Question 1

The proponents of ________ and ________ think that the Federal Reserve should adopt a constant monetary growth rule.

Accepted Answer

A)  new Keynesianism; the new classical model 
B)  the real business cycle model; Marxism 
C)  rational expectations; monetarism 
D)  the monetarist model; the Keynesian model 
A)  new Keynesianism; the new classical model 
B)  the real business cycle model; Marxism 
C)  rational expectations; monetarism 
D)  the monetarist model; the Keynesian model

Question 2

Which of the following models has as its central idea that workers and firms have rational expectations?

Accepted Answer

A)  the monetarist model 
B)  the new classical model 
C)  the real business cycle model 
D)  the new Keynesian model 
A)  the monetarist model 
B)  the new classical model 
C)  the real business cycle model 
D)  the new Keynesian model

Question 3

Which of the following models advocate that the quantity of money should be increased at a constant rate?

Accepted Answer

A)  the monetarist model 
B)  the new classical model 
C)  the real business cycle model 
D)  the new Keynesian model 
A)  the monetarist model 
B)  the new classical model 
C)  the real business cycle model 
D)  the new Keynesian model

Question 4

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Accepted Answer

A)  The price level will fall, and the level of GDP will rise. 
B)  The price level will fall, and the level of GDP will fall. 
C)  The price level will rise, and the level of GDP will fall. 
D)  The price level will rise, and the level of GDP will be unaffected. 
A)  The price level will fall, and the level of GDP will rise. 
B)  The price level will fall, and the level of GDP will fall. 
C)  The price level will rise, and the level of GDP will fall. 
D)  The price level will rise, and the level of GDP will be unaffected.

Question 5

If the U.S. dollar decreases in value relative to other currencies, how does this affect the aggregate demand curve?

Accepted Answer

A)  This will move the economy up along a stationary aggregate demand curve. 
B)  This will move the economy down along a stationary aggregate demand curve. 
C)  This will shift the aggregate demand curve to the left. 
D)  This will shift the aggregate demand curve to the right. 
A)  This will move the economy up along a stationary aggregate demand curve. 
B)  This will move the economy down along a stationary aggregate demand curve. 
C)  This will shift the aggregate demand curve to the left. 
D)  This will shift the aggregate demand curve to the right.

Question 6

What is the relationship among the AD, SRAS and LRAS curves when the economy is in macroeconomic equilibrium?

Accepted Answer

When the economy is in long-ru

Question 7

The dynamic aggregate demand and aggregate supply model assumes that potential GDP increases over time.

Accepted Answer

A) True 
 B)False

Question 8

After an unexpected ________ in the price of oil, the long-run adjustment decreases the price level and ________ the unemployment rate as they return to their original levels.

Accepted Answer

A)  increase; increases 
B)  increase; decreases 
C)  decrease; increases 
D)  decrease; decreases 
A)  increase; increases 
B)  increase; decreases 
C)  decrease; increases 
D)  decrease; decreases

Question 9

Workers and firms both expect that prices will be 2.5% higher next year than they are this year. As a result

Accepted Answer

A)  workers will be willing to take lower wages next year, but not lower than a 2.5 percent decrease. 
B)  the purchasing power of wages will rise if wages increase by 2.5%. 
C)  the short-run aggregate supply curve will shift to the left as wages increase. 
D)  aggregate demand will increase by 2.5%. 
A)  workers will be willing to take lower wages next year, but not lower than a 2.5 percent decrease. 
B)  the purchasing power of wages will rise if wages increase by 2.5%. 
C)  the short-run aggregate supply curve will shift to the left as wages increase. 
D)  aggregate demand will increase by 2.5%.

Question 10

Why does the short-run aggregate supply curve slope upward?

Accepted Answer

The short-run aggregate supply curve slo

Question 11

President Trump has proposed lowering income taxes for individuals. Explain how lower income taxes affect the aggregate demand curve.

Accepted Answer

Lowering the income tax increases the am

Question 12

A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Accepted Answer

A)  The price level will fall, and the level of GDP will be unaffected. 
B)  The price level will fall, and the level of GDP will fall. 
C)  The price level will rise, and the level of GDP will fall. 
D)  The price level will rise, and the level of GDP will be unaffected. 
A)  The price level will fall, and the level of GDP will be unaffected. 
B)  The price level will fall, and the level of GDP will fall. 
C)  The price level will rise, and the level of GDP will fall. 
D)  The price level will rise, and the level of GDP will be unaffected.

Question 13

An increase in the price level will

Accepted Answer

A)  shift the aggregate demand curve to the left. 
B)  shift the aggregate demand curve to the right. 
C)  move the economy up along a stationary aggregate demand curve. 
D)  move the economy down along a stationary aggregate demand curve. 
A)  shift the aggregate demand curve to the left. 
B)  shift the aggregate demand curve to the right. 
C)  move the economy up along a stationary aggregate demand curve. 
D)  move the economy down along a stationary aggregate demand curve.

Question 14

The new classical model has as its central idea that

Accepted Answer

A)  wage and price stickiness explain fluctuations in real GDP. 
B)  workers and firms have rational expectations. 
C)  the Federal Reserve should adopt a monetary growth rule. 
D)  shifts in aggregate demand have no impact on real GDP. 
A)  wage and price stickiness explain fluctuations in real GDP. 
B)  workers and firms have rational expectations. 
C)  the Federal Reserve should adopt a monetary growth rule. 
D)  shifts in aggregate demand have no impact on real GDP.

Question 15

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result

Accepted Answer

A)  the long-run aggregate supply curve will shift to the right. 
B)  the long-run aggregate supply curve will shift to the left. 
C)  the economy will move up along the long-run aggregate supply curve. 
D)  the economy will move down along the long-run aggregate supply curve. 
A)  the long-run aggregate supply curve will shift to the right. 
B)  the long-run aggregate supply curve will shift to the left. 
C)  the economy will move up along the long-run aggregate supply curve. 
D)  the economy will move down along the long-run aggregate supply curve.

Question 16

What does the phrase "Keynesian revolution" refer to?

Accepted Answer

The Keynesian revolution is th

Question 17

In the dynamic aggregated demand and aggregate supply model, if AD shifts further than AS

Accepted Answer

A)  inflation occurs. 
B)  deflation occurs. 
C)  stagflation occurs. 
D)  disinflation occurs. 
A)  inflation occurs. 
B)  deflation occurs. 
C)  stagflation occurs. 
D)  disinflation occurs.

Question 18

Using the aggregate supply and demand model, illustrate what happens in the long run when the economy suffers a supply shock. Begin your analysis by assuming the economy has suffered the supply shock in the short run, but has not yet adjusted to it in the long run.

Accepted Answer

@#IMG-DLM& The economy is at point B with the pric

Question 19

A decrease in the price level results in a(n) ________ in the quantity of real GDP demanded because a lower price level ________ consumption, investment, and net exports.

Accepted Answer

A)  decrease; increases 
B)  increase; increases 
C)  decrease; decreases 
D)  increase; decreases 
A)  decrease; increases 
B)  increase; increases 
C)  decrease; decreases 
D)  increase; decreases

Question 20

When the economy enters into a recession, your employer is ________ to reduce your wages because ________.

Accepted Answer

A)  unlikely; output and input prices generally fall during recession 
B)  unlikely; lower wages reduce productivity and morale 
C)  likely; output prices always fall during recession 
D)  likely; aggregate demand is vertical in the long run 
A)  unlikely; output and input prices generally fall during recession 
B)  unlikely; lower wages reduce productivity and morale 
C)  likely; output prices always fall during recession 
D)  likely; aggregate demand is vertical in the long run

Exam 24: Aggregate Demand and Aggregate Supply Analysis

The proponents of ________ and ________ think that the Federal Reserve should adopt a constant monetary growth rule.

Which of the following models has as its central idea that workers and firms have rational expectations?

Which of the following models advocate that the quantity of money should be increased at a constant rate?

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

If the U.S. dollar decreases in value relative to other currencies, how does this affect the aggregate demand curve?

What is the relationship among the AD, SRAS and LRAS curves when the economy is in macroeconomic equilibrium?

The dynamic aggregate demand and aggregate supply model assumes that potential GDP increases over time.

After an unexpected ________ in the price of oil, the long-run adjustment decreases the price level and ________ the unemployment rate as they return to their original levels.

Workers and firms both expect that prices will be 2.5% higher next year than they are this year. As a result

Why does the short-run aggregate supply curve slope upward?

President Trump has proposed lowering income taxes for individuals. Explain how lower income taxes affect the aggregate demand curve.

A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

An increase in the price level will

The new classical model has as its central idea that

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result

What does the phrase "Keynesian revolution" refer to?

In the dynamic aggregated demand and aggregate supply model, if AD shifts further than AS

Using the aggregate supply and demand model, illustrate what happens in the long run when the economy suffers a supply shock. Begin your analysis by assuming the economy has suffered the supply shock in the short run, but has not yet adjusted to it in the long run.

A decrease in the price level results in a(n) ________ in the quantity of real GDP demanded because a lower price level ________ consumption, investment, and net exports.

When the economy enters into a recession, your employer is ________ to reduce your wages because ________.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

The proponents of and think that the Federal Reserve should adopt a constant monetary growth rule.

After an unexpected in the price of oil, the long-run adjustment decreases the price level and the unemployment rate as they return to their original levels.

A decrease in the price level results in a(n) in the quantity of real GDP demanded because a lower price level consumption, investment, and net exports.

When the economy enters into a recession, your employer is to reduce your wages because .