Question 1

In which case can we be sure that real GDP and the price level rise in the short run?

Accepted Answer

A)  foreign economies expand and taxes increase. 
B)  foreign economies expand and taxes decrease. 
C)  foreign economies contract and taxes decrease. 
D)  foreign economies contract and taxes increase. 
A)  foreign economies expand and taxes increase. 
B)  foreign economies expand and taxes decrease. 
C)  foreign economies contract and taxes decrease. 
D)  foreign economies contract and taxes increase.

Question 2

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this

Accepted Answer

A)  it is only necessary that long-run aggregate supply shifts right over time. 
B)  it is only necessary that aggregate demand shifts right over time. 
C)  both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther. 
D)  None of the above cases would produce rising prices and growing real GDP over time. 
A)  it is only necessary that long-run aggregate supply shifts right over time. 
B)  it is only necessary that aggregate demand shifts right over time. 
C)  both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther. 
D)  None of the above cases would produce rising prices and growing real GDP over time.

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 Figure 33-7. Suppose the economy starts at Y. If there is a fall in aggregate demand, then the economy moves to

Accepted Answer

A)  V in the long run. 
B)  W in the long run. 
C)  X in the long run. 
D)  Z in the long run. 
A)  V in the long run. 
B)  W in the long run. 
C)  X in the long run. 
D)  Z in the long run.

Question 4

A decrease in the expected price level shifts short-run aggregate supply to the

Accepted Answer

A)  right, and an increase in the actual price level shifts short-run aggregate supply to the right. 
B)  right, and an increase in the actual price level does not shift short-run aggregate supply. 
C)  left, and an increase in the actual price level shifts short-run aggregate supply to the left. 
D)  left, and an increase in the actual price level does not shift short-run aggregate supply. 
A)  right, and an increase in the actual price level shifts short-run aggregate supply to the right. 
B)  right, and an increase in the actual price level does not shift short-run aggregate supply. 
C)  left, and an increase in the actual price level shifts short-run aggregate supply to the left. 
D)  left, and an increase in the actual price level does not shift short-run aggregate supply.

Question 5

When the price level falls

Accepted Answer

A)  people want to hold more money. 
B)  the interest rate rises. 
C)  investment spending rises. 
D)  All of the above are correct. 
A)  people want to hold more money. 
B)  the interest rate rises. 
C)  investment spending rises. 
D)  All of the above are correct.

Question 6

The long-run aggregate supply curve shifts right if

Accepted Answer

A)  the price level rises. 
B)  the price level falls. 
C)  the capital stock increases. 
D)  the capital stock decreases. 
A)  the price level rises. 
B)  the price level falls. 
C)  the capital stock increases. 
D)  the capital stock decreases.

Question 7

Other things the same, the aggregate quantity of output supplied will decrease 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 8

An increase in the price level and a reduction in output would result from

Accepted Answer

A)  a fall in stock prices. 
B)  a decrease in the supply of an important resource. 
C)  an increase in government expenditures. 
D)  an increase in taxes. 
A)  a fall in stock prices. 
B)  a decrease in the supply of an important resource. 
C)  an increase in government expenditures. 
D)  an increase in taxes.

Question 9

The long-run aggregate supply curve shifts right if

Accepted Answer

A)  either immigration from abroad increases or technology improves. 
B)  immigration from abroad increases, but not if technology improves. 
C)  technology improves, but not if immigration from abroad increases. 
D)  None of the above are correct. 
A)  either immigration from abroad increases or technology improves. 
B)  immigration from abroad increases, but not if technology improves. 
C)  technology improves, but not if immigration from abroad increases. 
D)  None of the above are correct.

Question 10

Which of the following adjust to bring aggregate supply and demand into balance?

Accepted Answer

A)  the price level and real output 
B)  the real rate of interest and the money supply 
C)  government expenditures and taxes 
D)  the saving rate and net exports 
A)  the price level and real output 
B)  the real rate of interest and the money supply 
C)  government expenditures and taxes 
D)  the saving rate and net exports

Question 11

Which of the following would cause stagflation?

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 12

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer 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 13

Figure 33-5.  
-Refer to Figure 33-5. In Figure 33-5,

Accepted Answer

A)  Point B represents a short-run equilibrium and a long-run equilibrium. 
B)  Point B represents a short-run equilibrium, and Point A represents a long-run equilibrium. 
C)  Point B represents a long-run equilibrium, and Point A represents a short-run equilibrium. 
D)  Point B represents a long-run equilibrium, and Point C represents a short-run equilibrium. 
A)  Point B represents a short-run equilibrium and a long-run equilibrium. 
B)  Point B represents a short-run equilibrium, and Point A represents a long-run equilibrium. 
C)  Point B represents a long-run equilibrium, and Point A represents a short-run equilibrium. 
D)  Point B represents a long-run equilibrium, and Point C represents a short-run equilibrium.

Question 14

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Accepted Answer

A)  the price level is higher than expected making production more profitable. 
B)  the price level is higher than expected making production less profitable 
C)  the price level is lower than expected making production more profitable. 
D)  the price level is higher than expected making production less profitable. 
A)  the price level is higher than expected making production more profitable. 
B)  the price level is higher than expected making production less profitable 
C)  the price level is lower than expected making production more profitable. 
D)  the price level is higher than expected making production less profitable.

Question 15

If the price level is higher than expected, firms might raise their production in the short run if

Accepted Answer

A)  the nominal wage they pay their employees was set based on the expected price level. 
B)  prices are costly to adjust and they have set their price at some time in the past but are not ready to change it. 
C)  they believe that the price of their product has risen relative to the price of other products, when in fact the rise in the price of their product reflects an increase in the general price level. 
D)  All of the above are correct. 
A)  the nominal wage they pay their employees was set based on the expected price level. 
B)  prices are costly to adjust and they have set their price at some time in the past but are not ready to change it. 
C)  they believe that the price of their product has risen relative to the price of other products, when in fact the rise in the price of their product reflects an increase in the general price level. 
D)  All of the above are correct.

Question 16

When the dollar depreciates, 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 17

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 18

Other things the same, an unexpected fall in the price level results in some firms having

Accepted Answer

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

Question 19

The long-run aggregate supply curve

Accepted Answer

A)  is vertical. 
B)  is a graphical representation of the classical dichotomy. 
C)  indicates monetary neutrality in the long run. 
D)  All of the above are correct. 
A)  is vertical. 
B)  is a graphical representation of the classical dichotomy. 
C)  indicates monetary neutrality in the long run. 
D)  All of the above are correct.

Question 20

Economic expansions in Europe and China would cause

Accepted Answer

A)  the U.S. price level and real GDP to rise. 
B)  the U.S. price level and real GDP to fall. 
C)  the U.S. price level to rise and real GDP to fall. 
D)  the U.S. price level to fall and real GDP to rise. 
A)  the U.S. price level and real GDP to rise. 
B)  the U.S. price level and real GDP to fall. 
C)  the U.S. price level to rise and real GDP to fall. 
D)  the U.S. price level to fall and real GDP to rise.

Exam 23: Aggregate Demand and Aggregate Supply

In which case can we be sure that real GDP and the price level rise in the short run?

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this

A decrease in the expected price level shifts short-run aggregate supply to the

When the price level falls

The long-run aggregate supply curve shifts right if

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

An increase in the price level and a reduction in output would result from

The long-run aggregate supply curve shifts right if

Which of the following adjust to bring aggregate supply and demand into balance?

Which of the following would cause stagflation?

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

Figure 33-5. -Refer to Figure 33-5. In Figure 33-5,

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

If the price level is higher than expected, firms might raise their production in the short run if

When the dollar depreciates, U.S.

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

Other things the same, an unexpected fall in the price level results in some firms having

The long-run aggregate supply curve

Economic expansions in Europe and China would cause

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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