Question 1

The aggregate supply curve is upward sloping in

Accepted Answer

A)  the short and long run. 
B)  neither the short nor long run. 
C)  the long run, but not the short run. 
D)  the short run, but not the long run. 
A)  the short and long run. 
B)  neither the short nor long run. 
C)  the long run, but not the short run. 
D)  the short run, but not the long run.

Question 2

When the dollar appreciates, U.S.

Accepted Answer

A)  exports decrease, while imports increase. 
B)  exports and imports decrease. 
C)  exports and imports increase. 
D)  exports increase, while imports decrease. 
A)  exports decrease, while imports increase. 
B)  exports and imports decrease. 
C)  exports and imports increase. 
D)  exports increase, while imports decrease.

Question 3

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

Accepted Answer

A)  both an increase in the capital stock and technological improvements 
B)  an increase in the capital stock but not technological improvements 
C)  an increase in the capital stock but not technological improvements. 
D)  neither an increase in the capital stock nor an technological improvements 
A)  both an increase in the capital stock and technological improvements 
B)  an increase in the capital stock but not technological improvements 
C)  an increase in the capital stock but not technological improvements. 
D)  neither an increase in the capital stock nor an technological improvements

Question 4

In order to understand how the economy works in the short run, we need to

Accepted Answer

A)  study the classical model. 
B)  study a model in which real and nominal variables interact. 
C)  understand that "money is a veil." 
D)  understand that money is neutral in the short run. 
A)  study the classical model. 
B)  study a model in which real and nominal variables interact. 
C)  understand that "money is a veil." 
D)  understand that money is neutral in the short run.

Question 5

Which of the following is not correct?

Accepted Answer

A)  The model of aggregate demand and aggregate supply is used by most economists to analyze short-run fluctuations. 
B)  During a recession firms cut back production and workers are laid off. 
C)  A recession is a period of declining real incomes and declining unemployment. 
D)  A depression is a severe recession. 
A)  The model of aggregate demand and aggregate supply is used by most economists to analyze short-run fluctuations. 
B)  During a recession firms cut back production and workers are laid off. 
C)  A recession is a period of declining real incomes and declining unemployment. 
D)  A depression is a severe recession.

Question 6

When the price level falls

Accepted Answer

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

Question 7

Wages tend to be sticky

Accepted Answer

A)  because of contracts, social norms, and notions of fairness. 
B)  because of contracts, but not social norms or notions of fairness. 
C)  because of social norms and notions of fairness, but not contracts. 
D)  None of the above are correct. 
A)  because of contracts, social norms, and notions of fairness. 
B)  because of contracts, but not social norms or notions of fairness. 
C)  because of social norms and notions of fairness, but not contracts. 
D)  None of the above are correct.

Question 8

Which of the following would cause prices to fall and output to rise in the short run?

Accepted Answer

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

Question 9

The division of variables into real and nominal is a dichotomy assumed by

Accepted Answer

A)  classical economists. 
B)  John Maynard Keynes. 
C)  the wealth effect. 
D)  short-run macroeconomic theory. 
A)  classical economists. 
B)  John Maynard Keynes. 
C)  the wealth effect. 
D)  short-run macroeconomic theory.

Question 10

Other things the same, an increase 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 11

Other things the same, if the price level rises, then domestic interest rates

Accepted Answer

A)  rise, so domestic residents will want to hold more foreign bonds. 
B)  rise, so domestic residents will want to hold fewer foreign bonds. 
C)  fall, so domestic residents will want to hold more foreign bonds. 
D)  fall, so domestic residents will want to hold fewer foreign bonds. 
A)  rise, so domestic residents will want to hold more foreign bonds. 
B)  rise, so domestic residents will want to hold fewer foreign bonds. 
C)  fall, so domestic residents will want to hold more foreign bonds. 
D)  fall, so domestic residents will want to hold fewer foreign bonds.

Question 12

Which of the following would shift the long-run aggregate supply curve right?

Accepted Answer

A)  both an increase in the capital stock and an increase in the price level 
B)  an increase in the capital stock, but not an increase in the price level 
C)  an increase in the money supply, but not an increase in the capital stock 
D)  neither an increase in the money supply nor an increase in the capital stock 
A)  both an increase in the capital stock and an increase in the price level 
B)  an increase in the capital stock, but not an increase in the price level 
C)  an increase in the money supply, but not an increase in the capital stock 
D)  neither an increase in the money supply nor an increase in the capital stock

Question 13

We depart from the assumptions of classical economics when we focus on the relationship between

Accepted Answer

A)  the quantity of output and the price level. 
B)  the quantity of output and the unemployment rate. 
C)  the price level and the inflation rate. 
D)  inflation and the nominal interest rate. 
A)  the quantity of output and the price level. 
B)  the quantity of output and the unemployment rate. 
C)  the price level and the inflation rate. 
D)  inflation and the nominal interest rate.

Question 14

During a recession the economy experiences

Accepted Answer

A)  rising income and unemployment. 
B)  rising income and falling unemployment. 
C)  falling income and rising unemployment. 
D)  falling income and unemployment. 
A)  rising income and unemployment. 
B)  rising income and falling unemployment. 
C)  falling income and rising unemployment. 
D)  falling income and unemployment.

Question 15

Figure 33-8.  
-Refer to Figure 33-8. Suppose the economy starts at Z. Stagflation would be consistent with the move to

Accepted Answer

A)  P1 and Y1 . 
B)  P1 and Y3 . 
C)  P3 and Y1 . 
D)  P3 and Y3 . 
A)  P1 and Y1 . 
B)  P1 and Y3 . 
C)  P3 and Y1 . 
D)  P3 and Y3 .

Question 16

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction 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 17

The quantity of aggregate goods and services demanded rises when the

Accepted Answer

A)  price level rises, because the interest rate rises. 
B)  price level rises, because the interest rate falls. 
C)  price level falls, because the interest rate rises. 
D)  price level falls, because the interest rate falls. 
A)  price level rises, because the interest rate rises. 
B)  price level rises, because the interest rate falls. 
C)  price level falls, because the interest rate rises. 
D)  price level falls, because the interest rate falls.

Question 18

Other things the same, if the price level 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 19

Which of the following is correct?

Accepted Answer

A)  An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left. 
B)  An increase in stock prices reduces consumption spending so that aggregate demand shifts left. 
C)  An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left. 
D)  A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left. 
A)  An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left. 
B)  An increase in stock prices reduces consumption spending so that aggregate demand shifts left. 
C)  An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left. 
D)  A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left.

Question 20

Refer to Political Instability Abroad. What would the change in the interest rate created by foreigners wanting to buy more U.S. assets do to investment spending in the U.S.?

Accepted Answer

A)  make it rise which by itself would increase U.S. aggregate demand. 
B)  make it rise which by itself would decrease U.S. aggregate demand. 
C)  make it fall which by itself would increase U.S. aggregate demand. 
D)  make it fall which by itself would decrease U.S. aggregate demand. 
A)  make it rise which by itself would increase U.S. aggregate demand. 
B)  make it rise which by itself would decrease U.S. aggregate demand. 
C)  make it fall which by itself would increase U.S. aggregate demand. 
D)  make it fall which by itself would decrease U.S. aggregate demand.

Exam 23: Aggregate Demand and Aggregate Supply

The aggregate supply curve is upward sloping in

When the dollar appreciates, U.S.

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

In order to understand how the economy works in the short run, we need to

Which of the following is not correct?

When the price level falls

Wages tend to be sticky

Which of the following would cause prices to fall and output to rise in the short run?

The division of variables into real and nominal is a dichotomy assumed by

Other things the same, an increase in the price level makes the dollars people hold worth

Other things the same, if the price level rises, then domestic interest rates

Which of the following would shift the long-run aggregate supply curve right?

We depart from the assumptions of classical economics when we focus on the relationship between

During a recession the economy experiences

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. Stagflation would be consistent with the move to

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift

The quantity of aggregate goods and services demanded rises when the

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

Which of the following is correct?

Refer to Political Instability Abroad. What would the change in the interest rate created by foreigners wanting to buy more U.S. assets do to investment spending in the U.S.?

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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