Question 1

In the long run, an increase in the stock of human capital

Accepted Answer

A)  and increases in the money supply both make the price level rise. 
B)  and increases in the money supply both make the price level fall. 
C)  makes the price level rise, while increases in the money supply make prices fall. 
D)  makes the price level fall, while increases in the money supply make prices rise. 
A)  and increases in the money supply both make the price level rise. 
B)  and increases in the money supply both make the price level fall. 
C)  makes the price level rise, while increases in the money supply make prices fall. 
D)  makes the price level fall, while increases in the money supply make prices rise.

Question 2

Explain how an increase in the price level changes interest rates. How does this change in interest rates lead to changes in investment and net exports?

Accepted Answer

When the price level increases, the purc

Question 3

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. In the long run, the change in price expectations created by the stock market boom 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 4

Which of the following has been suggested as a cause of the Great Depression?

Accepted Answer

A)  a decline in the money supply 
B)  a decrease in stock prices 
C)  the collapse of the banking system 
D)  All of the above are correct. 
A)  a decline in the money supply 
B)  a decrease in stock prices 
C)  the collapse of the banking system 
D)  All of the above are correct.

Question 5

As the price level rises,

Accepted Answer

A)  the exchange rate falls, so net exports fall. 
B)  the exchange rate falls, so net exports rise. 
C)  the exchange rate rises, so net exports fall. 
D)  the exchange rate rises, so net exports rise. 
A)  the exchange rate falls, so net exports fall. 
B)  the exchange rate falls, so net exports rise. 
C)  the exchange rate rises, so net exports fall. 
D)  the exchange rate rises, so net exports rise.

Question 6

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  Congress reduces purchases of new weapons systems. 
B)  The Fed buys bonds in the open market. 
C)  The price level falls. 
D)  Net exports fall. 
A)  Congress reduces purchases of new weapons systems. 
B)  The Fed buys bonds in the open market. 
C)  The price level falls. 
D)  Net exports fall.

Question 7

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

Accepted Answer

A)  U.S. residents want to buy more foreign bonds. The real exchange rate rises. 
B)  U.S. residents want to buy more foreign bonds. The real exchange rate falls. 
C)  U.S. residents want to buy fewer foreign bonds. The real exchange rate rises. 
D)  U.S. residents want to buy fewer foreign bonds. The real exchange rate falls. 
A)  U.S. residents want to buy more foreign bonds. The real exchange rate rises. 
B)  U.S. residents want to buy more foreign bonds. The real exchange rate falls. 
C)  U.S. residents want to buy fewer foreign bonds. The real exchange rate rises. 
D)  U.S. residents want to buy fewer foreign bonds. The real exchange rate falls.

Question 8

When taxes increase, 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 9

Most economists believe that classical theory describes the world in the short run but not in the long run.

Accepted Answer

A) True 
 B)False

Question 10

Other things the same, if the money supply rises by 2% and people were expecting it to rise by 5%, then some firms have

Accepted Answer

A)  higher than desired prices, which increases their sales. 
B)  higher than desired prices, which depresses their sales. 
C)  lower than desired prices, which increases their sales. 
D)  lower than desired prices, which depresses their sales. 
A)  higher than desired prices, which increases their sales. 
B)  higher than desired prices, which depresses their sales. 
C)  lower than desired prices, which increases their sales. 
D)  lower than desired prices, which depresses their sales.

Question 11

When the price level falls, people want to

Accepted Answer

A)  hold more money and the quantity of aggregate goods and services demanded increases. 
B)  hold more money and the quantity of aggregate goods and services demanded decreases. 
C)  hold less money and the quantity of aggregate goods and services demanded increases. 
D)  hold less money and the quantity of aggregate goods and services demanded decreases. 
A)  hold more money and the quantity of aggregate goods and services demanded increases. 
B)  hold more money and the quantity of aggregate goods and services demanded decreases. 
C)  hold less money and the quantity of aggregate goods and services demanded increases. 
D)  hold less money and the quantity of aggregate goods and services demanded decreases.

Question 12

Technological progress shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 13

Other things the same, a decrease in the price level makes the dollars people hold worth

Accepted Answer

A)  more, so they can buy more. 
B)  more, so they can buy less. 
C)  less, so they can buy more. 
D)  less, so they can buy less. 
A)  more, so they can buy more. 
B)  more, so they can buy less. 
C)  less, so they can buy more. 
D)  less, so they can buy less.

Question 14

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Accepted Answer

A)  the price level and real output. 
B)  real output and employment. 
C)  employment and the inflation rate. 
D)  the value of money and the price level. 
A)  the price level and real output. 
B)  real output and employment. 
C)  employment and the inflation rate. 
D)  the value of money and the price level.

Question 15

Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, they can offset the initial shift by shifting

Accepted Answer

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

Question 16

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

Accepted Answer

A) True 
 B)False

Question 17

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

Accepted Answer

Variables that fall along with real GDP

Question 18

When looking at a graph of aggregate demand, which of the following is correct?

Accepted Answer

A)  There are nominal variables on both the vertical and the horizontal axes. 
B)  There are real variables on both the vertical and horizontal axes. 
C)  The variable on the vertical axis is nominal; the variable on the horizontal axis is real 
D)  The variable on the vertical axis is real; the variable on the horizontal axis is nominal 
A)  There are nominal variables on both the vertical and the horizontal axes. 
B)  There are real variables on both the vertical and horizontal axes. 
C)  The variable on the vertical axis is nominal; the variable on the horizontal axis is real 
D)  The variable on the vertical axis is real; the variable on the horizontal axis is nominal

Question 19

Like real GDP, investment fluctuates, but it fluctuates much less than real GDP.

Accepted Answer

A) True 
 B)False

Question 20

Aggregate demand shifts right when the Federal Reserve

Accepted Answer

A)  raises personal income taxes. 
B)  increases the money supply. 
C)  institutes an investment tax credit. 
D)  All of the above are correct. 
A)  raises personal income taxes. 
B)  increases the money supply. 
C)  institutes an investment tax credit. 
D)  All of the above are correct.

Exam 23: Aggregate Demand and Aggregate Supply

In the long run, an increase in the stock of human capital

Explain how an increase in the price level changes interest rates. How does this change in interest rates lead to changes in investment and net exports?

Which of the following has been suggested as a cause of the Great Depression?

As the price level rises,

Which of the following shifts aggregate demand to the right?

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

When taxes increase, consumption

Most economists believe that classical theory describes the world in the short run but not in the long run.

Other things the same, if the money supply rises by 2% and people were expecting it to rise by 5%, then some firms have

When the price level falls, people want to

Technological progress shifts the long-run aggregate supply curve to the right.

Other things the same, a decrease in the price level makes the dollars people hold worth

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, they can offset the initial shift by shifting

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

When looking at a graph of aggregate demand, which of the following is correct?

Like real GDP, investment fluctuates, but it fluctuates much less than real GDP.

Aggregate demand shifts right when the Federal Reserve

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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