Question 1

The upward slope of the aggregate-supply curve in the short run shows that:

Accepted Answer

A) a fall in the price level raises the overall quantity of goods and services supplied 
B) an increase in the price level increases the overall quantity of goods and services demanded 
C) a fall in the price level has no effect on the overall quantity of goods and services supplied 
D) a fall in the price level reduces the overall quantity of goods and services supplied 
A) a fall in the price level raises the overall quantity of goods and services supplied 
B) an increase in the price level increases the overall quantity of goods and services demanded 
C) a fall in the price level has no effect on the overall quantity of goods and services supplied 
D) a fall in the price level reduces the overall quantity of goods and services supplied

Question 2

When inflation is decreasing, prices are falling.

Accepted Answer

A) True 
 B)False

Question 3

Pigou's wealth effect suggests that when the price level falls, consumers feel wealthier and so increase their spending.Another implication of falling prices, however, is that the real value of dollar-denominated debts will increase.For example, if you owe $100, the real value of your debt goes up, and you are worse off.If someone owes you $100, then falling prices make you better off.Now suppose that on average those who borrow money tend to spend a larger fraction of their income than do those who lend money.Will spending rise or fall as a result of a fall in the price level?

Accepted Answer

In this case, spending will actually fal

Question 4

The new Keynesian sticky-price theory suggests that an unexpected fall in the price level leaves some firms with higher-than-desired prices because of menu costs, causing sales to be depressed and inducing the firms to increase the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 5

An increase in net lump-sum taxes shifts the AD curve to the right.

Accepted Answer

A) True 
 B)False

Question 6

In the long run, the quantity of goods and services supplied depends on the economy's labour, capital, technology and overall level of prices.

Accepted Answer

A) True 
 B)False

Question 7

The position of the long-run aggregate-supply curve shows the quality of goods and services predicted by classical macroeconomic theory.

Accepted Answer

A) True 
 B)False

Question 8

When an increase in the minimum wage raises the natural rate of unemployment:

Accepted Answer

A) the short-run aggregate-supply curve shifts to the right, and the long-run aggregate-supply curve shifts to the left 
B) the short-run aggregate-supply curve shifts to the left, and the long-run aggregate-supply curve shifts to the right 
C) both short-run and long-run aggregate-supply curves shift to the left 
D) both short-run and long-run aggregate-supply curves shift to the right 
A) the short-run aggregate-supply curve shifts to the right, and the long-run aggregate-supply curve shifts to the left 
B) the short-run aggregate-supply curve shifts to the left, and the long-run aggregate-supply curve shifts to the right 
C) both short-run and long-run aggregate-supply curves shift to the left 
D) both short-run and long-run aggregate-supply curves shift to the right

Question 9

Which of the following explanations for the upward slope of the short-run aggregate-supply curve is correct?

Accepted Answer

A) Misperceptions 
B) Sticky wages 
C) Sticky prices 
D) All of the above 
A) Misperceptions 
B) Sticky wages 
C) Sticky prices 
D) All of the above

Question 10

Explain why the short-run aggregate supply curve is upward sloping.

Accepted Answer

There are three theories to explain shor

Question 11

Deteriorating economic conditions could be due to:

Accepted Answer

A) increases in investment spending 
B) decreases in the national debt 
C) decreases in spending on factories, housing and inventories 
D) consumers buying too much on credit 
A) increases in investment spending 
B) decreases in the national debt 
C) decreases in spending on factories, housing and inventories 
D) consumers buying too much on credit

Question 12

An increase in aggregate supply will:

Accepted Answer

A) reduce both the price level and real domestic output 
B) reduce the price level but increase real domestic output 
C) increase both the price level and real domestic output 
D) increase the price level but reduce real domestic output 
A) reduce both the price level and real domestic output 
B) reduce the price level but increase real domestic output 
C) increase both the price level and real domestic output 
D) increase the price level but reduce real domestic output

Question 13

The downward slope of the aggregate-demand curve shows that:

Accepted Answer

A) a fall in the price level reduces the overall quantity of goods and services demanded 
B) a rise in the price level increases the overall quantity of goods and services demanded 
C) a fall in the price level has no effect on the overall quantity of goods and services demanded 
D) a fall in the price level increases the overall quantity of goods and services demanded 
A) a fall in the price level reduces the overall quantity of goods and services demanded 
B) a rise in the price level increases the overall quantity of goods and services demanded 
C) a fall in the price level has no effect on the overall quantity of goods and services demanded 
D) a fall in the price level increases the overall quantity of goods and services demanded

Question 14

The Keynesian sticky-wage theory states that in the short run:

Accepted Answer

A) wages do not adjust to changes in prices; therefore, real wages change and suppliers adjust their output levels 
B) wages adjust to changes in prices; therefore, real wages are unchanged and suppliers do not adjust their output levels 
C) wages adjust instantaneously to changes in prices 
D) none of the above is an implication of the Keynesian sticky-wage theory 
A) wages do not adjust to changes in prices; therefore, real wages change and suppliers adjust their output levels 
B) wages adjust to changes in prices; therefore, real wages are unchanged and suppliers do not adjust their output levels 
C) wages adjust instantaneously to changes in prices 
D) none of the above is an implication of the Keynesian sticky-wage theory

Question 15

A decrease in aggregate expenditure shifts the aggregate demand curve to the:

Accepted Answer

A) right by the level of decrease in aggregate expenditure 
B) left by the level of decrease in aggregate expenditure times the multiplier 
C) left by the level of decrease in aggregate expenditure 
D) right by the level of decrease in aggregate expenditure times the multiplier 
A) right by the level of decrease in aggregate expenditure 
B) left by the level of decrease in aggregate expenditure times the multiplier 
C) left by the level of decrease in aggregate expenditure 
D) right by the level of decrease in aggregate expenditure times the multiplier

Question 16

Mundell-Fleming's effect implies that a currency depreciation:

Accepted Answer

A) increases net exports and decreases the quantity of goods and services demanded 
B) decreases net exports and increases the quantity of goods and services demanded 
C) increases net exports and increases the quantity of goods and services demanded 
D) decreases net exports and decreases the quantity of goods and services demanded 
A) increases net exports and decreases the quantity of goods and services demanded 
B) decreases net exports and increases the quantity of goods and services demanded 
C) increases net exports and increases the quantity of goods and services demanded 
D) decreases net exports and decreases the quantity of goods and services demanded

Question 17

Most economists believe that classical economic theory is a good description of the world:

Accepted Answer

A) in the short run, but not in the long run 
B) in the long run, but not in the short run 
C) in the short run and in the long run 
D) in the nineteenth century, but not in the twentieth century 
A) in the short run, but not in the long run 
B) in the long run, but not in the short run 
C) in the short run and in the long run 
D) in the nineteenth century, but not in the twentieth century

Question 18

In a recession, real GDP falls and:

Accepted Answer

A) unemployment may rise or fall 
B) unemployment falls 
C) unemployment rises 
D) unemployment is unaffected 
A) unemployment may rise or fall 
B) unemployment falls 
C) unemployment rises 
D) unemployment is unaffected

Question 19

When factors (other than price level) that affect the quantity of goods and services supplied change:

Accepted Answer

A) the aggregate-supply curve shifts 
B) the aggregate-supply curve is not affected 
C) the aggregate supply becomes vertical 
D) the aggregate-supply curve becomes horizontal 
E) the aggregate-demand curve shifts 
A) the aggregate-supply curve shifts 
B) the aggregate-supply curve is not affected 
C) the aggregate supply becomes vertical 
D) the aggregate-supply curve becomes horizontal 
E) the aggregate-demand curve shifts

Question 20

If people's expectations about future price levels change:

Accepted Answer

A) the short-run aggregate-supply curve shifts 
B) the short-run aggregate-supply curve is not affected 
C) the short-run aggregate-supply curve becomes vertical 
D) the short-run aggregate-supply curve becomes horizontal 
E) all of the above are possible 
A) the short-run aggregate-supply curve shifts 
B) the short-run aggregate-supply curve is not affected 
C) the short-run aggregate-supply curve becomes vertical 
D) the short-run aggregate-supply curve becomes horizontal 
E) all of the above are possible

Exam 33: Aggregate Demand and Aggregate Supply

The upward slope of the aggregate-supply curve in the short run shows that:

When inflation is decreasing, prices are falling.

The new Keynesian sticky-price theory suggests that an unexpected fall in the price level leaves some firms with higher-than-desired prices because of menu costs, causing sales to be depressed and inducing the firms to increase the quantity of goods and services they produce.

An increase in net lump-sum taxes shifts the AD curve to the right.

In the long run, the quantity of goods and services supplied depends on the economy's labour, capital, technology and overall level of prices.

The position of the long-run aggregate-supply curve shows the quality of goods and services predicted by classical macroeconomic theory.

When an increase in the minimum wage raises the natural rate of unemployment:

Which of the following explanations for the upward slope of the short-run aggregate-supply curve is correct?

Explain why the short-run aggregate supply curve is upward sloping.

Deteriorating economic conditions could be due to:

An increase in aggregate supply will:

The downward slope of the aggregate-demand curve shows that:

The Keynesian sticky-wage theory states that in the short run:

A decrease in aggregate expenditure shifts the aggregate demand curve to the:

Mundell-Fleming's effect implies that a currency depreciation:

Most economists believe that classical economic theory is a good description of the world:

In a recession, real GDP falls and:

When factors (other than price level) that affect the quantity of goods and services supplied change:

If people's expectations about future price levels change:

Ten Lessons From 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

Application: 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

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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 Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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