Question 1

The aggregate quantity of goods and services demanded changes as the price level falls because

Accepted Answer

A)  real wealth falls, interest rates rise, and the dollar appreciates. 
B)  real wealth falls, interest rates rise, and the dollar depreciates. 
C)  real wealth rises, interest rates fall, and the dollar appreciates. 
D)  real wealth rises, interest rates fall, and the dollar depreciates. 
A)  real wealth falls, interest rates rise, and the dollar appreciates. 
B)  real wealth falls, interest rates rise, and the dollar depreciates. 
C)  real wealth rises, interest rates fall, and the dollar appreciates. 
D)  real wealth rises, interest rates fall, and the dollar depreciates.

Question 2

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 3

Other things the same, when the price level rises, interest rates

Accepted Answer

A)  rise, so firms increase investment. 
B)  rise, so firms decrease investment. 
C)  fall, so firms increase investment. 
D)  fall, so firms decrease investment. 
A)  rise, so firms increase investment. 
B)  rise, so firms decrease investment. 
C)  fall, so firms increase investment. 
D)  fall, so firms decrease investment.

Question 4

The recessions of the 1970s are often attributed to

Accepted Answer

A)  declining inflation expectations. 
B)  an increase in oil prices. 
C)  declines in the price of stock. 
D)  decreases in the money supply. 
A)  declining inflation expectations. 
B)  an increase in oil prices. 
C)  declines in the price of stock. 
D)  decreases in the money supply.

Question 5

Make a list of expenditures whose sum equals GDP.

Accepted Answer

consumption, investm

Question 6

An increase in the expected price level shifts the

Accepted Answer

A)  short-run and long-run aggregate supply curves left. 
B)  the short-run but not the long-run aggregate supply curve left. 
C)  the long-run but not the short-run aggregate supply curve left. 
D)  neither the long-run nor the short-run aggregate supply curve left. 
A)  short-run and long-run aggregate supply curves left. 
B)  the short-run but not the long-run aggregate supply curve left. 
C)  the long-run but not the short-run aggregate supply curve left. 
D)  neither the long-run nor the short-run aggregate supply curve left.

Question 7

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

Accepted Answer

A)  It would have to have shifted left by less than aggregate supply. 
B)  It would have to have shifted left by more than aggregate supply. 
C)  It would have to have shifted right by less than aggregate supply. 
D)  It would have to have shifted right by more than aggregate supply. 
A)  It would have to have shifted left by less than aggregate supply. 
B)  It would have to have shifted left by more than aggregate supply. 
C)  It would have to have shifted right by less than aggregate supply. 
D)  It would have to have shifted right by more than aggregate supply.

Question 8

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

Accepted Answer

A)  increased consumption, which shifts the aggregate-demand curve right. 
B)  increased consumption, which shifts the aggregate-demand curve left. 
C)  decreased consumption, which shifts the aggregate-demand curve right. 
D)  decreased consumption, which shifts the aggregate-demand curve left. 
A)  increased consumption, which shifts the aggregate-demand curve right. 
B)  increased consumption, which shifts the aggregate-demand curve left. 
C)  decreased consumption, which shifts the aggregate-demand curve right. 
D)  decreased consumption, which shifts the aggregate-demand curve left.

Question 9

A decrease in what variable will raise the quantity of goods and services supplied, and shift only the short run aggregate supply curve to the right?

Accepted Answer

The expect

Question 10

According to classical macroeconomic theory, changes in the money supply change nominal but not real variables.

Accepted Answer

A) True 
 B)False

Question 11

A relatively mild period of falling incomes and rising unemployment is called an)

Accepted Answer

A)  depression. 
B)  recession. 
C)  expansion. 
D)  business cycle. 
A)  depression. 
B)  recession. 
C)  expansion. 
D)  business cycle.

Question 12

Suppose people anticipate an increase in the expected price level. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Accepted Answer

The short-run aggreg

Question 13

Which of the following alone can explain the change in the price level and output during World War II?

Accepted Answer

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

Question 14

Historically, as recessions have ended the unemployment rate declined

Accepted Answer

A)  gradually to near zero. 
B)  rapidly to near zero. 
C)  gradually to a rate of about 5%-6%. 
D)  rapidly to a rate of about 5%-6%. 
A)  gradually to near zero. 
B)  rapidly to near zero. 
C)  gradually to a rate of about 5%-6%. 
D)  rapidly to a rate of about 5%-6%.

Question 15

Figure 33-2.  
-Refer to Figure 33-2. Line X 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.

Question 16

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

Accepted Answer

A)  either an increase in the price of imported natural resources or a reduction in trade restrictions. 
B)  neither an increase in the price of imported natural resources or a reduction in trade restrictions. 
C)  an increase in the price of imported natural resources and an increase in trade restrictions. 
D)  an increase in trade restrictions and a decrease in the price of imported natural resources. 
A)  either an increase in the price of imported natural resources or a reduction in trade restrictions. 
B)  neither an increase in the price of imported natural resources or a reduction in trade restrictions. 
C)  an increase in the price of imported natural resources and an increase in trade restrictions. 
D)  an increase in trade restrictions and a decrease in the price of imported natural resources.

Question 17

According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produce had

Accepted Answer

A)  increased, so it would increase production. 
B)  increased, so it would decrease production. 
C)  decreased, so it would increase production. 
D)  decreased, so it would decrease production. 
A)  increased, so it would increase production. 
B)  increased, so it would decrease production. 
C)  decreased, so it would increase production. 
D)  decreased, so it would decrease production.

Question 18

The aggregate demand and aggregate supply model helps us to understand both short-run economic fluctuations and how the economy moves from the short to the long run.

Accepted Answer

A) True 
 B)False

Question 19

Figure 33-4  
-Refer to Figure 33-4. If the economy is at A and there is a fall in aggregate demand, in the short run the economy

Accepted Answer

A)  stays at A. 
B)  moves to B. 
C)  moves to C. 
D)  moves to D. 
A)  stays at A. 
B)  moves to B. 
C)  moves to C. 
D)  moves to D.

Question 20

Which of the following is correct?

Accepted Answer

A)  Short run fluctuations in economic activity happen only in developing countries. 
B)  During economic contractions most firms experience rising profits. 
C)  Recessions come at irregular intervals and are easy to predict. 
D)  When real GDP falls, the rate of unemployment rises. 
A)  Short run fluctuations in economic activity happen only in developing countries. 
B)  During economic contractions most firms experience rising profits. 
C)  Recessions come at irregular intervals and are easy to predict. 
D)  When real GDP falls, the rate of unemployment rises.

Exam 23: Aggregate Demand and Aggregate Supply

The aggregate quantity of goods and services demanded changes as the price level falls because

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

Other things the same, when the price level rises, interest rates

The recessions of the 1970s are often attributed to

Make a list of expenditures whose sum equals GDP.

An increase in the expected price level shifts the

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

A decrease in what variable will raise the quantity of goods and services supplied, and shift only the short run aggregate supply curve to the right?

According to classical macroeconomic theory, changes in the money supply change nominal but not real variables.

A relatively mild period of falling incomes and rising unemployment is called an)

Suppose people anticipate an increase in the expected price level. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Which of the following alone can explain the change in the price level and output during World War II?

Historically, as recessions have ended the unemployment rate declined

Figure 33-2. -Refer to Figure 33-2. Line X is

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

According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produce had

The aggregate demand and aggregate supply model helps us to understand both short-run economic fluctuations and how the economy moves from the short to the long run.

Figure 33-4 -Refer to Figure 33-4. If the economy is at A and there is a fall in aggregate demand, in the short run the economy

Which of the following is correct?

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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