Question 1

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

Accepted Answer

A)  an increase in the money supply 
B)  an increase in the price level 
C)  a decrease in the expected price level 
D)  All of the above are correct. 
A)  an increase in the money supply 
B)  an increase in the price level 
C)  a decrease in the expected price level 
D)  All of the above are correct.

Question 2

The mathematical equation: quantity of output supplied = natural rate of output + aactual price level - expected price level), expresses

Accepted Answer

A)  how the long run equilibrium adjusts to changes in money supply. 
B)  how output deviates in the short run from its long run natural rate. 
C)  how the short run aggregate supply curve shifts. 
D)  how adverse shifts in aggregate supply can cause stagflation. 
A)  how the long run equilibrium adjusts to changes in money supply. 
B)  how output deviates in the short run from its long run natural rate. 
C)  how the short run aggregate supply curve shifts. 
D)  how adverse shifts in aggregate supply can cause stagflation.

Question 3

During recessions which type of spending falls?

Accepted Answer

A)  consumption and investment 
B)  investment but not consumption 
C)  consumption but not investment 
D)  neither consumption nor investment 
A)  consumption and investment 
B)  investment but not consumption 
C)  consumption but not investment 
D)  neither consumption nor investment

Question 4

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Accepted Answer

A)  employment and production rise. 
B)  employment rises and production falls. 
C)  employment falls and production rises. 
D)  employment and production fall. 
A)  employment and production rise. 
B)  employment rises and production falls. 
C)  employment falls and production rises. 
D)  employment and production fall.

Question 5

Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, then

Accepted Answer

A)  employment and production rise. 
B)  employment rises and production falls. 
C)  employment falls and production rises. 
D)  employment and production fall. 
A)  employment and production rise. 
B)  employment rises and production falls. 
C)  employment falls and production rises. 
D)  employment and production fall.

Question 6

In the aggregate demand and aggregate supply model, the point where the aggregate demand curve crosses the long run aggregate supply curve, and the expected price level equals the actual price level, is known as what?

Accepted Answer

Long run e

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. 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 8

Keynes thought that the behavior of the economy in the short run was influenced by what he called "animal spirits." By this he meant that business people sometimes felt good about the economy, and carried out lots of investment, and at other times felt bad about the economy, and so cut back on their investment spending. Explain how such fluctuations in investment would lead to fluctuations in real GDP and prices.

Accepted Answer

Fluctuations in investment cause the agg

Question 9

Which of the following would help explain why the aggregate demand curve slopes downward?

Accepted Answer

A)  An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services. 
B)  A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports. 
C)  A higher price level increases real wealth, which stimulates spending on consumption. 
D)  A lower price level reduces the interest rate, which encourages greater spending on investment goods. 
A)  An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services. 
B)  A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports. 
C)  A higher price level increases real wealth, which stimulates spending on consumption. 
D)  A lower price level reduces the interest rate, which encourages greater spending on investment goods.

Question 10

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 11

The position of the long-run aggregate supply curve

Accepted Answer

A)  is determined by resource usage and technology. 
B)  is at the point where the unemployment rate is zero. 
C)  shifts to the right when the money supply increases. 
D)  is at the point where the economy would cease to grow. 
A)  is determined by resource usage and technology. 
B)  is at the point where the unemployment rate is zero. 
C)  shifts to the right when the money supply increases. 
D)  is at the point where the economy would cease to grow.

Question 12

Other things the same, an increase in the amount of capital firms wish to purchase would initially shift

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 13

Other things the same, the aggregate quantity of output supplied will increase if the price level

Accepted Answer

A)  is lower than expected so that firms believe the relative price of their output has increased. 
B)  is lower than expected so that firms believe the relative price of their output has decreased. 
C)  is higher than expected so that firms believe the relative price of their output has increased. 
D)  is higher than expected so that firms believe the relative price of their output has decreased. 
A)  is lower than expected so that firms believe the relative price of their output has increased. 
B)  is lower than expected so that firms believe the relative price of their output has decreased. 
C)  is higher than expected so that firms believe the relative price of their output has increased. 
D)  is higher than expected so that firms believe the relative price of their output has decreased.

Question 14

When taxes decrease, consumption

Accepted Answer

A)  increases, so aggregate demand shifts right. 
B)  increases, so aggregate supply shifts right. 
C)  decreases, so aggregate demand shifts left. 
D)  decreases, so aggregate supply shifts left. 
A)  increases, so aggregate demand shifts right. 
B)  increases, so aggregate supply shifts right. 
C)  decreases, so aggregate demand shifts left. 
D)  decreases, so aggregate supply shifts left.

Question 15

The long-run aggregate supply curve shifts right if

Accepted Answer

A)  technology improves. 
B)  the price level decreases. 
C)  the money supply increases. 
D)  All of the above are correct. 
A)  technology improves. 
B)  the price level decreases. 
C)  the money supply increases. 
D)  All of the above are correct.

Question 16

Other things the same, if the price level falls, people

Accepted Answer

A)  increase foreign bond purchases, so the dollar appreciates. 
B)  increase foreign bond purchases, so the dollar depreciates. 
C)  increase domestic bond purchases, so the dollar appreciates. 
D)  increase domestic bond purchases, so the dollar depreciates. 
A)  increase foreign bond purchases, so the dollar appreciates. 
B)  increase foreign bond purchases, so the dollar depreciates. 
C)  increase domestic bond purchases, so the dollar appreciates. 
D)  increase domestic bond purchases, so the dollar depreciates.

Question 17

As the price level rises

Accepted Answer

A)  people will want to buy more bonds, so the interest rate rises. 
B)  people will want to buy fewer bonds, so the interest rate falls. 
C)  people will want to buy more bonds, so the interest rate falls. 
D)  people will want to buy fewer bonds, so the interest rate rises. 
A)  people will want to buy more bonds, so the interest rate rises. 
B)  people will want to buy fewer bonds, so the interest rate falls. 
C)  people will want to buy more bonds, so the interest rate falls. 
D)  people will want to buy fewer bonds, so the interest rate rises.

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 Stock Market Boom 2015. How is the new long-run equilibrium different from the original one?

Accepted Answer

A)  the price level and real GDP are higher 
B)  the price level and real GDP are lower. 
C)  the price level is higher and real GDP is the same. 
D)  the price level is the same and real GDP is higher. 
A)  the price level and real GDP are higher 
B)  the price level and real GDP are lower. 
C)  the price level is higher and real GDP is the same. 
D)  the price level is the same and real GDP is higher.

Question 19

If there are sticky wages, and the price level is greater than what was expected, then

Accepted Answer

A)  the quantity of aggregate goods and services supplied falls, which is shown by a shift of the short-run aggregate supply curve to the left. 
B)  the quantity of aggregate goods and services supplied falls, as shown by a movement to the left along the short-run aggregate supply curve. 
C)  the quantity of aggregate goods and services supplied rises, as shown by a shift of the short-run aggregate supply curve to the right. 
D)  the quantity of aggregate goods and services supplied rises, as shown by a movement to the right along the short-run aggregate supply curve. 
A)  the quantity of aggregate goods and services supplied falls, which is shown by a shift of the short-run aggregate supply curve to the left. 
B)  the quantity of aggregate goods and services supplied falls, as shown by a movement to the left along the short-run aggregate supply curve. 
C)  the quantity of aggregate goods and services supplied rises, as shown by a shift of the short-run aggregate supply curve to the right. 
D)  the quantity of aggregate goods and services supplied rises, as shown by a movement to the right along the short-run aggregate supply curve.

Question 20

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

Accepted Answer

A)  higher than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied. 
B)  higher than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied. 
C)  lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied. 
D)  lower than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied. 
A)  higher than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied. 
B)  higher than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied. 
C)  lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied. 
D)  lower than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied.

Exam 23: Aggregate Demand and Aggregate Supply

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

The mathematical equation: quantity of output supplied = natural rate of output + aactual price level - expected price level), expresses

During recessions which type of spending falls?

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, then

In the aggregate demand and aggregate supply model, the point where the aggregate demand curve crosses the long run aggregate supply curve, and the expected price level equals the actual price level, is known as what?

Which of the following would help explain why the aggregate demand curve slopes downward?

An increase in the money supply shifts the long-run aggregate supply curve to the right.

The position of the long-run aggregate supply curve

Other things the same, an increase in the amount of capital firms wish to purchase would initially shift

Other things the same, the aggregate quantity of output supplied will increase if the price level

When taxes decrease, consumption

The long-run aggregate supply curve shifts right if

Other things the same, if the price level falls, people

As the price level rises

If there are sticky wages, and the price level is greater than what was expected, then

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

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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