Question 1

If aggregate demand shifts left, then in the short run

Accepted Answer

A)  the price level and real GDP both rise. 
B)  the price level rises and real GDP falls. 
C)  the price level falls and real GDP rises. 
D)  the price and real GDP both fall. 
A)  the price level and real GDP both rise. 
B)  the price level rises and real GDP falls. 
C)  the price level falls and real GDP rises. 
D)  the price and real GDP both fall.

Question 2

The investment component of GDP measures spending on

Accepted Answer

A)  financial assets such as stocks and bonds. During recessions it declines by a relatively large amount. 
B)  residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively large amount. 
C)  financial assets such as stocks and bonds. During recessions it declines by a relatively small amount. 
D)  residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively small amount. 
A)  financial assets such as stocks and bonds. During recessions it declines by a relatively large amount. 
B)  residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively large amount. 
C)  financial assets such as stocks and bonds. During recessions it declines by a relatively small amount. 
D)  residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively small amount.

Question 3

Other things the same, a decrease in the price level makes consumers feel

Accepted Answer

A)  less wealthy, so the quantity of goods and services demanded falls. 
B)  less wealthy, so the quantity of goods and services demanded rises. 
C)  more wealthy, so the quantity of goods and services demanded rises. 
D)  more wealthy, so the quantity of goods and services demanded falls. 
A)  less wealthy, so the quantity of goods and services demanded falls. 
B)  less wealthy, so the quantity of goods and services demanded rises. 
C)  more wealthy, so the quantity of goods and services demanded rises. 
D)  more wealthy, so the quantity of goods and services demanded falls.

Question 4

If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds

Accepted Answer

A)  the dollar would appreciate which would cause aggregate demand to shift right. 
B)  the dollar would appreciate which would cause aggregate demand to shift left. 
C)  the dollar would depreciate which would cause aggregate demand to shift right. 
D)  the dollar would depreciate which would cause aggregate demand to shift left. 
A)  the dollar would appreciate which would cause aggregate demand to shift right. 
B)  the dollar would appreciate which would cause aggregate demand to shift left. 
C)  the dollar would depreciate which would cause aggregate demand to shift right. 
D)  the dollar would depreciate which would cause aggregate demand to shift left.

Question 5

In 1986, OPEC countries increased their production of oil. This caused

Accepted Answer

A)  the price level to rise. 
B)  aggregate supply to shift right. 
C)  unemployment to rise. 
D)  None of the above is correct. 
A)  the price level to rise. 
B)  aggregate supply to shift right. 
C)  unemployment to rise. 
D)  None of the above is correct.

Question 6

A decrease in the expected price level shifts

Accepted Answer

A)  only the long-run aggregate supply curve right. 
B)  only the short-run aggregate supply curve right. 
C)  both the short-run and the long-run aggregate supply curve right. 
D)  Neither the short-run nor the long-run aggregate supply curve right. 
A)  only the long-run aggregate supply curve right. 
B)  only the short-run aggregate supply curve right. 
C)  both the short-run and the long-run aggregate supply curve right. 
D)  Neither the short-run nor the long-run aggregate supply curve right.

Question 7

In the last half of 1999, the U.S. unemployment rate was about 4 percent. Historical experience suggests that this is

Accepted Answer

A)  above the natural rate, so real GDP growth was likely low. 
B)  above the natural rate, so real GDP growth was likely high. 
C)  below the natural rate, so real GDP growth was likely low. 
D)  below the natural rate, so real GDP growth was likely high. 
A)  above the natural rate, so real GDP growth was likely low. 
B)  above the natural rate, so real GDP growth was likely high. 
C)  below the natural rate, so real GDP growth was likely low. 
D)  below the natural rate, so real GDP growth was likely high.

Question 8

Which of the following is not a determinant of the long-run level of real GDP?

Accepted Answer

A)  the price level. 
B)  the amount of capital used by firms. 
C)  available stock of human capital. 
D)  available technology 
A)  the price level. 
B)  the amount of capital used by firms. 
C)  available stock of human capital. 
D)  available technology

Question 9

Most economists believe that in the long run, changes in the money supply

Accepted Answer

A)  affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory. 
B)  affect nominal but not real variables. This view that money is ultimately neutral is inconsistent with classical theory. 
C)  affect real but not nominal variables. This view that money is ultimately neutral is consistent with classical theory. 
D)  affect real but not nominal variables. This view that money is ultimately neutral is inconsistent with classical theory. 
A)  affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory. 
B)  affect nominal but not real variables. This view that money is ultimately neutral is inconsistent with classical theory. 
C)  affect real but not nominal variables. This view that money is ultimately neutral is consistent with classical theory. 
D)  affect real but not nominal variables. This view that money is ultimately neutral is inconsistent with classical theory.

Question 10

An increase in the money supply causes output to rise in the long run.

Accepted Answer

A) True 
 B)False

Question 11

According to classical macroeconomic theory, changes in the money supply affect

Accepted Answer

A)  real GDP and the price level. 
B)  real GDP but not the price level. 
C)  the price level, but not real GDP. 
D)  neither the price level nor real GDP. 
A)  real GDP and the price level. 
B)  real GDP but not the price level. 
C)  the price level, but not real GDP. 
D)  neither the price level nor real GDP.

Question 12

Keynes believed that economies experiencing high unemployment should adopt policies to

Accepted Answer

A)  reduce the money supply. 
B)  reduce government expenditures. 
C)  increase aggregate demand. 
D)  increase aggregate supply. 
A)  reduce the money supply. 
B)  reduce government expenditures. 
C)  increase aggregate demand. 
D)  increase aggregate supply.

Question 13

Of the following theories, which is consistent with a vertical long-run aggregate supply curve?

Accepted Answer

A)  the sticky-wage theory 
B)  misperceptions theory 
C)  both the sticky-wage and misperceptions theories. 
D)  neither the sticky-wage nor the misperceptions theory. 
A)  the sticky-wage theory 
B)  misperceptions theory 
C)  both the sticky-wage and misperceptions theories. 
D)  neither the sticky-wage nor the misperceptions theory.

Question 14

From 1995 to 1999 there was a dramatic rise in stock prices. If this rise made people feel wealthier, then it would have shifted

Accepted Answer

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

Question 15

If the actual price level is 165, but people had been expecting it to be 160, then

Accepted Answer

A)  the quantity of output supplied rises, but only in the short run. 
B)  the quantity of output supplied rises in the short run and the long run. 
C)  the quantity of output supplied falls, but only in the short run. 
D)  the quantity of output supplied falls in the short run and the long run. 
A)  the quantity of output supplied rises, but only in the short run. 
B)  the quantity of output supplied rises in the short run and the long run. 
C)  the quantity of output supplied falls, but only in the short run. 
D)  the quantity of output supplied falls in the short run and the long run.

Question 16

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 P1 and Y1 , 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 17

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. 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 18

Figure 33-13.  
-Refer to Figure 33-13. Identify the price and output levels consistent with long-run equilibrium.

Accepted Answer

The answer of Figure 33-13.  
-Refer to Figure 33-13....

Question 19

Figure 33-16.  
-Refer to Figure 33-16. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Accepted Answer

The answer of Figure 33-16.  
-Refer to Figure 33-16....

Question 20

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

Accepted Answer

A) True 
 B)False

Exam 23: Aggregate Demand and Aggregate Supply

If aggregate demand shifts left, then in the short run

The investment component of GDP measures spending on

Other things the same, a decrease in the price level makes consumers feel

If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds

In 1986, OPEC countries increased their production of oil. This caused

A decrease in the expected price level shifts

In the last half of 1999, the U.S. unemployment rate was about 4 percent. Historical experience suggests that this is

Which of the following is not a determinant of the long-run level of real GDP?

Most economists believe that in the long run, changes in the money supply

An increase in the money supply causes output to rise in the long run.

According to classical macroeconomic theory, changes in the money supply affect

Keynes believed that economies experiencing high unemployment should adopt policies to

Of the following theories, which is consistent with a vertical long-run aggregate supply curve?

From 1995 to 1999 there was a dramatic rise in stock prices. If this rise made people feel wealthier, then it would have shifted

If the actual price level is 165, but people had been expecting it to be 160, then

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 P1 and Y1 , then it must be the case that

Figure 33-13. -Refer to Figure 33-13. Identify the price and output levels consistent with long-run equilibrium.

Figure 33-16. -Refer to Figure 33-16. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

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