Question 1

Which of the following is not included in aggregate demand?

Accepted Answer

A)  purchases of stock and bonds 
B)  purchases of services such as visits to the doctor 
C)  purchases of capital goods such as equipment in a factory 
D)  purchases by foreigners of consumer goods produced in the United States 
A)  purchases of stock and bonds 
B)  purchases of services such as visits to the doctor 
C)  purchases of capital goods such as equipment in a factory 
D)  purchases by foreigners of consumer goods produced in the United States

Question 2

If the price level falls, the real value of a dollar

Accepted Answer

A)  rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve. 
B)  rises, so people will want to buy more. This response shifts aggregate demand to the right. 
C)  falls, so people will want to buy less. This response helps explain the slope of the aggregate demand curve. 
D)  falls, so people will want to buy less. This response shifts aggregate demand to the left. 
A)  rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve. 
B)  rises, so people will want to buy more. This response shifts aggregate demand to the right. 
C)  falls, so people will want to buy less. This response helps explain the slope of the aggregate demand curve. 
D)  falls, so people will want to buy less. This response shifts aggregate demand to the left.

Question 3

An increase in the actual price level does not shift the short-run aggregate supply curve, but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 4

Figure 33-5.  
-Refer to Figure 33-5. The appearance of the long-run aggregate-supply LRAS) curve

Accepted Answer

A)  is consistent with the concept of monetary neutrality. 
B)  is consistent with the idea that point A represents a long-run equilibrium and a short-run equilibrium when the relevant short-run aggregate-supply curve is SRAS1. 
C)  indicates that Y1 is the natural rate of output. 
D)  All of the above are correct. 
A)  is consistent with the concept of monetary neutrality. 
B)  is consistent with the idea that point A represents a long-run equilibrium and a short-run equilibrium when the relevant short-run aggregate-supply curve is SRAS1. 
C)  indicates that Y1 is the natural rate of output. 
D)  All of the above are correct.

Question 5

Identify the direction of the change during a recession in each of the following: consumption expenditures, investment expenditures, and unemployment.

Accepted Answer

Consumption expendit

Question 6

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 Stock Market Boom 2015. Which curve shifts and in which direction?

Accepted Answer

A)  aggregate demand shifts right 
B)  aggregate demand shifts left 
C)  aggregate supply shifts right 
D)  aggregate supply shifts left. 
A)  aggregate demand shifts right 
B)  aggregate demand shifts left 
C)  aggregate supply shifts right 
D)  aggregate supply shifts left.

Question 7

Figure 33-8.  
-Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P3 and Y3 , then it must be the case that

Accepted Answer

A)  short run aggregate supply has decreased. 
B)  short run aggregate supply has increased. 
C)  aggregate demand has increased. 
D)  aggregate demand has decreased. 
A)  short run aggregate supply has decreased. 
B)  short run aggregate supply has increased. 
C)  aggregate demand has increased. 
D)  aggregate demand has decreased.

Question 8

Recessions occur at irregular intervals and are almost impossible to predict with much accuracy.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following rises during recessions?

Accepted Answer

A)  layoffs and consumer spending 
B)  layoffs but not consumer spending 
C)  consumer spending but not layoffs 
D)  neither layoffs nor consumer spending 
A)  layoffs and consumer spending 
B)  layoffs but not consumer spending 
C)  consumer spending but not layoffs 
D)  neither layoffs nor consumer spending

Question 10

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 11

As the price level rises

Accepted Answer

A)  people will want to hold more money, so the interest rate rises. 
B)  people will want to hold more money, so the interest rate falls. 
C)  people will want to hold less money, so the interest rate falls. 
D)  people will want to hold less money, so the interest rate rises. 
A)  people will want to hold more money, so the interest rate rises. 
B)  people will want to hold more money, so the interest rate falls. 
C)  people will want to hold less money, so the interest rate falls. 
D)  people will want to hold less money, so the interest rate rises.

Question 12

If the price level falls, the real value of a dollar

Accepted Answer

A)  rises, so people will want to buy more. 
B)  rises, so people will want to buy less. 
C)  falls, so people will want to buy more. 
D)  falls, so people will want to buy less. 
A)  rises, so people will want to buy more. 
B)  rises, so people will want to buy less. 
C)  falls, so people will want to buy more. 
D)  falls, so people will want to buy less.

Question 13

Aggregate demand includes

Accepted Answer

A)  the quantity of goods and services the government, households, firms, and customers abroad want to buy. 
B)  neither the quantity of goods and services the government, households, nor firms want to buy nor the quantity of goods and services customers abroad want to buy. 
C)  the quantity of goods and service the government wants to buy, but not the quantity of goods and services households, firms, or customers abroad want to buy. 
D)  the quantity of goods and services households and firms want to buy, but not the quantity of goods and services the government wants to buy. 
A)  the quantity of goods and services the government, households, firms, and customers abroad want to buy. 
B)  neither the quantity of goods and services the government, households, nor firms want to buy nor the quantity of goods and services customers abroad want to buy. 
C)  the quantity of goods and service the government wants to buy, but not the quantity of goods and services households, firms, or customers abroad want to buy. 
D)  the quantity of goods and services households and firms want to buy, but not the quantity of goods and services the government wants to buy.

Question 14

As the price level rises

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 15

Using the aggregate demand and aggregate supply model, a decrease of what curve is by itself consistent with the changes in prices and output that occurred during the onset of the Great Depression?

Accepted Answer

The answer of Using the aggregate demand and aggregate supply...

Question 16

If output is above its natural rate, then according to sticky-wage theory

Accepted Answer

A)  workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce less at any given price level. 
B)  workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce more at any given price level. 
C)  will strike bargains for higher wages. In response to the higher wages firms will produce less at any given price level. 
D)  workers and firms will strike bargains for higher wages. In response to the higher wages firms will produce more at any given price level. 
A)  workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce less at any given price level. 
B)  workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce more at any given price level. 
C)  will strike bargains for higher wages. In response to the higher wages firms will produce less at any given price level. 
D)  workers and firms will strike bargains for higher wages. In response to the higher wages firms will produce more at any given price level.

Question 17

During recessions

Accepted Answer

A)  workers are laid off. 
B)  factories are idle. 
C)  firms may find they are unable to sell all they produce. 
D)  All of the above are correct. 
A)  workers are laid off. 
B)  factories are idle. 
C)  firms may find they are unable to sell all they produce. 
D)  All of the above are correct.

Question 18

Suppose that the economy is at long-run equilibrium. If there is a sharp rise in the stock market combined with a significant increase in the minimum wage, then 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 19

The aggregate demand and aggregate supply graph has the

Accepted Answer

A)  quantity of output on the horizontal axis. Output is best measured by real GDP. 
B)  quantity of output on the horizontal axis. Output is best measured by nominal GDP. 
C)  quantity of output on the vertical axis. Output is best measured by real GDP. 
D)  quantity of output on the vertical axis. Output is best measured by nominal GDP. 
A)  quantity of output on the horizontal axis. Output is best measured by real GDP. 
B)  quantity of output on the horizontal axis. Output is best measured by nominal GDP. 
C)  quantity of output on the vertical axis. Output is best measured by real GDP. 
D)  quantity of output on the vertical axis. Output is best measured by nominal GDP.

Question 20

Economic variables we are most interested in are

Accepted Answer

A)  real variables, but we usually observe nominal variables. 
B)  nominal variables, but we usually observe real variables. 
C)  real variables, which we usually observe. 
D)  nominal variables, which we usually observe. 
A)  real variables, but we usually observe nominal variables. 
B)  nominal variables, but we usually observe real variables. 
C)  real variables, which we usually observe. 
D)  nominal variables, which we usually observe.

Exam 23: Aggregate Demand and Aggregate Supply

Which of the following is not included in aggregate demand?

If the price level falls, the real value of a dollar

An increase in the actual price level does not shift the short-run aggregate supply curve, but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Figure 33-5. -Refer to Figure 33-5. The appearance of the long-run aggregate-supply LRAS) curve

Identify the direction of the change during a recession in each of the following: consumption expenditures, investment expenditures, and unemployment.

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P3 and Y3 , then it must be the case that

Recessions occur at irregular intervals and are almost impossible to predict with much accuracy.

Which of the following rises during recessions?

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

As the price level rises

If the price level falls, the real value of a dollar

Aggregate demand includes

As the price level rises

Using the aggregate demand and aggregate supply model, a decrease of what curve is by itself consistent with the changes in prices and output that occurred during the onset of the Great Depression?

If output is above its natural rate, then according to sticky-wage theory

During recessions

Suppose that the economy is at long-run equilibrium. If there is a sharp rise in the stock market combined with a significant increase in the minimum wage, then in the short run

The aggregate demand and aggregate supply graph has the

Economic variables we are most interested in are

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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