Question 1

Which of the following is correct?

Accepted Answer

A)  Over the business cycle investment fluctuates more than consumption. 
B)  Economic fluctuations are easy to predict. 
C)  During recessions employment rises. 
D)  Because of government policy the U.S. had zero recessions in the last 25 years. 
A)  Over the business cycle investment fluctuates more than consumption. 
B)  Economic fluctuations are easy to predict. 
C)  During recessions employment rises. 
D)  Because of government policy the U.S. had zero recessions in the last 25 years.

Question 2

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 3

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Accepted Answer

A)  relative to prices wages are higher and employment rise. 
B)  relative to prices wages are higher and employment falls. 
C)  relative to prices wages are lower and employment rises. 
D)  relative to prices wages are lower and employment falls. 
A)  relative to prices wages are higher and employment rise. 
B)  relative to prices wages are higher and employment falls. 
C)  relative to prices wages are lower and employment rises. 
D)  relative to prices wages are lower and employment falls.

Question 4

A change in the money supply changes only nominal variables in the long run.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following did not happen during the onset of the Great Depression?

Accepted Answer

A)  The money supply fell as households took money out of bank deposits. 
B)  The Fed conducted expansionary monetary policy. 
C)  Stock prices fell about 90 percent. 
D)  Disruption of the banking system made it difficult for some firms to obtain funds for investment. 
A)  The money supply fell as households took money out of bank deposits. 
B)  The Fed conducted expansionary monetary policy. 
C)  Stock prices fell about 90 percent. 
D)  Disruption of the banking system made it difficult for some firms to obtain funds for investment.

Question 6

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 7

Keynes explained that recessions and depressions occur because of

Accepted Answer

A)  excess aggregate demand. 
B)  inadequate aggregate demand. 
C)  excess aggregate supply. 
D)  inadequate aggregate supply. 
A)  excess aggregate demand. 
B)  inadequate aggregate demand. 
C)  excess aggregate supply. 
D)  inadequate aggregate supply.

Question 8

An increase in household saving causes consumption to

Accepted Answer

A)  rise and aggregate demand to increase. 
B)  rise and aggregate demand to decrease. 
C)  fall and aggregate demand to increase. 
D)  fall and aggregate demand to decrease. 
A)  rise and aggregate demand to increase. 
B)  rise and aggregate demand to decrease. 
C)  fall and aggregate demand to increase. 
D)  fall and aggregate demand to decrease.

Question 9

Stagflation exists when prices

Accepted Answer

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

Question 10

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 11

Other things the same, a fall in an economy's overall level of prices tends to

Accepted Answer

A)  raise both the quantity demanded and supplied of goods and services. 
B)  raise the quantity demanded of goods and services, but lower the quantity supplied. 
C)  lower the quantity demanded of goods and services, but raise the quantity supplied. 
D)  lower both the quantity demanded and the quantity supplied of goods and services. 
A)  raise both the quantity demanded and supplied of goods and services. 
B)  raise the quantity demanded of goods and services, but lower the quantity supplied. 
C)  lower the quantity demanded of goods and services, but raise the quantity supplied. 
D)  lower both the quantity demanded and the quantity supplied of goods and services.

Question 12

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

Accepted Answer

A)  a decrease in the actual price level 
B)  a decrease in the expected price level 
C)  a decrease in the capital stock 
D)  a decrease in the money supply 
A)  a decrease in the actual price level 
B)  a decrease in the expected price level 
C)  a decrease in the capital stock 
D)  a decrease in the money supply

Question 13

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Accepted Answer

A)  nominal wages are slow to adjust to changing economic conditions 
B)  as the price level falls, the exchange rate falls 
C)  an increase in the money supply lowers the interest rate 
D)  an increase in the interest rate increases investment spending 
A)  nominal wages are slow to adjust to changing economic conditions 
B)  as the price level falls, the exchange rate falls 
C)  an increase in the money supply lowers the interest rate 
D)  an increase in the interest rate increases investment spending

Question 14

When the Fed buys bonds

Accepted Answer

A)  the supply of money increases and so aggregate demand shifts right. 
B)  the supply of money decreases and so aggregate demand shifts left. 
C)  the supply of money decreases and so aggregate demand shifts right. 
D)  the supply of money increases and so aggregate demand shifts left. 
A)  the supply of money increases and so aggregate demand shifts right. 
B)  the supply of money decreases and so aggregate demand shifts left. 
C)  the supply of money decreases and so aggregate demand shifts right. 
D)  the supply of money increases and so aggregate demand shifts left.

Question 15

Other things the same, as the price level falls, a country's exchange rate

Accepted Answer

A)  and interest rates rise. 
B)  and interest rates fall. 
C)  falls and interest rates rise. 
D)  rises and interest rates fall. 
A)  and interest rates rise. 
B)  and interest rates fall. 
C)  falls and interest rates rise. 
D)  rises and interest rates fall.

Question 16

The exchange-rate effect helps explain what feature in the aggregate demand and aggregate supply model?

Accepted Answer

why the ag

Question 17

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U.S. Which pair of GDP growth rates and unemployment rates is realistic?

Accepted Answer

A)  10 percent, 1 percent 
B)  2 percent, 12 percent 
C)  -1 percent, 8 percent 
D)  -2 percent, 2 percent 
A)  10 percent, 1 percent 
B)  2 percent, 12 percent 
C)  -1 percent, 8 percent 
D)  -2 percent, 2 percent

Question 18

All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the expected price level.

Accepted Answer

A) True 
 B)False

Question 19

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 20

In 2008, the United States was in recession. Which of the following things would you not expect to have happened?

Accepted Answer

A)  increased layoffs and firings. 
B)  a higher rate of bankruptcy. 
C)  increased claims for unemployment insurance. 
D)  increased real GDP. 
A)  increased layoffs and firings. 
B)  a higher rate of bankruptcy. 
C)  increased claims for unemployment insurance. 
D)  increased real GDP.

Exam 23: Aggregate Demand and Aggregate Supply

Which of the following is correct?

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

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

A change in the money supply changes only nominal variables in the long run.

Which of the following did not happen during the onset of the Great Depression?

As the price level falls

Keynes explained that recessions and depressions occur because of

An increase in household saving causes consumption to

Stagflation exists when prices

People will buy more if the price level

Other things the same, a fall in an economy's overall level of prices tends to

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

Which of the following can explain the upward slope of the short-run aggregate supply curve?

When the Fed buys bonds

Other things the same, as the price level falls, a country's exchange rate

The exchange-rate effect helps explain what feature in the aggregate demand and aggregate supply model?

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U.S. Which pair of GDP growth rates and unemployment rates is realistic?

All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the expected price level.

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

In 2008, the United States was in recession. Which of the following things would you not expect to have happened?

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

Filters