Question 1

In order to understand how the economy works in the short run,we need to

Accepted Answer

A)   study the classical model.
B)   study a model in which real and nominal variables interact.
C)   understand that "money is a veil."
D)   understand that money is neutral in the short run.E) B) and C)
F) A) and C)

Question 2

Which of the sentences concerning the aggregate demand and aggregate supply model is correct?

Accepted Answer

A)   The aggregate demand and aggregate supply model is nothing more than a large version of the model of market demand and supply.
B)   The price level and quantity of output adjust to bring aggregate demand and supply into balance.
C)   The aggregate supply curve shows the quantity of goods and services that households,firms,and the government want to buy at each price.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 3

Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time.
-Refer to Optimism.What happens to the expected price level and what's the result for wage bargaining?

Accepted Answer

A)   The expected price level falls.Bargains are struck for higher wages.
B)   The expected price level falls.Bargains are struck for lower wages.
C)   The expected price level rises.Bargains are struck for higher wages.
D)   The expected price level rises.Bargains are struck for lower wages.E) A) and B)
F) A) and C)

Question 4

Make a list of expenditures whose sum equals GDP.

Accepted Answer

consumption,investme...

Question 5

Which part of real GDP fluctuates most over the course of the business cycle?

Accepted Answer

A)   consumption expenditures
B)   government expenditures
C)   investment expenditures
D)   net exportsE) All of the above
F) B) and C)

Question 6

The long-run aggregate supply curve

Accepted Answer

A)   is vertical.
B)   is a graphical representation of the classical dichotomy.
C)   indicates monetary neutrality in the long run.
D)   All of the above are correct.E) C) and D)
F) None of the above

Question 7

The average price level is measured by

Accepted Answer

A)   any real variable.
B)   the rate of inflation.
C)   the level of the money supply.
D)   the CPI or the GDP deflator.E) C) and D)
F) B) and C)

Question 8

Suppose a stock market crash makes people feel poorer.This decrease in wealth would induce people to desire

Accepted Answer

A)   decreased consumption,which shifts aggregate supply left.
B)   decreased consumption,which shifts aggregate demand left.
C)   increased consumption,which shifts aggregate supply right.
D)   increased consumption,which shifts aggregate demand right.E) None of the above
F) A) and C)

Question 9

When the money supply increases

Accepted Answer

A)   interest rates fall and so aggregate demand shifts right.
B)   interest rates fall and so aggregate demand shifts left.
C)   interest rates rise and so aggregate demand shifts right.
D)   interest rates rise and so aggregate demand shifts left.E) A) and C)
F) None of the above

Question 10

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)   The price level rises.
B)   The price level falls.
C)   The dollar depreciates for some reason other than a change in the price level.
D)   Stock prices fall for some reason other than a change in the price level.E) A) and B)
F) B) and D)

Question 11

Figure 33-2. 
-Refer to Stock Market Boom 2014.In the long run,the change in price expectations created by the stock market boom shifts

Accepted Answer

A)   long-run aggregate supply right.
B)   long-run aggregate supply left.
C)   short-run aggregate supply right.
D)   short-run aggregate supply left.E) All of the above
F) A) and D)

Question 12

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.E) All of the above
F) None of the above

Question 13

Which of the following,other things the same,would make the price level decrease and real GDP increase?

Accepted Answer

A)   long-run aggregate supply shifts right
B)   long-run aggregate supply shifts left
C)   aggregate demand shifts right
D)   aggregate demand shifts leftE) B) and D)
F) B) and C)

Question 14

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.To explain this

Accepted Answer

A)   it is only necessary that long-run aggregate supply shifts right over time.
B)   it is only necessary that aggregate demand shifts right over time.
C)   both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther.
D)   None of the above cases would produce rising prices and growing real GDP over time.E) A) and B)
F) A) and C)

Question 15

If the price level is higher than expected,firms might raise their production in the short run if

Accepted Answer

A)   the nominal wage they pay their employees was set based on the expected price level.
B)   prices are costly to adjust and they have set their price at some time in the past but are not ready to change it.
C)   they believe that the price of their product has risen relative to the price of other products,when in fact the rise in the price of their product reflects an increase in the general price level.
D)   All of the above are correct.E) A) and B)
F) B) and C)

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

Question 17

If the economy is initially at long-run equilibrium and aggregate demand declines,then in the long run the price level

Accepted Answer

A)   and output are higher than in the original long-run equilibrium.
B)   and output are lower than in the original long-run equilibrium.
C)   is lower and output is the same as the original long-run equilibrium.
D)   is the same and output is lower than in the original long-run equilibrium.E) C) and D)
F) A) and C)

Question 18

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) None of the above
F) A) and B)

Question 19

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

Question 20

When taxes decrease,consumption

Accepted Answer

A)   increases,so aggregate demand shifts right.
B)   increases,so aggregate supply shifts right.
C)   decreases,so aggregate demand shifts left.
D)   decreases,so aggregate supply shifts left.E) A) and D)
F) C) and D)

Exam 33: Aggregate Demand and Aggregate Supply

Correct Answer
verified

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

Correct Answer
verified

Which of the following,other things the same,would make the price level decrease and real GDP increase?

Correct Answer
verified

Which part of real GDP fluctuates most over the course of the business cycle?

Correct Answer
verified

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 Answer
verified

When taxes decrease,consumption

Correct Answer
verified

Make a list of expenditures whose sum equals GDP.

Correct Answer
verified
consumption,investme...
View Answer

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

Correct Answer
verified

In order to understand how the economy works in the short run,we need to

Correct Answer
verified

When the money supply increases

Correct Answer
verified

Which of the following shifts aggregate demand to the left?

Correct Answer
verified

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

Correct Answer
verified

If the price level is higher than expected,firms might raise their production in the short run if

Correct Answer
verified

The average price level is measured by

Correct Answer
verified

Which of the sentences concerning the aggregate demand and aggregate supply model is correct?

Correct Answer
verified

If the economy is initially at long-run equilibrium and aggregate demand declines,then in the long run the price level

Correct Answer
verified

The long-run aggregate supply curve

Correct Answer
verified

Figure 33-2. -Refer to Stock Market Boom 2014.In the long run,the change in price expectations created by the stock market boom shifts

Correct Answer
verified

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.To explain this

Correct Answer
verified

Suppose a stock market crash makes people feel poorer.This decrease in wealth would induce people to desire

Correct Answer
verified

Exam 33: Aggregate Demand and Aggregate Supply

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following,other things the same,would make the price level decrease and real GDP increase?

Correct AnswerverifiedShow Answer

Which part of real GDP fluctuates most over the course of the business cycle?

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

When taxes decrease,consumption

Correct AnswerverifiedShow Answer

Make a list of expenditures whose sum equals GDP.

Correct Answerverifiedconsumption,investme...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

In order to understand how the economy works in the short run,we need to

Correct AnswerverifiedShow Answer

When the money supply increases

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price level is higher than expected,firms might raise their production in the short run if

Correct AnswerverifiedShow Answer

The average price level is measured by

Correct AnswerverifiedShow Answer

Which of the sentences concerning the aggregate demand and aggregate supply model is correct?

Correct AnswerverifiedShow Answer

If the economy is initially at long-run equilibrium and aggregate demand declines,then in the long run the price level

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve

Correct AnswerverifiedShow Answer

Figure 33-2. -Refer to Stock Market Boom 2014.In the long run,the change in price expectations created by the stock market boom shifts

Correct AnswerverifiedShow Answer

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.To explain this

Correct AnswerverifiedShow Answer

Suppose a stock market crash makes people feel poorer.This decrease in wealth would induce people to desire

Correct AnswerverifiedShow Answer

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consumption,investme...
View Answer

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