Question 1

The model of aggregate demand and aggregate supply

Accepted Answer

A)   is different from the model of supply and demand for a particular market,in that we cannot focus on the substitution of resources between markets to explain aggregate relationships.
B)   is different from the model of supply and demand for a particular market,in that we have to separate real and nominal variables in the aggregate model.
C)   is a straightforward extension of the model of supply and demand for a particular market,in which substitution of resources between markets is highlighted.
D)   is a straightforward extension of the model of supply and demand for a particular market,in which the interaction between real and nominal variables is highlighted.E) A) and B)
F) A) and C)

Question 2

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Accepted Answer

A)   the relationship between output and unemployment is erratic and difficult to characterize.
B)   when one macroeconomic variable that measures income or spending is falling,other macroeconomic variables that measure income or spending are likely to be rising.
C)   recessions do not occur at regular intervals.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 3

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) B) and D)
F) A) and D)

Question 4

The classical dichotomy and monetary neutrality are represented graphically by

Accepted Answer

A)   an upward-sloping long-run aggregate-supply curve.
B)   a vertical long-run aggregate-supply curve.
C)   an upward-sloping short-run aggregate-curve.
D)   a downward-sloping aggregate-demand curve.E) C) and D)
F) All of the above

Question 5

What curve shows the quantity of goods and services that households,firms,the government,and customers abroad want to buy at each price level?

Accepted Answer

The aggreg...

Question 6

As the price level rises

Accepted Answer

A)   people are more willing to lend,so interest rates rise.
B)   people are more willing to lend,so interest rates fall.
C)   people are less willing to lend,so interest rates fall.
D)   people are less willing to lend,so interest rates rise.E) C) and D)
F) All of the above

Question 7

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

Accepted Answer

A)   both an increase in the price level that is greater than expected and an increase in the expected price level.
B)   an increase in the price level that is greater than expected,but not an increase in the expected price level.
C)   an increase in the expected price level,but not an increase in the price level that is greater than expected.
D)   neither an increase in the price level that is greater than expected nor an increase in the expected price level.E) A) and D)
F) A) and C)

Question 8

Other things the same,a decrease 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.E) B) and C)
F) A) and B)

Question 9

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes.We would expect that the rebuilding increased aggregate demand in

Accepted Answer

A)   both the United States and Europe.
B)   the United States but not Europe.
C)   Europe,but not the United States.
D)   neither the United States,nor Europe.E) None of the above
F) All of the above

Question 10

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.E) None of the above
F) B) and D)

Question 11

An economic contraction caused by a shift in aggregate demand remedies itself over time as the expected price level

Accepted Answer

A)   rises,shifting aggregate demand right.
B)   rises,shifting aggregate demand left.
C)   falls,shifting aggregate supply right.
D)   falls,shifting aggregate supply left.E) None of the above
F) A) and B)

Question 12

If the price level falls,the real value of a dollar

Accepted Answer

A)   rises,so people will want to buy more.
B)   rises,so people will want to buy less.
C)   falls,so people will want to buy more.
D)   falls,so people will want to buy less.E) A) and C)
F) B) and D)

Question 13

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 14

Real GDP

Accepted Answer

A)   is the current dollar value of all goods produced by the citizens of an economy within a given time.
B)   measures economic activity and income.
C)   is used primarily to measure long-run changes rather than short-run fluctuations.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 15

During recessions declines in investment account for about

Accepted Answer

A)   1/6 of the decline in real GDP.
B)   1/3 of the decline in real GDP.
C)   1/2 of the decline in real GDP.
D)   2/3 of the decline in real GDP.E) C) and D)
F) B) and D)

Question 16

Suppose the economy is in long-run equilibrium and the government decreases its expenditures.Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Accepted Answer

A)   as people revise their price-level expectations upward,firms and workers strike bargains for higher nominal wages.
B)   as people revise their price-level expectations upward,firms and workers strike bargains for lower nominal wages.
C)   as people revise their price-level expectations downward,firms and workers strike bargains for higher nominal wages.
D)   as people revise their price-level expectations downward,firms and workers strike bargains for lower nominal wages.E) A) and D)
F) B) and C)

Question 17

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.E) C) and D)
F) All of the above

Question 18

Economic variables are most often expressed in

Accepted Answer

A)   nominal terms,and that's what's important.
B)   nominal terms,but real variables are what's important.
C)   real terms,and that's what's important.
D)   real terms,but nominal variables are what's important.E) B) and C)
F) None of the above

Question 19

Other things the same,an increase in the price level makes consumers feel

Accepted Answer

A)   less wealthy,so the quantity of goods and services demanded falls.
B)   less wealthy,so the quantity of goods and services demanded rises.
C)   more wealthy,so the quantity of goods and services demanded rises.
D)   more wealthy,so the quantity of goods and services demanded falls.E) All of the above
F) A) and D)

Question 20

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.E) B) and C)
F) B) and D)

Exam 33: Aggregate Demand and Aggregate Supply

Suppose the economy is in long-run equilibrium and the government decreases its expenditures.Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Correct AnswerverifiedShow Answer

The model of aggregate demand and aggregate supply

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

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An increase in the expected price level shifts the

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During recessions declines in investment account for about

Correct AnswerverifiedShow Answer

An economic contraction caused by a shift in aggregate demand remedies itself over time as the expected price level

Correct AnswerverifiedShow Answer

Other things the same,an increase in the price level makes consumers feel

Correct AnswerverifiedShow Answer

What curve shows the quantity of goods and services that households,firms,the government,and customers abroad want to buy at each price level?

Correct AnswerverifiedThe aggreg...View AnswerShow Answer

Real GDP

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The aggregate supply curve is upward sloping in

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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?

Correct AnswerverifiedShow Answer

Other things the same,a decrease in the price level makes the dollars people hold worth

Correct AnswerverifiedShow Answer

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

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As the price level rises

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John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Correct AnswerverifiedShow Answer

If the price level falls,the real value of a dollar

Correct AnswerverifiedShow Answer

The classical dichotomy and monetary neutrality are represented graphically by

Correct AnswerverifiedShow Answer

Economic variables are most often expressed in

Correct AnswerverifiedShow Answer

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes.We would expect that the rebuilding increased aggregate demand in

Correct AnswerverifiedShow Answer

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Correct AnswerverifiedShow Answer

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The aggreg...
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