Question 1

Misperceptions theory helps explain what feature of the aggregate demand and aggregate supply model?

Accepted Answer

why the short run ag...

Question 2

Other things the same, as the price level rises, the real value of money

Accepted Answer

A)   and the exchange rate rise.
B)   and the exchange rate fall.
C)   rises and the exchange rate falls.
D)   falls and the exchange rate rises.E) C) and D)
F) A) and B)

Question 3

Which of the following would not be included in aggregate demand?

Accepted Answer

A)   an increase in firms' inventories.
B)   purchases of goods by households.
C)   firms' purchases of newly produced machinery.
D)   government's tax collections.E) A) and B)
F) A) and C)

Question 4

The aggregate demand and aggregate supply model helps us to understand both short-run economic fluctuations and how the economy moves from the short to the long run.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following shifts aggregate demand right?

Accepted Answer

A)   both a decrease in the price level and the implementation of an investment tax credit
B)   a decrease in the price level but not the implementation of an investment tax credit
C)   the implementation of an investment tax credit but not a decrease in the price level
D)   neither a decrease in the price level nor the implementation of an investment tax creditE) C) and D)
F) B) and C)

Question 6

The classical dichotomy and monetary neutrality are represented graphically by

Accepted Answer

A)   an upward-sloping long-run aggregate-supply curve.
B)   a vertical long-run aggregate-supply curve.
C)   an upward-sloping short-run aggregate-curve.
D)   a downward-sloping aggregate-demand curve.E) All of the above
F) A) and C)

Question 7

All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the expected price level.

Accepted Answer

A) True 
 B)False

Question 8

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.E) None of the above
F) A) and C)

Question 9

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

Accepted Answer

A)   increased consumption, which shifts the aggregate-demand curve right.
B)   increased consumption, which shifts the aggregate-demand curve left.
C)   decreased consumption, which shifts the aggregate-demand curve right.
D)   decreased consumption, which shifts the aggregate-demand curve left.E) A) and B)
F) C) and D)

Question 10

In which case can we be sure aggregate demand shifts left overall?

Accepted Answer

A)   people want to save more for retirement and the Fed increases the money supply.
B)   people want to save more for retirement and the Fed decreases the money supply.
C)   people want to save less for retirement and the Fed increases the money supply.
D)   people want to save less for retirement and the Fed decreases the money supply.E) B) and C)
F) None of the above

Question 11

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Accepted Answer

A)   because unemployment is low, wages will be bid up and short-run aggregate supply will shift right.
B)   because unemployment is low, wages will be bid down and short-run aggregate supply will shift right.
C)   because unemployment is high, wages will be bid up and short-run aggregate supply will shift right.
D)   because unemployment is high, wages will be bid down and short-run aggregate supply will shift right.E) None of the above
F) A) and B)

Question 12

As recessions begin, income

Accepted Answer

A)   and unemployment both rise.
B)   rises and unemployment falls.
C)   falls and unemployment rises.
D)   and unemployment both fall.E) A) and D)
F) None of the above

Question 13

Changes in what four variables will shift the long run aggregate supply curve?

Accepted Answer

Labor, capital, natu...

Question 14

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 exportsE) B) and C)
F) All of the above

Question 15

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Accepted Answer

A)   nominal wages are slow to adjust to changing economic conditions
B)   as the price level falls, the exchange rate falls
C)   an increase in the money supply lowers the interest rate
D)   an increase in the interest rate increases investment spendingE) A) and D)
F) None of the above

Question 16

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift

Accepted Answer

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

Question 17

The short-run effects of an increase in the expected price level include

Accepted Answer

A)   a lower level of output and a lower price level.
B)   a lower level of output and a higher price level.
C)   a higher level of output and a lower price level.
D)   a higher level of output and a higher price level.E) B) and C)
F) A) and B)

Question 18

Other things the same, if the price level falls, people

Accepted Answer

A)   increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases.
B)   increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.
C)   decrease foreign bond purchases, so the supply of dollars in market for foreign-currency exchange increases.
D)   decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.E) None of the above
F) A) and B)

Question 19

The recessions associated with the business cycle come at regular intervals.

Accepted Answer

A) True 
 B)False

Question 20

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage. They may infer that the reward to working is

Accepted Answer

A)   temporarily low and so supply a smaller quantity of labor.
B)   temporarily low and so supply a larger quantity of labor.
C)   temporarily high and so supply a smaller quantity of labor.
D)   temporarily high and so supply a larger quantity of labor.E) A) and D)
F) All of the above

Exam 20: Aggregate Demand and Aggregate Supply

Other things the same, as the price level rises, the real value of money

Correct AnswerverifiedShow Answer

The recessions associated with the business cycle come at regular intervals.

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand right?

Correct AnswerverifiedShow Answer

As recessions begin, income

Correct AnswerverifiedShow Answer

Misperceptions theory helps explain what feature of the aggregate demand and aggregate supply model?

Correct Answerverifiedwhy the short run ag...View AnswerShow Answer

The classical dichotomy and monetary neutrality are represented graphically by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the expected price level.

Correct AnswerverifiedShow Answer

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage. They may infer that the reward to working is

Correct AnswerverifiedShow Answer

Changes in what four variables will shift the long run aggregate supply curve?

Correct AnswerverifiedLabor, capital, natu...View AnswerShow Answer

In which case can we be sure aggregate demand shifts left overall?

Correct AnswerverifiedShow Answer

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

Correct AnswerverifiedShow Answer

The short-run effects of an increase in the expected price level include

Correct AnswerverifiedShow Answer

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift

Correct AnswerverifiedShow Answer

The aggregate demand and aggregate supply model helps us to understand both short-run economic fluctuations and how the economy moves from the short to the long run.

Correct AnswerverifiedShow Answer

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Correct AnswerverifiedShow Answer

Other things the same, if the price level falls, people

Correct AnswerverifiedShow Answer

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following would not be included in aggregate demand?

Correct AnswerverifiedShow Answer

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why the short run ag...
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Labor, capital, natu...
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