Question 1

When the price level falls

Accepted Answer

A) households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. 
B) households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. 
C) households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. 
D) None of the above are correct. 
A) households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. 
B) households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. 
C) households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. 
D) None of the above are correct.

Question 2

Figure 33-8.  
-Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P3 and Y3 , then it must be the case that

Accepted Answer

A) short run aggregate supply has decreased. 
B) short run aggregate supply has increased. 
C) aggregate demand has increased. 
D) aggregate demand has decreased. 
A) short run aggregate supply has decreased. 
B) short run aggregate supply has increased. 
C) aggregate demand has increased. 
D) aggregate demand has decreased.

Question 3

Real GDP

Accepted Answer

A) moves in the opposite direction as unemployment. 
B) increases as production falls. 
C) falls when households save a smaller fraction of their income. 
D) All of the above are correct. 
A) moves in the opposite direction as unemployment. 
B) increases as production falls. 
C) falls when households save a smaller fraction of their income. 
D) All of the above are correct.

Question 4

When taxes decrease, consumption

Accepted Answer

A) decreases as shown by a movement to the left along a given aggregate-demand curve. 
B) decreases as shown by a shift of the aggregate demand curve to the left. 
C) increases as shown by a movement to the right along a given aggregate-demand curve. 
D) increases as shown by a shift of the aggregate demand curve to the right. 
A) decreases as shown by a movement to the left along a given aggregate-demand curve. 
B) decreases as shown by a shift of the aggregate demand curve to the left. 
C) increases as shown by a movement to the right along a given aggregate-demand curve. 
D) increases as shown by a shift of the aggregate demand curve to the right.

Question 5

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

Accepted Answer

A) the dollar would appreciate which would cause aggregate demand to shift right. 
B) the dollar would appreciate which would cause aggregate demand to shift left. 
C) the dollar would depreciate which would cause aggregate demand to shift right. 
D) the dollar would depreciate which would cause aggregate demand to shift left. 
A) the dollar would appreciate which would cause aggregate demand to shift right. 
B) the dollar would appreciate which would cause aggregate demand to shift left. 
C) the dollar would depreciate which would cause aggregate demand to shift right. 
D) the dollar would depreciate which would cause aggregate demand to shift left.

Question 6

During the 2008-2009 recession real GDP fell by about

Accepted Answer

A) 2% 
B) 4% 
C) 6% 
D) 8% 
A) 2% 
B) 4% 
C) 6% 
D) 8%

Question 7

Suppose the economy is in long-run equilibrium. If there is an increase in the supply of labor as well as an increase in the money supply, then we would expect that in the short-run,

Accepted Answer

A) real GDP will rise and the price level might rise, fall, or stay the same. 
B) real GDP will fall and the price level might rise, fall, or stay the same. 
C) the price level will rise, and real GDP might rise, fall, or stay the same. 
D) the price level will fall, and real GDP might rise, fall, or stay the same. 
A) real GDP will rise and the price level might rise, fall, or stay the same. 
B) real GDP will fall and the price level might rise, fall, or stay the same. 
C) the price level will rise, and real GDP might rise, fall, or stay the same. 
D) the price level will fall, and real GDP might rise, fall, or stay the same.

Question 8

Figure 33-16.  
-Refer to Figure 33-16. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Accepted Answer

Question 9

Other things the same, an increase in the amount of capital firms wish to purchase would initially shift

Accepted Answer

A) aggregate demand right. 
B) aggregate demand left. 
C) aggregate supply right. 
D) aggregate supply left. 
A) aggregate demand right. 
B) aggregate demand left. 
C) aggregate supply right. 
D) aggregate supply left.

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. 
A) aggregate demand right. 
B) aggregate demand left. 
C) aggregate supply right. 
D) aggregate supply left.

Question 11

Refer to Pessimism. What happens to the expected price level and what's the result for wage bargaining?

Accepted Answer

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

Question 12

Which of the following is not correct?

Accepted Answer

A) The model of aggregate demand and aggregate supply is used by most economists to analyze short-run fluctuations. 
B) During a recession firms cut back production and workers are laid off. 
C) A recession is a period of declining real incomes and declining unemployment. 
D) A depression is a severe recession. 
A) The model of aggregate demand and aggregate supply is used by most economists to analyze short-run fluctuations. 
B) During a recession firms cut back production and workers are laid off. 
C) A recession is a period of declining real incomes and declining unemployment. 
D) A depression is a severe recession.

Question 13

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 14

Other things the same, as the price level falls,

Accepted Answer

A) the money supply falls. 
B) interest rates rise. 
C) a dollar buys more domestic goods. 
D) the aggregate-demand curve shifts right. 
A) the money supply falls. 
B) interest rates rise. 
C) a dollar buys more domestic goods. 
D) the aggregate-demand curve shifts right.

Question 15

The aggregate supply curve is upward sloping in

Accepted Answer

A) the short and long run. 
B) neither the short nor long run. 
C) the long run, but not the short run. 
D) the short run, but not the long run. 
A) the short and long run. 
B) neither the short nor long run. 
C) the long run, but not the short run. 
D) the short run, but not the long run.

Question 16

Refer to Optimism. Which curve shifts and in which direction?

Accepted Answer

A) aggregate demand shifts right 
B) aggregate demand shifts left 
C) aggregate supply shifts right. 
D) aggregate supply shifts left. 
A) aggregate demand shifts right 
B) aggregate demand shifts left 
C) aggregate supply shifts right. 
D) aggregate supply shifts left.

Question 17

People will buy more if the price level

Accepted Answer

A) rises because rising prices increase the real value of a dollar. 
B) rises because rising prices decrease the real value of a dollar. 
C) falls because falling prices increase the real value of a dollar. 
D) falls because falling prices decrease the real value of a dollar. 
A) rises because rising prices increase the real value of a dollar. 
B) rises because rising prices decrease the real value of a dollar. 
C) falls because falling prices increase the real value of a dollar. 
D) falls because falling prices decrease the real value of a dollar.

Question 18

Economic variables we are most interested in are

Accepted Answer

A) real variables, but we usually observe nominal variables. 
B) nominal variables, but we usually observe real variables. 
C) real variables, which we usually observe. 
D) nominal variables, which we usually observe. 
A) real variables, but we usually observe nominal variables. 
B) nominal variables, but we usually observe real variables. 
C) real variables, which we usually observe. 
D) nominal variables, which we usually observe.

Question 19

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. 
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.

Question 20

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 credit 
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 credit

Exam 33: Aggregate Demand and Aggregate Supply

When the price level falls

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P3 and Y3 , then it must be the case that

Real GDP

When taxes decrease, consumption

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

During the 2008-2009 recession real GDP fell by about

Suppose the economy is in long-run equilibrium. If there is an increase in the supply of labor as well as an increase in the money supply, then we would expect that in the short-run,

Figure 33-16. -Refer to Figure 33-16. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Other things the same, an increase in the amount of capital firms wish to purchase would initially shift

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

Refer to Pessimism. What happens to the expected price level and what's the result for wage bargaining?

Which of the following is not correct?

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?

Other things the same, as the price level falls,

The aggregate supply curve is upward sloping in

Refer to Optimism. Which curve shifts and in which direction?

People will buy more if the price level

Economic variables we are most interested in are

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

Which of the following shifts aggregate demand right?

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

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P₃ and Y₃ , then it must be the case that

Figure 33-16. -Refer to Figure 33-16. Suppose the economy starts at P₃ and Y₂. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.