Question 1

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 2

The effects of a higher than expected price level are shown by

Accepted Answer

A)  shifting the short-run aggregate supply curve right.
B)  shifting the short-run aggregate supply curve left.
C)  moving to the right along a given aggregate supply curve.
D)  moving to the left along a given aggregate supply curve.E) All of the above
F) A) and D)

Question 3

Refer to Optimism. What happens to the expected price level and what's the result for wage bargaining?

Accepted Answer

A)  The expected price level falls. Bargains are struck for higher wages.
B)  The expected price level falls. Bargains are struck for lower wages.
C)  The expected price level rises. Bargains are struck for higher wages.
D)  The expected price level rises. Bargains are struck for lower wages.E) B) and C)
F) A) and D)

Question 4

Other things the same, continued increases in technology lead to

Accepted Answer

A)  continued increases in the price level and real GDP.
B)  continued decreases in the price level and real GDP.
C)  continued increases in real GDP and continued increases in the price level.
D)  continued increases in real GDP and continued decreases in the price level.E) None of the above
F) A) and B)

Question 5

The aggregate demand and aggregate supply graph has

Accepted Answer

A)  quantity of output on the horizontal axis. Output can be measured by the GDP deflator.
B)  quantity of output on the horizontal axis. Output can be measured by real GDP.
C)  quantity of output on the vertical axis. Output can be measured by the GDP deflator.
D)  quantity of output on the vertical axis. Output can be measured by real GDP.E) A) and D)
F) B) and C)

Question 6

​Many macroeconomic variables

Accepted Answer

A)  ​fluctuate together and by different amounts.
B)  ​fluctuate together by the same amounts.
C)  ​never fluctuate together.
D)  ​fluctuate together about half of the time and by the same amount.E) A) and C)
F) C) and D)

Question 7

Using the aggregate demand and aggregate supply model, an increase in what curve is by itself consistent with the changes in prices and output that occurred during World War II?

Accepted Answer

The answer of Using the aggregate demand and aggregate supply...

Question 8

Aggregate demand shifts right if at a given price level

Accepted Answer

A)  taxes rise and shifts left if the money supply increases.
B)  taxes rise and shifts right if the money supply increases.
C)  taxes fall and shifts left if the money supply increases.
D)  taxes fall and shifts right if the money supply increases.E) B) and C)
F) All of the above

Question 9

The discovery of a large amount of previously-undiscovered oil in the U.S. would shift

Accepted Answer

A)  the long-run aggregate-supply curve to the right.
B)  the long-run aggregate-supply curve to the left.
C)  the aggregate-demand curve to the left.
D)  None of the above is correct.E) A) and B)
F) None of the above

Question 10

If the price level is higher than expected, firms might raise their production in the short run if

Accepted Answer

A)  the nominal wage they pay their employees was set based on the expected price level.
B)  prices are costly to adjust and they have set their price at some time in the past but are not ready to change it.
C)  they believe that the price of their product has risen relative to the price of other products, when in fact the rise in the price of their product reflects an increase in the general price level.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 11

Suppose that during World War II the long-run aggregate supply curve shifted right. In order for price and output to have changed in the direction they did, what would have to have happened to aggregate demand?

Accepted Answer

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

Question 12

Other things the same, as the price level falls,

Accepted Answer

A)  the dollar depreciates.
B)  the interest rate rises.
C)  people feel less wealthy.
D)  All of the above are correct.E) B) and D)
F) A) and D)

Question 13

Which of the following rises during recessions?

Accepted Answer

A)  layoffs and consumer spending
B)  layoffs but not consumer spending
C)  consumer spending but not layoffs
D)  neither layoffs nor consumer spendingE) B) and C)
F) None of the above

Question 14

The wealth effect helps explain what feature in the aggregate demand and aggregate supply model?

Accepted Answer

why the ag...

Question 15

Investment averages about ____ of GDP.​

Accepted Answer

A)  ​1/6
B)  ​1/8
C)  ​1/4
D)  ​1/2E) None of the above
F) B) and C)

Question 16

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 stockE) C) and D)
F) B) and C)

Question 17

During World War II,

Accepted Answer

A)  government purchases of goods and services increased fivefold.
B)  the economy's production increased about 25 percent.
C)  unemployment fell to about 5%.
D)  All of the above are correct.E) A) and D)
F) All of the above

Question 18

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following has been suggested as a cause of the Great Depression?

Accepted Answer

A)  a decline in the money supply
B)  a decrease in stock prices
C)  the collapse of the banking system
D)  All of the above are correct.E) A) and B)
F) B) and D)

Question 20

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

Accepted Answer

A)  U.S. goods become more expensive relative to foreign goods so aggregate demand shifts right.
B)  U.S. goods become less expensive relative to foreign goods so aggregate demand shifts right.
C)  U.S. goods become more expensive relative to foreign goods so aggregate demand shifts left.
D)  U.S. goods become less expensive relative to foreign goods so aggregate demand shifts left.E) B) and C)
F) A) and B)

Exam 33: Aggregate Demand and Aggregate Supply

The aggregate demand and aggregate supply graph has

Correct Answer
verified

Investment averages about ____ of GDP.

Correct Answer
verified

The effects of a higher than expected price level are shown by

Correct Answer
verified

During World War II,

Correct Answer
verified

Which of the following has been suggested as a cause of the Great Depression?

Correct Answer
verified

Using the aggregate demand and aggregate supply model, an increase in what curve is by itself consistent with the changes in prices and output that occurred during World War II?

Correct Answer
verified

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

Correct Answer
verified

Other things the same, continued increases in technology lead to

Correct Answer
verified

Suppose that during World War II the long-run aggregate supply curve shifted right. In order for price and output to have changed in the direction they did, what would have to have happened to aggregate demand?

Correct Answer
verified

If the price level is higher than expected, firms might raise their production in the short run if

Correct Answer
verified

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

Correct Answer
verified

Aggregate demand shifts right if at a given price level

Correct Answer
verified

Other things the same, as the price level falls,

Correct Answer
verified

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

Many macroeconomic variables

Correct Answer
verified

Refer to Optimism. What happens to the expected price level and what's the result for wage bargaining?

Correct Answer
verified

The wealth effect helps explain what feature in the aggregate demand and aggregate supply model?

Correct Answer
verified
why the ag...
View Answer

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Correct Answer
verified

The discovery of a large amount of previously-undiscovered oil in the U.S. would shift

Correct Answer
verified

Which of the following rises during recessions?

Correct Answer
verified

Exam 33: Aggregate Demand and Aggregate Supply

The aggregate demand and aggregate supply graph has

Correct AnswerverifiedShow Answer

Investment averages about ____ of GDP.​

Correct AnswerverifiedShow Answer

The effects of a higher than expected price level are shown by

Correct AnswerverifiedShow Answer

During World War II,

Correct AnswerverifiedShow Answer

Which of the following has been suggested as a cause of the Great Depression?

Correct AnswerverifiedShow Answer

Using the aggregate demand and aggregate supply model, an increase in what curve is by itself consistent with the changes in prices and output that occurred during World War II?

Correct AnswerverifiedShow Answer

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

Correct AnswerverifiedShow Answer

Other things the same, continued increases in technology lead to

Correct AnswerverifiedShow Answer

Suppose that during World War II the long-run aggregate supply curve shifted right. In order for price and output to have changed in the direction they did, what would have to have happened to aggregate demand?

Correct AnswerverifiedShow Answer

If the price level is higher than expected, firms might raise their production in the short run if

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Aggregate demand shifts right if at a given price level

Correct AnswerverifiedShow Answer

Other things the same, as the price level falls,

Correct AnswerverifiedShow Answer

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

​Many macroeconomic variables

Correct AnswerverifiedShow Answer

Refer to Optimism. What happens to the expected price level and what's the result for wage bargaining?

Correct AnswerverifiedShow Answer

The wealth effect helps explain what feature in the aggregate demand and aggregate supply model?

Correct Answerverifiedwhy the ag...View AnswerShow Answer

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Correct AnswerverifiedShow Answer

The discovery of a large amount of previously-undiscovered oil in the U.S. would shift

Correct AnswerverifiedShow Answer

Which of the following rises during recessions?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Investment averages about ____ of GDP.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Many macroeconomic variables

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
why the ag...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified