Question 1

During recessions declines in investment account for about

Accepted Answer

A)  1/6 of the decline in real GDP. 
B)  1/7 of the decline in real GDP. 
C)  1/3 of the decline in real GDP. 
D)  2/3 of the decline in real GDP. 
A)  1/6 of the decline in real GDP. 
B)  1/7 of the decline in real GDP. 
C)  1/3 of the decline in real GDP. 
D)  2/3 of the decline in real GDP.

Question 2

Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time.
-Refer to Pessimism. 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.

Question 3

Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time.
-Refer to Optimism. What happens to the expected price level and what's the result for wage bargaining?

Accepted Answer

A)  The expected price level falls. Bargains are struck for higher wages. 
B)  The expected price level falls. Bargains are struck for lower wages. 
C)  The expected price level rises. Bargains are struck for higher wages. 
D)  The expected price level rises. Bargains are struck for lower wages. 
A)  The expected price level falls. Bargains are struck for higher wages. 
B)  The expected price level falls. Bargains are struck for lower wages. 
C)  The expected price level rises. Bargains are struck for higher wages. 
D)  The expected price level rises. Bargains are struck for lower wages.

Question 4

As the price level rises, the interest rate

Accepted Answer

A)  falls, so the supply of dollars in the market for foreign currency exchange shifts left. 
B)  falls, so the supply of dollars in the market for foreign currency exchange shifts right. 
C)  rises, so the supply of dollars in the market for foreign currency exchange shifts left. 
D)  rises, so the supply of dollars in the market for foreign currency exchange shifts right. 
A)  falls, so the supply of dollars in the market for foreign currency exchange shifts left. 
B)  falls, so the supply of dollars in the market for foreign currency exchange shifts right. 
C)  rises, so the supply of dollars in the market for foreign currency exchange shifts left. 
D)  rises, so the supply of dollars in the market for foreign currency exchange shifts right.

Question 5

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Accepted Answer

A)  the relationship between output and unemployment is erratic and difficult to characterize. 
B)  when one macroeconomic variable that measures income or spending is falling, other macroeconomic variables that measure income or spending are likely to be rising. 
C)  recessions do not occur at regular intervals. 
D)  All of the above are correct. 
A)  the relationship between output and unemployment is erratic and difficult to characterize. 
B)  when one macroeconomic variable that measures income or spending is falling, other macroeconomic variables that measure income or spending are likely to be rising. 
C)  recessions do not occur at regular intervals. 
D)  All of the above are correct.

Question 6

Recession come at

Accepted Answer

A)  regular intervals. During recessions consumption spending falls relatively more than investment spending. 
B)  regular intervals. During recessions investment spending falls relatively more than consumption spending. 
C)  irregular intervals. During recessions consumption spending falls relatively more than investment spending. 
D)  irregular intervals. During recessions investment spending falls relatively more than consumption spending. 
A)  regular intervals. During recessions consumption spending falls relatively more than investment spending. 
B)  regular intervals. During recessions investment spending falls relatively more than consumption spending. 
C)  irregular intervals. During recessions consumption spending falls relatively more than investment spending. 
D)  irregular intervals. During recessions investment spending falls relatively more than consumption spending.

Question 7

Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time.
-Refer to Pessimism. In the long run, the change in price expectations created by pessimism shifts

Accepted Answer

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

Question 8

Which of the following shifts the short-run aggregate supply curve right?

Accepted Answer

A)  both an increase in the price level that is greater than expected and an increase in the expected price level. 
B)  an increase in the price level that is greater than expected, but not an increase in the expected price level. 
C)  an increase in the expected price level, but not an increase in the price level that is greater than expected. 
D)  neither an increase in the price level that is greater than expected nor an increase in the expected price level. 
A)  both an increase in the price level that is greater than expected and an increase in the expected price level. 
B)  an increase in the price level that is greater than expected, but not an increase in the expected price level. 
C)  an increase in the expected price level, but not an increase in the price level that is greater than expected. 
D)  neither an increase in the price level that is greater than expected nor an increase in the expected price level.

Question 9

In the short-run an increase in the costs of production makes

Accepted Answer

A)  output and prices rise. 
B)  output rise and prices fall. 
C)  output fall and prices rise. 
D)  output and prices fall. 
A)  output and prices rise. 
B)  output rise and prices fall. 
C)  output fall and prices rise. 
D)  output and prices fall.

Question 10

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 11

What curve shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level?

Accepted Answer

The aggreg

Question 12

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp rise in the stock market, an increase in government purchases, an increase in the money supply and a decline in the value of the dollar. In the short run

Accepted Answer

A)  the price level and real GDP will both rise. 
B)  the price level and real GDP will both fall. 
C)  neither the price leave nor real GDP will change. 
D)  All of the above are possible. 
A)  the price level and real GDP will both rise. 
B)  the price level and real GDP will both fall. 
C)  neither the price leave nor real GDP will change. 
D)  All of the above are possible.

Question 13

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 14

A decrease in the price level

Accepted Answer

A)  increases the quantity of goods and services supplied in the short run. 
B)  decreases the quantity of goods and services supplied in the long run. 
C)  decreases the quantity of goods and services demanded. 
D)  increases the quantity of goods and services demanded. 
A)  increases the quantity of goods and services supplied in the short run. 
B)  decreases the quantity of goods and services supplied in the long run. 
C)  decreases the quantity of goods and services demanded. 
D)  increases the quantity of goods and services demanded.

Question 15

Figure 33-4  
-Refer to Figure 33-4. If the economy starts at A and moves to D in the short run, the economy

Accepted Answer

A)  moves to A in the long run. 
B)  moves to B in the long run. 
C)  moves to C in the long run. 
D)  stays at D in the long run. 
A)  moves to A in the long run. 
B)  moves to B in the long run. 
C)  moves to C in the long run. 
D)  stays at D in the long run.

Question 16

Figure 33-6.  
-Refer to Figure 33-6. Which of the long-run aggregate-supply curves is consistent with a recession?

Accepted Answer

A)  LRAS1 
B)  LRAS2 
C)  LRAS3 
D)  Both LRAS1 and LRAS3 
A)  LRAS1 
B)  LRAS2 
C)  LRAS3 
D)  Both LRAS1 and LRAS3

Question 17

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Accepted Answer

When people expect the price l

Question 18

Most economists believe that in the short run

Accepted Answer

A)  real and nominal variables are determined independently and that money cannot move real GDP away from its long-run trend. 
B)  real and nominal variables are determined independently but that money can temporarily move real GDP away from its long-run trend. 
C)  real and nominal variables are highly intertwined but that money cannot move real GDP away from its long- run trend. 
D)  real and nominal variables are highly intertwined and that money can temporarily move real GDP away from its long-run trend. 
A)  real and nominal variables are determined independently and that money cannot move real GDP away from its long-run trend. 
B)  real and nominal variables are determined independently but that money can temporarily move real GDP away from its long-run trend. 
C)  real and nominal variables are highly intertwined but that money cannot move real GDP away from its long- run trend. 
D)  real and nominal variables are highly intertwined and that money can temporarily move real GDP away from its long-run trend.

Question 19

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Accepted Answer

A) True 
 B)False

Question 20

Figure 33-4  
-Refer to Figure 33-4. A decrease in taxes would move the economy from C to

Accepted Answer

A)  B in the short run and the long run. 
B)  D in the short run and the long run. 
C)  B in the short run and A in the long run. 
D)  D in the short run and C in the long run. 
A)  B in the short run and the long run. 
B)  D in the short run and the long run. 
C)  B in the short run and A in the long run. 
D)  D in the short run and C in the long run.

Exam 23: Aggregate Demand and Aggregate Supply

During recessions declines in investment account for about

As the price level rises, the interest rate

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Recession come at

Which of the following shifts the short-run aggregate supply curve right?

In the short-run an increase in the costs of production makes

Which of the following both shift aggregate demand right?

What curve shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp rise in the stock market, an increase in government purchases, an increase in the money supply and a decline in the value of the dollar. In the short run

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

A decrease in the price level

Figure 33-4 -Refer to Figure 33-4. If the economy starts at A and moves to D in the short run, the economy

Figure 33-6. -Refer to Figure 33-6. Which of the long-run aggregate-supply curves is consistent with a recession?

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Most economists believe that in the short run

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Figure 33-4 -Refer to Figure 33-4. A decrease in taxes would move the economy from C to

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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