Question 1

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 2

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

Question 3

The long-run aggregate supply curve would shift right if immigration from abroad

Accepted Answer

A)  increased or Congress made a substantial increase in the minimum wage.
B)  decreased or Congress abolished the minimum wage.
C)  increased or Congress abolished the minimum wage.
D)  decreased or Congress made a substantial increase in the minimum wage.E) None of the above
F) B) and C)

Question 4

Most economists believe that money neutrality holds

Accepted Answer

A)  in the short run but not the long run.
B)  in the long run but not the short run.
C)  in both the short run and the long run.
D)  in neither the short run nor the long run.E) A) and B)
F) None of the above

Question 5

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Accepted Answer

A)  relative to prices wages are higher and employment rise.
B)  relative to prices wages are higher and employment falls.
C)  relative to prices wages are lower and employment rises.
D)  relative to prices wages are lower and employment falls.E) C) and D)
F) All of the above

Question 6

Historically, the change in real GDP during recessions has been

Accepted Answer

A)  mostly a change in investment spending.
B)  mostly a change in consumption spending.
C)  about equally divided between consumption and investment spending.
D)  sometimes mostly a change in consumption and sometimes mostly a change in investment.E) A) and C)
F) A) and B)

Question 7

A decrease in U.S. interest rates leads to

Accepted Answer

A)  a depreciation of the dollar that leads to greater net exports.
B)  a depreciation of the dollar that leads to smaller net exports.
C)  an appreciation of the dollar that leads to greater net exports.
D)  an appreciation of the dollar that leads to smaller net exports.E) None of the above
F) A) and B)

Question 8

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) All of the above
F) A) and D)

Question 9

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 10

We depart from the assumptions of classical economics when we focus on the relationship between

Accepted Answer

A)  the quantity of output and the price level.
B)  the quantity of output and the unemployment rate.
C)  the price level and the inflation rate.
D)  inflation and the nominal interest rate.E) A) and B)
F) C) and D)

Question 11

The model of short-run economic fluctuations focuses on the price level and

Accepted Answer

A)  real GDP.
B)  economic growth.
C)  the neutrality of money.
D)  None of the above is correct.E) A) and D)
F) B) and D)

Question 12

A decrease in the expected price level shifts short-run aggregate supply to the

Accepted Answer

A)  right, and an increase in the actual price level shifts short-run aggregate supply to the right.
B)  right, and an increase in the actual price level does not shift short-run aggregate supply.
C)  left, and an increase in the actual price level shifts short-run aggregate supply to the left.
D)  left, and an increase in the actual price level does not shift short-run aggregate supply.E) A) and B)
F) A) and C)

Question 13

Which of the following rises when the U.S. price level falls?

Accepted Answer

A)  interest rates
B)  the value of the dollar in the market for foreign-currency exchange
C)  real wealth
D)  All of the above are correct.E) C) and D)
F) All of the above

Question 14

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

Accepted Answer

A)  rise, which means consumers will want to spend more on homebuilding.
B)  rise, which means consumers will want to spend less on homebuilding.
C)  fall, which means consumers will want to spend more on homebuilding.
D)  fall, which means consumers will want to spend less on homebuilding.E) None of the above
F) C) and D)

Question 15

The misperceptions theory of the short-run aggregate supply curve says that if the price level is higher than people expected, then some firms believe that the relative price of what they produce has

Accepted Answer

A)  decreased, so they increase production.
B)  decreased, so they decrease production.
C)  increased, so they increase production.
D)  increased, so they decrease production.E) None of the above
F) A) and D)

Question 16

Wages tend to be sticky

Accepted Answer

A)  because of contracts, social norms, and notions of fairness.
B)  because of contracts, but not social norms or notions of fairness.
C)  because of social norms and notions of fairness, but not contracts.
D)  None of the above are correct.E) B) and C)
F) A) and D)

Question 17

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

Accepted Answer

A decrease in aggregate demand causes th...

Question 18

Recessions occur at irregular intervals and are almost impossible to predict with much accuracy.

Accepted Answer

A) True 
 B)False

Question 19

A decrease in the money supply causes the interest rate to rise so that investment falls.

Accepted Answer

A) True 
 B)False

Question 20

Historical evidence for the U.S. economy indicates that

Accepted Answer

A)  recessions have occurred roughly once every six years since the 1960s.
B)  the unemployment rate usually decreases during a recession and increases shortly after the recession ends.
C)  real GDP usually remains roughly constant during a recession and decreases shortly after the recession ends.
D)  changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle.E) A) and B)
F) A) and C)

Exam 20: Aggregate Demand and Aggregate Supply

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve would shift right if immigration from abroad

Correct AnswerverifiedShow Answer

Wages tend to be sticky

Correct AnswerverifiedShow Answer

We depart from the assumptions of classical economics when we focus on the relationship between

Correct AnswerverifiedShow Answer

Most economists believe that money neutrality holds

Correct AnswerverifiedShow Answer

A decrease in U.S. interest rates leads to

Correct AnswerverifiedShow Answer

The model of short-run economic fluctuations focuses on the price level and

Correct AnswerverifiedShow Answer

Historically, the change in real GDP during recessions has been

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A decrease in the money supply causes the interest rate to rise so that investment falls.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

Correct AnswerverifiedA decrease in aggregate demand causes th...View AnswerShow Answer

Historical evidence for the U.S. economy indicates that

Correct AnswerverifiedShow Answer

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 sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Correct AnswerverifiedShow Answer

A decrease in the expected price level shifts short-run aggregate supply to the

Correct AnswerverifiedShow Answer

Recessions occur at irregular intervals and are almost impossible to predict with much accuracy.

Correct AnswerverifiedShow Answer

The misperceptions theory of the short-run aggregate supply curve says that if the price level is higher than people expected, then some firms believe that the relative price of what they produce has

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following rises when the U.S. price level falls?

Correct AnswerverifiedShow Answer

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
A decrease in aggregate demand causes th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified