Question 1

Which of the following would cause prices and real GDP to rise in the short run?

Accepted Answer

A)  an increase in the expected price level 
B)  an increase in the money supply 
C)  a decrease in the capital stock 
D)  an increase in taxes. 
A)  an increase in the expected price level 
B)  an increase in the money supply 
C)  a decrease in the capital stock 
D)  an increase in taxes.

Question 2

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Accepted Answer

A)  long-run aggregate supply shifts right 
B)  long-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left 
A)  long-run aggregate supply shifts right 
B)  long-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left

Question 3

The investment component of GDP measures spending on

Accepted Answer

A)  financial assets such as stocks and bonds. During recessions it declines by a relatively large amount. 
B)  residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively large amount. 
C)  financial assets such as stocks and bonds. During recessions it declines by a relatively small amount. 
D)  residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively small amount. 
A)  financial assets such as stocks and bonds. During recessions it declines by a relatively large amount. 
B)  residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively large amount. 
C)  financial assets such as stocks and bonds. During recessions it declines by a relatively small amount. 
D)  residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively small amount.

Question 4

Other things the same, if the U.S. price level falls, then

Accepted Answer

A)  U.S. residents want to buy more foreign bonds. The real exchange rate rises. 
B)  U.S. residents want to buy more foreign bonds. The real exchange rate falls. 
C)  U.S. residents want to buy fewer foreign bonds. The real exchange rate rises. 
D)  U.S. residents want to buy fewer foreign bonds. The real exchange rate falls. 
A)  U.S. residents want to buy more foreign bonds. The real exchange rate rises. 
B)  U.S. residents want to buy more foreign bonds. The real exchange rate falls. 
C)  U.S. residents want to buy fewer foreign bonds. The real exchange rate rises. 
D)  U.S. residents want to buy fewer foreign bonds. The real exchange rate falls.

Question 5

Which of the following shifts short-run aggregate supply left?

Accepted Answer

A)  an increase in price expectations 
B)  an increase in the actual price level 
C)  a decrease in the money supply 
D)  a decrease in the price of oil 
A)  an increase in price expectations 
B)  an increase in the actual price level 
C)  a decrease in the money supply 
D)  a decrease in the price of oil

Question 6

Which of the following typically rises during a recession?

Accepted Answer

A)  investment. 
B)  unemployment. 
C)  tax revenues. 
D)  new home construction. 
A)  investment. 
B)  unemployment. 
C)  tax revenues. 
D)  new home construction.

Question 7

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.

Question 8

Which of the following both shift aggregate demand right?

Accepted Answer

A)  net exports rise for some reason other than a price change and government purchases rise. 
B)  net exports rise for some reason other than a price change and taxes increase. 
C)  net exports fall for some reason other than a price change and government purchases fall. 
D)  net exports fall for some reason other than a price change and taxes fall. 
A)  net exports rise for some reason other than a price change and government purchases rise. 
B)  net exports rise for some reason other than a price change and taxes increase. 
C)  net exports fall for some reason other than a price change and government purchases fall. 
D)  net exports fall for some reason other than a price change and taxes fall.

Question 9

If the price level is higher than expected, firms might raise their production in the short run if

Accepted Answer

A)  the nominal wage they pay their employees was set based on the expected price level. 
B)  prices are costly to adjust and they have set their price at some time in the past but are not ready to change it. 
C)  they believe that the price of their product has risen relative to the price of other products, when in fact the rise in the price of their product reflects an increase in the general price level. 
D)  All of the above are correct. 
A)  the nominal wage they pay their employees was set based on the expected price level. 
B)  prices are costly to adjust and they have set their price at some time in the past but are not ready to change it. 
C)  they believe that the price of their product has risen relative to the price of other products, when in fact the rise in the price of their product reflects an increase in the general price level. 
D)  All of the above are correct.

Question 10

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction 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 11

Which of the following effects helps to explain the slope of the aggregate-demand curve?

Accepted Answer

A)  the exchange-rate effect 
B)  the wealth effect 
C)  the interest-rate effect 
D)  All of the above are correct. 
A)  the exchange-rate effect 
B)  the wealth effect 
C)  the interest-rate effect 
D)  All of the above are correct.

Question 12

Historical evidence for the U.S. economy indicates that

Accepted Answer

A)  recessions have occurred roughly once every six years since the 1960s. 
B)  the unemployment rate usually decreases during a recession and increases shortly after the recession ends. 
C)  real GDP usually remains roughly constant during a recession and decreases shortly after the recession ends. 
D)  changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle. 
A)  recessions have occurred roughly once every six years since the 1960s. 
B)  the unemployment rate usually decreases during a recession and increases shortly after the recession ends. 
C)  real GDP usually remains roughly constant during a recession and decreases shortly after the recession ends. 
D)  changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle.

Question 13

The initial impact of the repeal of an investment tax credit is to 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 14

Which part of real GDP fluctuates most over the course of the business cycle?

Accepted Answer

A)  consumption expenditures 
B)  government expenditures 
C)  investment expenditures 
D)  net exports 
A)  consumption expenditures 
B)  government expenditures 
C)  investment expenditures 
D)  net exports

Question 15

Figure 33-5.  
-Refer to Figure 33-5. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience

Accepted Answer

A)  a falling price level and a falling level of output, as the economy moves to point C. 
B)  a falling price level and a rising level of output, as the economy moves to point A. 
C)  a rising price level and a falling level of output, as the economy moves to point A. 
D)  a rising price level and a rising level of output, as the economy moves to point C. 
A)  a falling price level and a falling level of output, as the economy moves to point C. 
B)  a falling price level and a rising level of output, as the economy moves to point A. 
C)  a rising price level and a falling level of output, as the economy moves to point A. 
D)  a rising price level and a rising level of output, as the economy moves to point C.

Question 16

In the context of aggregate demand and aggregate supply, the wealth effect refers to the idea that, when the price level decreases, the real wealth of households

Accepted Answer

A)  increases and as a result consumption spending increases. This effect contributes to the downward slope of the aggregate-demand curve. 
B)  decreases and as a result consumption spending increases. This effect contributes to the upward slope of the aggregate-supply curve. 
C)  increases and as a result households increase their money holdings; in turn, interest rates increase and investment spending decreases. This effect contributes to the downward slope of the aggregate-demand curve. 
D)  decreases and as a result households increase their money holdings; in turn, interest rates increase and investment spending decreases. This effect contributes to the upward slope of the aggregate-supply curve. 
A)  increases and as a result consumption spending increases. This effect contributes to the downward slope of the aggregate-demand curve. 
B)  decreases and as a result consumption spending increases. This effect contributes to the upward slope of the aggregate-supply curve. 
C)  increases and as a result households increase their money holdings; in turn, interest rates increase and investment spending decreases. This effect contributes to the downward slope of the aggregate-demand curve. 
D)  decreases and as a result households increase their money holdings; in turn, interest rates increase and investment spending decreases. This effect contributes to the upward slope of the aggregate-supply curve.

Question 17

The curve that shows the quantity of goods and services that firms produce and sell

Accepted Answer

A)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-demand curve. 
B)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-supply curve. 
C)  as it relates to the overall price level is called the aggregate-demand curve. 
D)  as it relates to the overall price level is called the aggregate-supply curve. 
A)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-demand curve. 
B)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-supply curve. 
C)  as it relates to the overall price level is called the aggregate-demand curve. 
D)  as it relates to the overall price level is called the aggregate-supply curve.

Question 18

As the price level rises, the exchange rate

Accepted Answer

A)  falls, so exports rise and imports fall. 
B)  falls, so exports fall and imports rise. 
C)  rises, so exports rise and imports fall. 
D)  rises, so exports fall and imports rise. 
A)  falls, so exports rise and imports fall. 
B)  falls, so exports fall and imports rise. 
C)  rises, so exports rise and imports fall. 
D)  rises, so exports fall and imports rise.

Question 19

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  the Federal Reserve buys bonds. 
B)  a decrease in net exports due to something other than a change in domestic prices. 
C)  an increase in household saving. 
D)  All of the above are correct. 
A)  the Federal Reserve buys bonds. 
B)  a decrease in net exports due to something other than a change in domestic prices. 
C)  an increase in household saving. 
D)  All of the above are correct.

Question 20

Other things the same, an increase in the expected price level shifts

Accepted Answer

A)  short-run aggregate supply right. 
B)  short-run aggregate supply left. 
C)  aggregate-demand right. 
D)  aggregated-demand left. 
A)  short-run aggregate supply right. 
B)  short-run aggregate supply left. 
C)  aggregate-demand right. 
D)  aggregated-demand left.

Which of the following would cause prices and real GDP to rise in the short run?

Which of the following, other things the same, would make the price level decrease and real GDP increase?

The investment component of GDP measures spending on

Other things the same, if the U.S. price level falls, then

Which of the following shifts short-run aggregate supply left?

Which of the following typically rises during a recession?

As the price level falls

Which of the following both shift aggregate demand right?

If the price level is higher than expected, firms might raise their production in the short run if

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift

Which of the following effects helps to explain the slope of the aggregate-demand curve?

Historical evidence for the U.S. economy indicates that

The initial impact of the repeal of an investment tax credit is to shift

Which part of real GDP fluctuates most over the course of the business cycle?

Figure 33-5. -Refer to Figure 33-5. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience

In the context of aggregate demand and aggregate supply, the wealth effect refers to the idea that, when the price level decreases, the real wealth of households

The curve that shows the quantity of goods and services that firms produce and sell

As the price level rises, the exchange rate

Which of the following shifts aggregate demand to the right?

Other things the same, an increase in the expected price level shifts

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic 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

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Exam 15: Aggregate Demand and Aggregate Supply

Which of the following would cause prices and real GDP to rise in the short run?

Which of the following, other things the same, would make the price level decrease and real GDP increase?

The investment component of GDP measures spending on

Other things the same, if the U.S. price level falls, then

Which of the following shifts short-run aggregate supply left?

Which of the following typically rises during a recession?

As the price level falls

Which of the following both shift aggregate demand right?

If the price level is higher than expected, firms might raise their production in the short run if

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift

Which of the following effects helps to explain the slope of the aggregate-demand curve?

Historical evidence for the U.S. economy indicates that

The initial impact of the repeal of an investment tax credit is to shift

Which part of real GDP fluctuates most over the course of the business cycle?

Figure 33-5. -Refer to Figure 33-5. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience

In the context of aggregate demand and aggregate supply, the wealth effect refers to the idea that, when the price level decreases, the real wealth of households

The curve that shows the quantity of goods and services that firms produce and sell

As the price level rises, the exchange rate

Which of the following shifts aggregate demand to the right?

Other things the same, an increase in the expected price level shifts

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic 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