Question 1

The effects of a higher than expected price level are shown by

Accepted Answer

A)  shifting the short-run aggregate supply curve right. 
B)  shifting the short-run aggregate supply curve left. 
C)  moving to the right along a given aggregate supply curve. 
D)  moving to the left along a given aggregate supply curve. 
A)  shifting the short-run aggregate supply curve right. 
B)  shifting the short-run aggregate supply curve left. 
C)  moving to the right along a given aggregate supply curve. 
D)  moving to the left along a given aggregate supply curve.

Question 2

Figure 33-4  
-Refer to Figure 33-4. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from

Accepted Answer

A)  A to B. 
B)  C to D. 
C)  B to A. 
D)  D to C. 
A)  A to B. 
B)  C to D. 
C)  B to A. 
D)  D to C.

Question 3

When the price level falls

Accepted Answer

A)  The interest rate falls because people will want to hold more money and so sell bonds. 
B)  Firms will want to spend more on new business buildings and business equipment and households will want to spend more building new homes. 
C)  Both A and B are correct. 
D)  None of the above are correct. 
A)  The interest rate falls because people will want to hold more money and so sell bonds. 
B)  Firms will want to spend more on new business buildings and business equipment and households will want to spend more building new homes. 
C)  Both A and B are correct. 
D)  None of the above are correct.

Question 4

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

Accepted Answer

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

Question 5

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Accepted Answer

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

Question 6

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following accounts for about two-thirds of the decline in output during a recession?

Accepted Answer

A)  the decline in government purchases. 
B)  the decline in total consumption spending. 
C)  the decline in investment spending. 
D)  the decline in net exports. 
A)  the decline in government purchases. 
B)  the decline in total consumption spending. 
C)  the decline in investment spending. 
D)  the decline in net exports.

Question 8

Other things the same, if the U.S. price level rises, then

Accepted Answer

A)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises. 
B)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls. 
C)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises. 
D)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls. 
A)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises. 
B)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls. 
C)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises. 
D)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.

Question 9

Misperceptions theory helps explain what feature of the aggregate demand and aggregate supply model?

Accepted Answer

why the short run ag

Question 10

Other things the same, what happens in the short run to the price level and quantity of output when the aggregate demand curve shifts to the left?

Accepted Answer

The price

Question 11

Most macroeconomic variables that measure some type of income, spending, or production fluctuate closely together.

Accepted Answer

A) True 
 B)False

Question 12

When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is

Accepted Answer

A)  less than it desires and increase its production. 
B)  less than it desires and decrease its production 
C)  more than it desires and increase its production. 
D)  less than it desires and decrease its production. 
A)  less than it desires and increase its production. 
B)  less than it desires and decrease its production 
C)  more than it desires and increase its production. 
D)  less than it desires and decrease its production.

Question 13

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 Figure 33-7. If the economy starts at Y, then a recession occurs at

Accepted Answer

A)  V. 
B)  W. 
C)  X. 
D)  Z. 
A)  V. 
B)  W. 
C)  X. 
D)  Z.

Question 14

Suppose the economy is in long-run equilibrium. In a short span of time, there is an increase in the money supply, a tax decrease, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

Accepted Answer

A)  the price level and real GDP both to rise. 
B)  the price level and real GDP both to fall. 
C)  the price level and real GDP both to stay the same. 
D)  All of the above are possible. 
A)  the price level and real GDP both to rise. 
B)  the price level and real GDP both to fall. 
C)  the price level and real GDP both to stay the same. 
D)  All of the above are possible.

Question 15

Which of the following would increase the price level?

Accepted Answer

A)  an increase in the money supply. 
B)  an increase in taxes. 
C)  a decrease in the expected price level. 
D)  a decrease in the natural rate of unemployment. 
A)  an increase in the money supply. 
B)  an increase in taxes. 
C)  a decrease in the expected price level. 
D)  a decrease in the natural rate of unemployment.

Question 16

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

Accepted Answer

A)  increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. 
B)  increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. 
C)  decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. 
D)  decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. 
A)  increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. 
B)  increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. 
C)  decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. 
D)  decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.

Question 17

When the dollar appreciates, U.S.

Accepted Answer

A)  net exports rise, which increases the aggregate quantity of goods and services demanded. 
B)  net exports rise, which decreases the aggregate quantity of goods and services demanded. 
C)  net exports fall, which increases the aggregate quantity of goods and services demanded. 
D)  net exports fall, which decreases the aggregate quantity of goods and services demanded. 
A)  net exports rise, which increases the aggregate quantity of goods and services demanded. 
B)  net exports rise, which decreases the aggregate quantity of goods and services demanded. 
C)  net exports fall, which increases the aggregate quantity of goods and services demanded. 
D)  net exports fall, which decreases the aggregate quantity of goods and services demanded.

Question 18

Other things the same, if the long-run aggregate supply curve shifts left, 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 19

Stagflation results from continued decreases in aggregate demand.

Accepted Answer

A) True 
 B)False

Question 20

Figure 33-1.  
-Refer to Figure 33-1. Line A is

Accepted Answer

A)  investment spending. 
B)  real GDP. 
C)  unemployment rate. 
D)  CPI. 
A)  investment spending. 
B)  real GDP. 
C)  unemployment rate. 
D)  CPI.

Exam 23: Aggregate Demand and Aggregate Supply

The effects of a higher than expected price level are shown by

Figure 33-4 -Refer to Figure 33-4. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from

When the price level falls

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

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Which of the following accounts for about two-thirds of the decline in output during a recession?

Other things the same, if the U.S. price level rises, then

Misperceptions theory helps explain what feature of the aggregate demand and aggregate supply model?

Other things the same, what happens in the short run to the price level and quantity of output when the aggregate demand curve shifts to the left?

Most macroeconomic variables that measure some type of income, spending, or production fluctuate closely together.

When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is

Suppose the economy is in long-run equilibrium. In a short span of time, there is an increase in the money supply, a tax decrease, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

Which of the following would increase the price level?

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

When the dollar appreciates, U.S.

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

Stagflation results from continued decreases in aggregate demand.

Figure 33-1. -Refer to Figure 33-1. Line A is

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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