Question 1

Other things the same, if the price level falls, people

Accepted Answer

A)   increase foreign bond purchases, so the dollar appreciates.
B)   increase foreign bond purchases, so the dollar depreciates.
C)   increase domestic bond purchases, so the dollar appreciates.
D)   increase domestic bond purchases, so the dollar depreciates.E) None of the above
F) A) and B)

Question 2

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

Accepted Answer

A)   an increase in the money supply
B)   an increase in the price level
C)   a decrease in the expected price level
D)   All of the above are correct.E) B) and C)
F) All of the above

Question 3

Which of the following would help explain why the aggregate demand curve slopes downward?

Accepted Answer

A)   An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services.
B)   A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports.
C)   A higher price level increases real wealth, which stimulates spending on consumption.
D)   A lower price level reduces the interest rate, which encourages greater spending on investment goods.E) B) and D)
F) None of the above

Question 4

In the aggregate demand and aggregate supply model, the point where the aggregate demand curve crosses the long run aggregate supply curve, and the expected price level equals the actual price level, is known as what?

Accepted Answer

Long run e...

Question 5

The long-run aggregate supply curve shifts right if

Accepted Answer

A)   technology improves.
B)   the price level decreases.
C)   the money supply increases.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 6

The mathematical equation: quantity of output supplied = natural rate of output + aactual price level - expected price level) , expresses

Accepted Answer

A)   how the long run equilibrium adjusts to changes in money supply.
B)   how output deviates in the short run from its long run natural rate.
C)   how the short run aggregate supply curve shifts.
D)   how adverse shifts in aggregate supply can cause stagflation.E) A) and D)
F) All of the above

Question 7

Other things the same, an increase in the amount of capital firms wish to purchase would initially shift

Accepted Answer

A)   aggregate demand right.
B)   aggregate demand left.
C)   aggregate supply right.
D)   aggregate supply left.E) B) and D)
F) C) and D)

Question 8

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 Pessimism. Which curve shifts and in which direction?

Accepted Answer

A)   aggregate demand shifts right
B)   aggregate demand shifts left
C)   aggregate supply shifts right.
D)   aggregate supply shifts left.E) C) and D)
F) A) and B)

Question 9

The position of the long-run aggregate supply curve

Accepted Answer

A)   is determined by resource usage and technology.
B)   is at the point where the unemployment rate is zero.
C)   shifts to the right when the money supply increases.
D)   is at the point where the economy would cease to grow.E) B) and D)
F) B) and C)

Question 10

Other things the same, the aggregate quantity of output supplied will increase 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.E) B) and D)
F) A) and B)

Question 11

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 12

During recessions which type of spending falls?

Accepted Answer

A)   consumption and investment
B)   investment but not consumption
C)   consumption but not investment
D)   neither consumption nor investmentE) C) and D)
F) B) and D)

Question 13

Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, then

Accepted Answer

A)   employment and production rise.
B)   employment rises and production falls.
C)   employment falls and production rises.
D)   employment and production fall.E) None of the above
F) A) and B)

Question 14

As the price level rises

Accepted Answer

A)   people will want to buy more bonds, so the interest rate rises.
B)   people will want to buy fewer bonds, so the interest rate falls.
C)   people will want to buy more bonds, so the interest rate falls.
D)   people will want to buy fewer bonds, so the interest rate rises.E) All of the above
F) A) and B)

Question 15

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. How is the new long-run equilibrium different from the original one?

Accepted Answer

A)   the price level and real GDP are higher
B)   the price level and real GDP are lower.
C)   the price level is higher and real GDP is the same.
D)   the price level is the same and real GDP is higher.E) A) and B)
F) B) and C)

Question 16

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

Accepted Answer

A)   higher than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied.
B)   higher than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied.
C)   lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied.
D)   lower than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied.E) A) and D)
F) B) and D)

Question 17

When taxes decrease, 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.E) All of the above
F) A) and C)

Question 18

Keynes thought that the behavior of the economy in the short run was influenced by what he called "animal spirits." By this he meant that business people sometimes felt good about the economy, and carried out lots of investment, and at other times felt bad about the economy, and so cut back on their investment spending. Explain how such fluctuations in investment would lead to fluctuations in real GDP and prices.

Accepted Answer

Fluctuations in investment cause the agg...

Question 19

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Accepted Answer

A)   employment and production rise.
B)   employment rises and production falls.
C)   employment falls and production rises.
D)   employment and production fall.E) B) and C)
F) A) and D)

Question 20

If there are sticky wages, and the price level is greater than what was expected, then

Accepted Answer

A)   the quantity of aggregate goods and services supplied falls, which is shown by a shift of the short-run aggregate supply curve to the left.
B)   the quantity of aggregate goods and services supplied falls, as shown by a movement to the left along the short-run aggregate supply curve.
C)   the quantity of aggregate goods and services supplied rises, as shown by a shift of the short-run aggregate supply curve to the right.
D)   the quantity of aggregate goods and services supplied rises, as shown by a movement to the right along the short-run aggregate supply curve.E) A) and C)
F) A) and B)

Exam 23: Aggregate Demand and Aggregate Supply

The mathematical equation: quantity of output supplied = natural rate of output + aactual price level - expected price level) , expresses

Correct Answer
verified

As the price level rises

Correct Answer
verified

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Correct Answer
verified

Other things the same, if the price level falls, people

Correct Answer
verified

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

Correct Answer
verified

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

Correct Answer
verified

Correct Answer
verified
Fluctuations in investment cause the agg...
View Answer

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

Correct Answer
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The long-run aggregate supply curve shifts right if

Correct Answer
verified

In the aggregate demand and aggregate supply model, the point where the aggregate demand curve crosses the long run aggregate supply curve, and the expected price level equals the actual price level, is known as what?

Correct Answer
verified
Long run e...
View Answer

Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, then

Correct Answer
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If there are sticky wages, and the price level is greater than what was expected, then

Correct Answer
verified

The position of the long-run aggregate supply curve

Correct Answer
verified

Which of the following would help explain why the aggregate demand curve slopes downward?

Correct Answer
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During recessions which type of spending falls?

Correct Answer
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When taxes decrease, consumption

Correct Answer
verified

Correct Answer
verified

Other things the same, an increase in the amount of capital firms wish to purchase would initially shift

Correct Answer
verified

Correct Answer
verified

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Correct Answer
verified

Exam 23: Aggregate Demand and Aggregate Supply

The mathematical equation: quantity of output supplied = natural rate of output + aactual price level - expected price level) , expresses

Correct AnswerverifiedShow Answer

As the price level rises

Correct AnswerverifiedShow Answer

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Correct AnswerverifiedShow Answer

Other things the same, if the price level falls, people

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

Correct AnswerverifiedShow Answer

Correct AnswerverifiedFluctuations in investment cause the agg...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts right if

Correct AnswerverifiedShow Answer

In the aggregate demand and aggregate supply model, the point where the aggregate demand curve crosses the long run aggregate supply curve, and the expected price level equals the actual price level, is known as what?

Correct AnswerverifiedLong run e...View AnswerShow Answer

Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, then

Correct AnswerverifiedShow Answer

If there are sticky wages, and the price level is greater than what was expected, then

Correct AnswerverifiedShow Answer

The position of the long-run aggregate supply curve

Correct AnswerverifiedShow Answer

Which of the following would help explain why the aggregate demand curve slopes downward?

Correct AnswerverifiedShow Answer

During recessions which type of spending falls?

Correct AnswerverifiedShow Answer

When taxes decrease, consumption

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things the same, an increase in the amount of capital firms wish to purchase would initially shift

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Correct AnswerverifiedShow Answer

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Fluctuations in investment cause the agg...
View Answer

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Correct Answer
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Correct Answer
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Long run e...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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