Question 1

When the dollar depreciates,U.S.

Accepted Answer

A)  exports and imports increase. 
B)  exports increase,while imports decrease. 
C)  exports decrease,while imports increase. 
D)  exports and imports decrease. 
A)  exports and imports increase. 
B)  exports increase,while imports decrease. 
C)  exports decrease,while imports increase. 
D)  exports and imports decrease.

Question 2

Which of the following would raise the price level in both the short and long run?

Accepted Answer

A)  an increase in taxes 
B)  an increase in government expenditures 
C)  a decrease in the minimum wage 
D)  an increase in the capital stock 
A)  an increase in taxes 
B)  an increase in government expenditures 
C)  a decrease in the minimum wage 
D)  an increase in the capital stock

Question 3

Changes in the price level affect which components of aggregate demand?

Accepted Answer

A)  only consumption and investment 
B)  only consumption and net exports 
C)  only investment 
D)  consumption,investment,and net exports 
A)  only consumption and investment 
B)  only consumption and net exports 
C)  only investment 
D)  consumption,investment,and net exports

Question 4

Which of the following is correct?

Accepted Answer

A)  Short run fluctuations in economic activity happen only in developing countries. 
B)  During economic contractions most firms experience rising sales. 
C)  Recessions come at regular intervals and are easy to predict. 
D)  When real GDP falls,the rate of unemployment rises. 
A)  Short run fluctuations in economic activity happen only in developing countries. 
B)  During economic contractions most firms experience rising sales. 
C)  Recessions come at regular intervals and are easy to predict. 
D)  When real GDP falls,the rate of unemployment rises.

Question 5

Which of the following lists includes only changes that shift aggregate demand to the right?

Accepted Answer

A)  repeal of an investment tax credit,an increase in the money supply 
B)  repeal of an investment tax credit,a decrease in the money supply 
C)  passing of an investment tax credit,an increase in the money supply 
D)  passing of an investment tax credit,a decrease in the money supply 
A)  repeal of an investment tax credit,an increase in the money supply 
B)  repeal of an investment tax credit,a decrease in the money supply 
C)  passing of an investment tax credit,an increase in the money supply 
D)  passing of an investment tax credit,a decrease in the money supply

Question 6

Increased uncertainty and pessimism about the future of the economy leads firms to desire less investment spending which shifts the aggregate-demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 7

The model of aggregate demand and aggregate supply

Accepted Answer

A)  is different from the model of supply and demand for a particular market,in that we cannot focus on the substitution of resources between markets to explain aggregate relationships. 
B)  is different from the model of supply and demand for a particular market,in that we have to separate real and nominal variables in the aggregate model. 
C)  is a straightforward extension of the model of supply and demand for a particular market,in which substitution of resources between markets is highlighted. 
D)  is a straightforward extension of the model of supply and demand for a particular market,in which the interaction between real and nominal variables is highlighted. 
A)  is different from the model of supply and demand for a particular market,in that we cannot focus on the substitution of resources between markets to explain aggregate relationships. 
B)  is different from the model of supply and demand for a particular market,in that we have to separate real and nominal variables in the aggregate model. 
C)  is a straightforward extension of the model of supply and demand for a particular market,in which substitution of resources between markets is highlighted. 
D)  is a straightforward extension of the model of supply and demand for a particular market,in which the interaction between real and nominal variables is highlighted.

Question 8

Other things the same,when the price level rises more than expected,some firms will have

Accepted Answer

A)  higher than desired prices which increases their sales. 
B)  higher than desired prices which depresses their sales. 
C)  lower than desired prices which increases their sales. 
D)  lower than desired prices which depresses their sales. 
A)  higher than desired prices which increases their sales. 
B)  higher than desired prices which depresses their sales. 
C)  lower than desired prices which increases their sales. 
D)  lower than desired prices which depresses their sales.

Question 9

According to the sticky-wage theory of the short-run aggregate supply curve,if workers and firms expected prices to rise by 4 percent,but instead they rise by 2 percent,then

Accepted Answer

A)  employment and production rise. 
B)  employment rises and production falls. 
C)  employment falls and production rises. 
D)  employment and production fall. 
A)  employment and production rise. 
B)  employment rises and production falls. 
C)  employment falls and production rises. 
D)  employment and production fall.

Question 10

If the dollar appreciates because of speculation or government policy

Accepted Answer

A)  aggregate demand shifts left.If other countries experience recessions,aggregate demand in the U.S.also shifts left. 
B)  aggregate demand shifts left.If other countries experience recessions,aggregate demand in the U.S.shifts right. 
C)  aggregate demand shifts right.If other countries experience recessions,aggregate demand in the U.S.shifts left. 
D)  aggregate demand shifts right.If other countries experience recessions,aggregate demand in the U.S.also shifts right. 
A)  aggregate demand shifts left.If other countries experience recessions,aggregate demand in the U.S.also shifts left. 
B)  aggregate demand shifts left.If other countries experience recessions,aggregate demand in the U.S.shifts right. 
C)  aggregate demand shifts right.If other countries experience recessions,aggregate demand in the U.S.shifts left. 
D)  aggregate demand shifts right.If other countries experience recessions,aggregate demand in the U.S.also shifts right.

Question 11

The quantity of money has no real impact on things people really care about like whether or not they have a job.Most economists would agree that this statement is appropriate concerning

Accepted Answer

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

Question 12

Other things the same,the aggregate quantity of goods demanded decreases if

Accepted Answer

A)  real wealth falls. 
B)  the interest rate rises. 
C)  the dollar appreciates. 
D)  All of the above are correct. 
A)  real wealth falls. 
B)  the interest rate rises. 
C)  the dollar appreciates. 
D)  All of the above are correct.

Question 13

A decrease in the expected price level shifts

Accepted Answer

A)  only the long-run aggregate supply curve right. 
B)  only the short-run aggregate supply curve right. 
C)  both the short-run and the long-run aggregate supply curve right. 
D)  Neither the short-run nor the long-run aggregate supply curve right. 
A)  only the long-run aggregate supply curve right. 
B)  only the short-run aggregate supply curve right. 
C)  both the short-run and the long-run aggregate supply curve right. 
D)  Neither the short-run nor the long-run aggregate supply curve right.

Question 14

An increase in the price level and a reduction in output would result from

Accepted Answer

A)  a fall in stock prices. 
B)  natural disasters such as hurricanes,floods,and droughts.. 
C)  declining government expenditures. 
D)  tax rebates. 
A)  a fall in stock prices. 
B)  natural disasters such as hurricanes,floods,and droughts.. 
C)  declining government expenditures. 
D)  tax rebates.

Question 15

The aggregate-demand curve

Accepted Answer

A)  has a slope that is explained in the same way as the slope of the demand curve for a particular product. 
B)  is vertical in the long run. 
C)  shows an inverse relation between the price level and the quantity of all goods and services demanded. 
D)  All of the above are correct. 
A)  has a slope that is explained in the same way as the slope of the demand curve for a particular product. 
B)  is vertical in the long run. 
C)  shows an inverse relation between the price level and the quantity of all goods and services demanded. 
D)  All of the above are correct.

Question 16

During a recession the economy experiences

Accepted Answer

A)  rising employment and income. 
B)  rising employment and falling income. 
C)  rising income and falling employment. 
D)  falling employment and income. 
A)  rising employment and income. 
B)  rising employment and falling income. 
C)  rising income and falling employment. 
D)  falling employment and income.

Question 17

When looking at a graph of aggregate demand,which of the following is correct?

Accepted Answer

A)  There are nominal variables on both the vertical and the horizontal axes. 
B)  There are real variables on both the vertical and horizontal axes. 
C)  The variable on the vertical axis is nominal;the variable on the horizontal axis is real 
D)  The variable on the vertical axis is real;the variable on the horizontal axis is nominal 
A)  There are nominal variables on both the vertical and the horizontal axes. 
B)  There are real variables on both the vertical and horizontal axes. 
C)  The variable on the vertical axis is nominal;the variable on the horizontal axis is real 
D)  The variable on the vertical axis is real;the variable on the horizontal axis is nominal

Question 18

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.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 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

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.In the short run what happens to the price level and real GDP?

Accepted Answer

A)  both the price level and real GDP rise. 
B)  both the price level and real GDP fall. 
C)  the price level rises and real GDP falls. 
D)  the price level falls and real GDP rises. 
A)  both the price level and real GDP rise. 
B)  both the price level and real GDP fall. 
C)  the price level rises and real GDP falls. 
D)  the price level falls and real GDP rises.

Exam 33: Aggregate Demand and Aggregate Supply

When the dollar depreciates,U.S.

Which of the following would raise the price level in both the short and long run?

Changes in the price level affect which components of aggregate demand?

Which of the following is correct?

Which of the following lists includes only changes that shift aggregate demand to the right?

Increased uncertainty and pessimism about the future of the economy leads firms to desire less investment spending which shifts the aggregate-demand curve to the left.

The model of aggregate demand and aggregate supply

Other things the same,when the price level rises more than expected,some firms will have

According to the sticky-wage theory of the short-run aggregate supply curve,if workers and firms expected prices to rise by 4 percent,but instead they rise by 2 percent,then

If the dollar appreciates because of speculation or government policy

The quantity of money has no real impact on things people really care about like whether or not they have a job.Most economists would agree that this statement is appropriate concerning

Other things the same,the aggregate quantity of goods demanded decreases if

A decrease in the expected price level shifts

An increase in the price level and a reduction in output would result from

The aggregate-demand curve

During a recession the economy experiences

When looking at a graph of aggregate demand,which of the following is correct?

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.

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

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

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

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 Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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