Question 1

Which of the following shifts short-run, but not long-run aggregate supply right?

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)  an increase 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)  an increase in the money supply

Question 2

Other things the same, as the price level falls, which of the following increases?

Accepted Answer

A)  lending and investment spending 
B)  lending, but not investment spending 
C)  investment spending, but not lending 
D)  neither investment spending nor lending 
A)  lending and investment spending 
B)  lending, but not investment spending 
C)  investment spending, but not lending 
D)  neither investment spending nor lending

Question 3

Changes in what four variables will shift the long run aggregate supply curve?

Accepted Answer

Labor, capital, natu

Question 4

Other things the same, continued increases in the money supply lead to

Accepted Answer

A)  continued increases in the price level and real GDP. 
B)  continued increases in the price level but not continued increases in real GDP. 
C)  continued increases in real GDP but not continued increases in the price level. 
D)  a one-time permanent increase in both prices and real GDP. 
A)  continued increases in the price level and real GDP. 
B)  continued increases in the price level but not continued increases in real GDP. 
C)  continued increases in real GDP but not continued increases in the price level. 
D)  a one-time permanent increase in both prices and real GDP.

Question 5

Other things the same, if the long-run aggregate supply curve shifts right, prices

Accepted Answer

A)  and output both increase. 
B)  and output both decrease. 
C)  increase and output decreases. 
D)  decrease and output increases. 
A)  and output both increase. 
B)  and output both decrease. 
C)  increase and output decreases. 
D)  decrease and output increases.

Question 6

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Accepted Answer

A)  because unemployment is low, wages will be bid up and short-run aggregate supply will shift right. 
B)  because unemployment is low, wages will be bid down and short-run aggregate supply will shift right. 
C)  because unemployment is high, wages will be bid up and short-run aggregate supply will shift right. 
D)  because unemployment is high, wages will be bid down and short-run aggregate supply will shift right. 
A)  because unemployment is low, wages will be bid up and short-run aggregate supply will shift right. 
B)  because unemployment is low, wages will be bid down and short-run aggregate supply will shift right. 
C)  because unemployment is high, wages will be bid up and short-run aggregate supply will shift right. 
D)  because unemployment is high, wages will be bid down and short-run aggregate supply will shift right.

Question 7

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

Accepted Answer

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

Question 8

An economic expansion caused by a shift in aggregate demand causes prices to

Accepted Answer

A)  rise in the short run, and rise even more in the long run. 
B)  rise in the short run, and fall back to their original level in the long run. 
C)  fall in the short run, and fall even more in the long run. 
D)  fall in the short run, and rise back to their original level in the long run. 
A)  rise in the short run, and rise even more in the long run. 
B)  rise in the short run, and fall back to their original level in the long run. 
C)  fall in the short run, and fall even more in the long run. 
D)  fall in the short run, and rise back to their original level in the long run.

Question 9

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

Accepted Answer

Expected price level changes w

Question 10

Refer to Political Instability Abroad. What would happen to the dollar?

Accepted Answer

A)  It would appreciate in foreign exchange markets making U.S goods more expensive compared to foreign goods. 
B)  It would appreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods. 
C)  It would depreciate in foreign exchange markets making U.S. goods more expensive compared to foreign goods. 
D)  It would depreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods. 
A)  It would appreciate in foreign exchange markets making U.S goods more expensive compared to foreign goods. 
B)  It would appreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods. 
C)  It would depreciate in foreign exchange markets making U.S. goods more expensive compared to foreign goods. 
D)  It would depreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods.

Question 11

If money is neutral, then changes in the quantity of money

Accepted Answer

A)  do not affect real output. 
B)  affect both nominal and real output 
C)  do not affect nominal output. 
D)  affect neither nominal nor real output. 
A)  do not affect real output. 
B)  affect both nominal and real output 
C)  do not affect nominal output. 
D)  affect neither nominal nor real output.

Question 12

The aggregate-demand curve shows that a decrease in the price level

Accepted Answer

A)  decreases the dollar value of goods and services demanded in the economy. 
B)  decreases the real value of goods and services demanded in the economy. 
C)  increases the dollar value of goods and services demanded in the economy. 
D)  increases the real value of goods and services demanded in the economy. 
A)  decreases the dollar value of goods and services demanded in the economy. 
B)  decreases the real value of goods and services demanded in the economy. 
C)  increases the dollar value of goods and services demanded in the economy. 
D)  increases the real value of goods and services demanded in the economy.

Question 13

The long-run aggregate supply curve would shift right if the government were to

Accepted Answer

A)  reduce the minimum-wage. 
B)  make unemployment benefits more generous. 
C)  raise taxes on investment spending. 
D)  All of the above are correct. 
A)  reduce the minimum-wage. 
B)  make unemployment benefits more generous. 
C)  raise taxes on investment spending. 
D)  All of the above are correct.

Question 14

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

Accepted Answer

A)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. 
B)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. 
C)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower. 
D)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower. 
A)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. 
B)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. 
C)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower. 
D)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.

Question 15

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Accepted Answer

A) True 
 B)False

Question 16

Sticky nominal wages can result in

Accepted Answer

A)  lower profits for firms when the price level is lower than expected. 
B)  a decrease in real wages when the price level is lower than expected. 
C)  a short-run aggregate-supply curve that is vertical. 
D)  a long-run aggregate-supply curve that is upward-sloping. 
A)  lower profits for firms when the price level is lower than expected. 
B)  a decrease in real wages when the price level is lower than expected. 
C)  a short-run aggregate-supply curve that is vertical. 
D)  a long-run aggregate-supply curve that is upward-sloping.

Question 17

Other things the same, as the price level rises,

Accepted Answer

A)  the dollar depreciates. 
B)  the interest rate falls. 
C)  people feel less wealthy. 
D)  All of the above are correct. 
A)  the dollar depreciates. 
B)  the interest rate falls. 
C)  people feel less wealthy. 
D)  All of the above are correct.

Question 18

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. In the long run, the change in price expectations created by optimism 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 19

Historically, the change in real GDP during recessions has been

Accepted Answer

A)  mostly a change in investment spending. 
B)  mostly a change in consumption spending. 
C)  about equally divided between consumption and investment spending. 
D)  sometimes mostly a change in consumption and sometimes mostly a change in investment. 
A)  mostly a change in investment spending. 
B)  mostly a change in consumption spending. 
C)  about equally divided between consumption and investment spending. 
D)  sometimes mostly a change in consumption and sometimes mostly a change in investment.

Question 20

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

Accepted Answer

A)  the supply of dollars would shift right and the exchange rate would rise. 
B)  the supply of dollars would shift right and the exchange rate would fall. 
C)  the supply of dollars would shift left and the exchange rate would rise. 
D)  None of the above is correct. 
A)  the supply of dollars would shift right and the exchange rate would rise. 
B)  the supply of dollars would shift right and the exchange rate would fall. 
C)  the supply of dollars would shift left and the exchange rate would rise. 
D)  None of the above is correct.

Exam 23: Aggregate Demand and Aggregate Supply

Which of the following shifts short-run, but not long-run aggregate supply right?

Other things the same, as the price level falls, which of the following increases?

Changes in what four variables will shift the long run aggregate supply curve?

Other things the same, continued increases in the money supply lead to

Other things the same, if the long-run aggregate supply curve shifts right, prices

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

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

An economic expansion caused by a shift in aggregate demand causes prices to

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

Refer to Political Instability Abroad. What would happen to the dollar?

If money is neutral, then changes in the quantity of money

The aggregate-demand curve shows that a decrease in the price level

The long-run aggregate supply curve would shift right if the government were to

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Sticky nominal wages can result in

Other things the same, as the price level rises,

Historically, the change in real GDP during recessions has been

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

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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