Question 1

The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following explains why production rises in most years?

Accepted Answer

A)  increases in the labor force 
B)  increases in the capital stock 
C)  advances in technological knowledge 
D)  All of the above are correct.

Question 3

If businesses in general decide that they have overbuilt and so now have too much capital, their response to this would initially shift

Accepted Answer

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

Question 4

Which of the following is included in the aggregate demand for goods and services?

Accepted Answer

A)  consumption demand 
B)  investment demand 
C)  net exports 
D)  All of the above are correct.

Question 5

Which of the following affected aggregate demand during the recession of 2008-2009?

Accepted Answer

A)  a decline in residential construction and a decrease in lending 
B)  a decline in residential construction but not a decrease in lending 
C)  a decrease in lending but not a decline in residential construction 
D)  neither a decrease in residential construction nor a decrease in lending

Question 6

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

Accepted Answer

A)  real GDP and the price level are lower in country B. 
B)  real GDP, but not the price level, is lower in country B. 
C)  the price level, but not real GDP is lower in country B. 
D)  neither the price level or real GDP is lower in country B.

Question 7

In which case can we be sure real GDP rises in the short run?

Accepted Answer

A)  government purchases increase and taxes rise. 
B)  government purchases increase and taxes fall. 
C)  government purchases decrease and taxes rise. 
D)  government purchases decrease and taxes fall.

Question 8

Assuming that a is positive, theories of short-run aggregate supply are expressed mathematically as

Accepted Answer

A)  quantity of output supplied = natural rate of output + aactual price level - expected price level). 
B)  quantity of output supplied = natural rate of output + aexpected price level - actual price level). 
C)  quantity of output supplied = aactual price level -expected price level) - natural rate of output. 
D)  quantity of output supplied = aexpected price level - actual price level) - natural rate of output.

Question 9

In the long-run, an increase in aggregate demand increases the price level, but not real GDP.

Accepted Answer

A) True 
 B)False

Question 10

Other things the same, the aggregate quantity of goods demanded in the U.S. increases if

Accepted Answer

A)  real wealth rises. 
B)  the interest rate rises. 
C)  the dollar appreciates. 
D)  All of the above are correct.

Question 11

If aggregate demand shifts right then in the short run

Accepted Answer

A)  firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the right. 
B)  firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the left. 
C)  firms will decrease production. In the long run increased price expectations shift the short-run aggregate supply curve to the right. 
D)  firms will decrease production. In the long run increased price expectations shift the short-run aggregate supply curve to the left.

Question 12

Policymakers who influence aggregate demand can potentially mitigate the severity of economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  nominal variables and real variables. 
B)  nominal variables, but not real variables. 
C)  real variables, but not nominal variables. 
D)  neither nominal nor real variables.

Question 14

Figure 33-5. 
-Refer to Figure 33-5. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience

Accepted Answer

A)  a falling price level and a falling level of output, as the economy moves to point C. 
B)  a falling price level and a rising level of output, as the economy moves to point A. 
C)  a rising price level and a falling level of output, as the economy moves to point A. 
D)  a rising price level and a rising level of output, as the economy moves to point C.

Question 15

Figure 33-12. 
-Refer to Figure 33-12. Explain how the aggregate demand and aggregate supply model changed during periods 1 and 2.

Accepted Answer

The answer of Figure 33-12. 
-Refer to Figure 33-12. Explain...

Question 16

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

Accepted Answer

A)  variables measured in terms of money and variables measured in terms of quantities or relative prices 
B)  variables measured in terms of money but not variables measured in terms of quantities or relative prices 
C)  variables measured in terms of quantities or relative prices, but not variables measured in terms of money 
D)  neither variables measured in terms of money nor variables measured in terms of quantities or relative prices

Question 17

In the first few years of the Great Depression, unemployment rose to about

Accepted Answer

A)  10 percent, and prices rose about 14 percent. 
B)  15 percent, and prices rose about 22 percent. 
C)  20 percent, and prices fell about 14 percent. 
D)  25 percent, and prices fell about 22 percent.

Question 18

The recessions associated with the business cycle come at regular intervals.

Accepted Answer

A) True 
 B)False

Question 19

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following would cause prices and real GDP to rise in the short run?

Accepted Answer

A)  an increase in the expected price level 
B)  an increase in the money supply 
C)  a decrease in the capital stock 
D)  an increase in taxes.

Exam 23: Aggregate Demand and Aggregate Supply

The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Which of the following explains why production rises in most years?

If businesses in general decide that they have overbuilt and so now have too much capital, their response to this would initially shift

Which of the following is included in the aggregate demand for goods and services?

Which of the following affected aggregate demand during the recession of 2008-2009?

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

In which case can we be sure real GDP rises in the short run?

Assuming that a is positive, theories of short-run aggregate supply are expressed mathematically as

In the long-run, an increase in aggregate demand increases the price level, but not real GDP.

Other things the same, the aggregate quantity of goods demanded in the U.S. increases if

If aggregate demand shifts right then in the short run

Policymakers who influence aggregate demand can potentially mitigate the severity of economic fluctuations.

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

Figure 33-5. -Refer to Figure 33-5. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience

Figure 33-12. -Refer to Figure 33-12. Explain how the aggregate demand and aggregate supply model changed during periods 1 and 2.

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

In the first few years of the Great Depression, unemployment rose to about

The recessions associated with the business cycle come at regular intervals.

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

Which of the following would cause prices and real GDP to rise in the short run?