Question 1

What curve shows the quantity of goods and services that firms choose to produce and sell at each price level?

Accepted Answer

The aggreg

Question 2

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  a decrease in the money supply 
B)  increases in the profitability of capital due perhaps to technological progress. 
C)  the repeal of an investment tax credit 
D)  a decrease in the price level 
A)  a decrease in the money supply 
B)  increases in the profitability of capital due perhaps to technological progress. 
C)  the repeal of an investment tax credit 
D)  a decrease in the price level

Question 3

Other things the same, when the price level falls, interest rates

Accepted Answer

A)  rise, so firms increase investment. 
B)  rise, so firms decrease investment. 
C)  fall, so firms increase investment. 
D)  fall, so firms decrease investment. 
A)  rise, so firms increase investment. 
B)  rise, so firms decrease investment. 
C)  fall, so firms increase investment. 
D)  fall, so firms decrease investment.

Question 4

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 5

Most economists believe that classical theory describes the world

Accepted Answer

A)  in the short run. 
B)  in the long run. 
C)  in both the short run and the long run. 
D)  in neither the short run nor the long run. 
A)  in the short run. 
B)  in the long run. 
C)  in both the short run and the long run. 
D)  in neither the short run nor the long run.

Question 6

Figure 33-4  
-Refer to Figure 33-4. In the short run, a favorable shift in aggregate supply would move the economy from

Accepted Answer

A)  A to B. 
B)  B to C. 
C)  C to D. 
D)  D to A. 
A)  A to B. 
B)  B to C. 
C)  C to D. 
D)  D to A.

Question 7

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Accepted Answer

A)  as people revise their price-level expectations upward, firms and workers strike bargains for higher nominal wages. 
B)  as people revise their price-level expectations upward, firms and workers strike bargains for lower nominal wages. 
C)  as people revise their price-level expectations downward, firms and workers strike bargains for higher nominal wages. 
D)  as people revise their price-level expectations downward, firms and workers strike bargains for lower nominal wages. 
A)  as people revise their price-level expectations upward, firms and workers strike bargains for higher nominal wages. 
B)  as people revise their price-level expectations upward, firms and workers strike bargains for lower nominal wages. 
C)  as people revise their price-level expectations downward, firms and workers strike bargains for higher nominal wages. 
D)  as people revise their price-level expectations downward, firms and workers strike bargains for lower nominal wages.

Question 8

Which of the following would cause investment spending to decrease and aggregate demand to shift left?

Accepted Answer

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

Question 9

Figure 33-15.  
-Refer to Figure 33-15. Suppose the economy begins at point A. Decreases in what four variables could result in a movement to point D?

Accepted Answer

consumption, investm

Question 10

According to the classical model, an increase in the money supply causes

Accepted Answer

A)  output to increase in the long run. 
B)  the unemployment rate to fall in the long run. 
C)  prices to rise in the long run. 
D)  interest rates to fall in the long run. 
A)  output to increase in the long run. 
B)  the unemployment rate to fall in the long run. 
C)  prices to rise in the long run. 
D)  interest rates to fall in the long run.

Question 11

Other things the same, if the price level falls, domestic interest rates

Accepted Answer

A)  rise, so domestic residents will want to hold more foreign bonds. 
B)  rise, so domestic residents will want to hold fewer foreign bonds. 
C)  fall, so domestic residents will want to hold more foreign bonds. 
D)  fall, so domestic residents will want to hold fewer foreign bonds. 
A)  rise, so domestic residents will want to hold more foreign bonds. 
B)  rise, so domestic residents will want to hold fewer foreign bonds. 
C)  fall, so domestic residents will want to hold more foreign bonds. 
D)  fall, so domestic residents will want to hold fewer foreign bonds.

Question 12

When output rises, unemployment falls.

Accepted Answer

A) True 
 B)False

Question 13

As recessions begin, income

Accepted Answer

A)  and unemployment both rise. 
B)  rises and unemployment falls. 
C)  falls and unemployment rises. 
D)  and unemployment both fall. 
A)  and unemployment both rise. 
B)  rises and unemployment falls. 
C)  falls and unemployment rises. 
D)  and unemployment both fall.

Question 14

The effect of a change in the value of the dollar in the foreign exchange market due to a change in the price level helps explain the slope of aggregate demand, but does not shift it. The effects of a change in the value of the dollar in the foreign exchange market due to speculation is shown by shifting the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 15

Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

Accepted Answer

The price level decr

Question 16

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major restrictions on logging removed. 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 17

If wages are sticky, then a greater than expected increase in the price level

Accepted Answer

A)  raises the real costs of production, so the short-run aggregate supply curve shifts left. 
B)  raises the real costs of production, so the aggregate quantity of goods and services declines. 
C)  reduces the real costs of production, so the short-run aggregate supply curve shifts right. 
D)  reduces the real costs of production, so the aggregate quantity of goods and services rises. 
A)  raises the real costs of production, so the short-run aggregate supply curve shifts left. 
B)  raises the real costs of production, so the aggregate quantity of goods and services declines. 
C)  reduces the real costs of production, so the short-run aggregate supply curve shifts right. 
D)  reduces the real costs of production, so the aggregate quantity of goods and services rises.

Question 18

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 19

Other things the same, as the price level decreases it induces greater spending on

Accepted Answer

A)  both net exports and investment. 
B)  net exports but not investment. 
C)  investment but not net exports. 
D)  neither net exports nor investment. 
A)  both net exports and investment. 
B)  net exports but not investment. 
C)  investment but not net exports. 
D)  neither net exports nor investment.

Question 20

Suppose the government raises taxes. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Accepted Answer

The aggreg

Exam 23: Aggregate Demand and Aggregate Supply

What curve shows the quantity of goods and services that firms choose to produce and sell at each price level?

Which of the following shifts aggregate demand to the right?

Other things the same, when the price level falls, interest rates

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Most economists believe that classical theory describes the world

Figure 33-4 -Refer to Figure 33-4. In the short run, a favorable shift in aggregate supply would move the economy from

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Which of the following would cause investment spending to decrease and aggregate demand to shift left?

Figure 33-15. -Refer to Figure 33-15. Suppose the economy begins at point A. Decreases in what four variables could result in a movement to point D?

According to the classical model, an increase in the money supply causes

Other things the same, if the price level falls, domestic interest rates

When output rises, unemployment falls.

As recessions begin, income

Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major restrictions on logging removed. In the short run

If wages are sticky, then a greater than expected increase in the price level

The model of aggregate demand and aggregate supply

Other things the same, as the price level decreases it induces greater spending on

Suppose the government raises taxes. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

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 Costs of Production

Firms in Competitive Markets

Monopoly

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

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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