Question 1

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. 
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.

Question 2

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

Accepted Answer

why the short run ag

Question 3

Briefly state the three key facts about economic fluctuations.

Accepted Answer

(1) Economic fluctuations are

Question 4

Figure 33-1.  
-Refer to Figure 33-1. Line A is

Accepted Answer

A) investment spending. 
B) real GDP. 
C) unemployment rate. 
D) CPI. 
A) investment spending. 
B) real GDP. 
C) unemployment rate. 
D) CPI.

Question 5

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Accepted Answer

A) the price level to rise and real GDP to fall. 
B) the price level to fall and real GDP to rise. 
C) the price level and real GDP both to stay the same. 
D) All of the above are possible. 
A) the price level to rise and real GDP to fall. 
B) the price level to fall and real GDP to rise. 
C) the price level and real GDP both to stay the same. 
D) All of the above are possible.

Question 6

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 7

Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on 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. 
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.

Question 8

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Accepted Answer

A) True 
 B)False

Question 9

Most macroeconomic variables that measure some type of income, spending, or production fluctuate closely together.

Accepted Answer

A) True 
 B)False

Question 10

Suppose the expected price level increases. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Accepted Answer

The short run aggreg

Question 11

Which of the following shifts the short-run aggregate supply curve to the right?

Accepted Answer

A) a decrease in the actual price level 
B) an increase in the actual price level 
C) a decrease in the expected price level 
D) an increase in the expected price level 
A) a decrease in the actual price level 
B) an increase in the actual price level 
C) a decrease in the expected price level 
D) an increase in the expected price level

Question 12

Which of the following is correct?

Accepted Answer

A) The short-run, but not the long-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
B) The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
C) The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables. 
D) Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables. 
A) The short-run, but not the long-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
B) The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. 
C) The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables. 
D) Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables.

Question 13

During a recession, unemployment ​

Accepted Answer

A) ​increases. 
B) ​decreases. 
C) ​is equal to the natural rate of unemployment. 
D) ​is frictional unemployment minus structural unemployment. 
A) ​increases. 
B) ​decreases. 
C) ​is equal to the natural rate of unemployment. 
D) ​is frictional unemployment minus structural unemployment.

Question 14

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. 
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.

Question 15

Which of the following both shift aggregate demand left?

Accepted Answer

A) a decrease in taxes and at a given price level consumers feel more wealthy 
B) a decrease in taxes and at a given price level consumers feel less wealthy 
C) an increase in taxes and at a given price level consumers feel more wealthy 
D) an increase in taxes and at a given price level consumers feel less wealthy 
A) a decrease in taxes and at a given price level consumers feel more wealthy 
B) a decrease in taxes and at a given price level consumers feel less wealthy 
C) an increase in taxes and at a given price level consumers feel more wealthy 
D) an increase in taxes and at a given price level consumers feel less wealthy

Question 16

Refer to Stock Market Boom 2015. 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. 
A) long-run aggregate supply right. 
B) long-run aggregate supply left. 
C) short-run aggregate supply right. 
D) short-run aggregate supply left.

Question 17

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

Accepted Answer

A) the supply of dollars would shift right and the exchange rate would rise. 
B) the supply of dollars would shift right and the exchange rate would fall. 
C) the supply of dollars would shift left and the exchange rate would rise. 
D) None of the above is correct. 
A) the supply of dollars would shift right and the exchange rate would rise. 
B) the supply of dollars would shift right and the exchange rate would fall. 
C) the supply of dollars would shift left and the exchange rate would rise. 
D) None of the above is correct.

Question 18

Figure 33-9.  
-Refer to Figure 33-9. Suppose the economy starts where LRAS = AD1 = SRAS1. A decrease in short-run aggregate supply would be consistent with the movement to

Accepted Answer

A) P1, Y1. 
B) P2, Y1. 
C) P1, Y2. 
D) P3, Y2. 
A) P1, Y1. 
B) P2, Y1. 
C) P1, Y2. 
D) P3, Y2.

Question 19

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

Variables that fall along with real GDP

Question 20

As the price level falls

Accepted Answer

A) people are more willing to lend, so interest rates rise. 
B) people are more willing to lend, so interest rates fall. 
C) people are less willing to lend, so interest rates fall. 
D) people are less willing to lend, so interest rates rise. 
A) people are more willing to lend, so interest rates rise. 
B) people are more willing to lend, so interest rates fall. 
C) people are less willing to lend, so interest rates fall. 
D) people are less willing to lend, so interest rates rise.

Exam 33: Aggregate Demand and Aggregate Supply

Aggregate demand includes

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

Briefly state the three key facts about economic fluctuations.

Figure 33-1. -Refer to Figure 33-1. Line A is

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

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.

Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Most macroeconomic variables that measure some type of income, spending, or production fluctuate closely together.

Suppose the expected price level increases. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Which of the following shifts the short-run aggregate supply curve to the right?

Which of the following is correct?

During a recession, unemployment ​

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

Which of the following both shift aggregate demand left?

Refer to Stock Market Boom 2015. In the long run, the change in price expectations created by the stock market boom shifts

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

Figure 33-9. -Refer to Figure 33-9. Suppose the economy starts where LRAS = AD1 = SRAS1. A decrease in short-run aggregate supply would be consistent with the movement to

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.

As the price level falls

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

During a recession, unemployment

Figure 33-9. -Refer to Figure 33-9. Suppose the economy starts where LRAS = AD1 = SRAS₁. A decrease in short-run aggregate supply would be consistent with the movement to