases.
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 17

Other things the same, what happens in the short run to the price level and quantity of output when the aggregate demand curve shifts to the left?

Accepted Answer

The price ...

Question 18

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.E) C) and D)
F) A) and B)

Question 19

Keynes thought that the behavior of the economy in the short run was influenced by what he called "animal spirits." By this he meant that business people sometimes felt good about the economy, and carried out lots of investment, and at other times felt bad about the economy, and so cut back on their investment spending. Explain how such fluctuations in investment would lead to fluctuations in real GDP and prices.

Accepted Answer

Fluctuations in investment cause the agg...

Question 20

Which of the following did the Fed do during the recession of 2008-2009?

Accepted Answer

A)   lowered the federal funds rate and sold securities and loans
B)   lowered the federal funds rate and purchased securities and loans
C)   raised the federal funds rate and sold securities and loans
D)   raised the federal funds rate and purchased securities and loansE) A) and C)
F) B) and D)

Exam 20: Aggregate Demand and Aggregate Supply

In the early 1930s in the United States, there was a

Correct Answer
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Correct Answer
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Fluctuations in investment cause the agg...
View Answer

An economic expansion caused by a shift in aggregate demand remedies itself over time as the expected price level

Correct Answer
verified

Which of the following did the Fed do during the recession of 2008-2009?

Correct Answer
verified

Aggregate demand includes

Correct Answer
verified

During the 2008-2009 recession real GDP fell by about

Correct Answer
verified

In the short-run an increase in the costs of production makes

Correct Answer
verified

The long-run aggregate supply curve shifts right if

Correct Answer
verified

Other things the same, what happens in the short run to the price level and quantity of output when the aggregate demand curve shifts to the left?

Correct Answer
verified
The price ...
View Answer

Other things the same, the aggregate quantity of output supplied will increase if the price level

Correct Answer
verified

If aggregate demand shifts right, then eventually price level expectations rise. The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.

Correct Answer
verified

From 2006 to 2008 there was a dramatic fall in the price of houses. If this fall made people feel less wealthy, then it would have shifted

Correct Answer
verified

Other things the same, an unexpected fall in the price level results in some firms having

Correct Answer
verified

Which of the following will both make people buy more?

Correct Answer
verified

When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is

Correct Answer
verified

During periods of stagflation, what happens to output and prices in the economy?

Correct Answer
verified
Output fal...
View Answer

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

Correct Answer
verified

A decrease in what variable will raise the quantity of goods and services supplied, and shift only the short run aggregate supply curve to the right?

Correct Answer
verified
The expect...
View Answer

Which of the following shifts aggregate demand to the right?

Correct Answer
verified

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Correct Answer
verified

Exam 20: Aggregate Demand and Aggregate Supply

In the early 1930s in the United States, there was a

Correct AnswerverifiedShow Answer

Correct AnswerverifiedFluctuations in investment cause the agg...View AnswerShow Answer

An economic expansion caused by a shift in aggregate demand remedies itself over time as the expected price level

Correct AnswerverifiedShow Answer

Which of the following did the Fed do during the recession of 2008-2009?

Correct AnswerverifiedShow Answer

Aggregate demand includes

Correct AnswerverifiedShow Answer

During the 2008-2009 recession real GDP fell by about

Correct AnswerverifiedShow Answer

In the short-run an increase in the costs of production makes

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts right if

Correct AnswerverifiedShow Answer

Other things the same, what happens in the short run to the price level and quantity of output when the aggregate demand curve shifts to the left?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Other things the same, the aggregate quantity of output supplied will increase if the price level

Correct AnswerverifiedShow Answer

If aggregate demand shifts right, then eventually price level expectations rise. The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.

Correct AnswerverifiedShow Answer

From 2006 to 2008 there was a dramatic fall in the price of houses. If this fall made people feel less wealthy, then it would have shifted

Correct AnswerverifiedShow Answer

Other things the same, an unexpected fall in the price level results in some firms having

Correct AnswerverifiedShow Answer

Which of the following will both make people buy more?

Correct AnswerverifiedShow Answer

When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is

Correct AnswerverifiedShow Answer

During periods of stagflation, what happens to output and prices in the economy?

Correct AnswerverifiedOutput fal...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

A decrease in what variable will raise the quantity of goods and services supplied, and shift only the short run aggregate supply curve to the right?

Correct AnswerverifiedThe expect...View AnswerShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Fluctuations in investment cause the agg...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The price ...
View Answer

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified
Output fal...
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Correct Answer
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Correct Answer
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The expect...
View Answer

Correct Answer
verified

Correct Answer
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