Question 1

Figure 33-16. 
Refer to Figure 33-16. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Accepted Answer

The answer of Figure 33-16. 
Refer to Figure 33-16. Suppose...

Question 2

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) A) and B)
F) A) and C)

Question 3

Most economists believe that in the long run, changes in the money supply

Accepted Answer

A)   affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory.
B)   affect nominal but not real variables. This view that money is ultimately neutral is inconsistent with classical theory.
C)   affect real but not nominal variables. This view that money is ultimately neutral is consistent with classical theory.
D)   affect real but not nominal variables. This view that money is ultimately neutral is inconsistent with classical theory.E) A) and B)
F) A) and C)

Question 4

Suppose a recession overseas reduces a country's exports. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Accepted Answer

The aggregate-demand...

Question 5

An increase 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 D)
F) A) and B)

Question 6

Other things the same, if the U.S. price level rises, then

Accepted Answer

A)   the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises.
B)   the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls.
C)   the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises.
D)   the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.E) A) and D)
F) A) and C)

Question 7

In the early 1930s in the United States, there was a

Accepted Answer

A)   large increase in output. In the early 1940s there was also a large increase in output.
B)   large increase in output. In the early 1940s there was a large decrease in output.
C)   large decrease in output. In the early 1940s there was a large increase in output.
D)   large decrease in output. In the early 1940s there was also a large decrease in output.E) A) and D)
F) None of the above

Question 8

When taxes increase, 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) B) and C)
F) A) and C)

Question 9

Changes in the price of oil

Accepted Answer

A)   can only lead to recessions.
B)   have not contributed much to output fluctuations in the United States.
C)   change the economy principally by changing aggregate demand.
D)   created both inflation and recession in the United States in the 1970s.E) None of the above
F) A) and B)

Question 10

Who is credited for the original development of the model of aggregate demand and aggregate supply?

Accepted Answer

The answer of Who is credited for the original development...

Question 11

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants increases the number of workers it employs. What could explain this?

Accepted Answer

A)   both sticky price theory and sticky wage theory
B)   sticky price theory but not sticky wage theory
C)   sticky wage theory but not sticky price theory
D)   neither sticky wage theory nor sticky price theoryE) A) and B)
F) A) and C)

Question 12

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 13

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, taxes fall. In the short-run

Accepted Answer

A)   real GDP will rise, and the price level might rise, fall, or stay the same.
B)   real GDP will fall, and the price level might rise, fall, or stay the same.
C)   the price level will rise, and real GDP might rise, fall, or stay the same.
D)   the price level will fall, and real GDP might rise, fall, or stay the same.E) B) and D)
F) C) and D)

Question 14

The downward slope of the aggregate demand curve is based on logic that as the price level rises, consumption, investment, and net exports all fall.

Accepted Answer

A) True 
 B)False

Question 15

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) All of the above
F) B) and C)

Question 16

An increase in the price level and a reduction in output would result from

Accepted Answer

A)   a fall in stock prices.
B)   a decrease in the supply of an important resource.
C)   an increase in government expenditures.
D)   an increase in taxes.E) A) and B)
F) B) and C)

Question 17

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Accepted Answer

A) True 
 B)False

Question 18

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 Financial Crisis. If nominal wages are sticky, which of the following helps explains the change in output?

Accepted Answer

A)   real wages fall, so firms choose to produce less
B)   real wages fall, so firms choose to produce more
C)   real wages rise, so firms choose to produce less
D)   real wages rise, so firms choose to produce moreE) B) and C)
F) C) and D)

Question 19

Other things the same, if the long-run aggregate supply curve shifts right, prices

Accepted Answer

A)   and output both increase.
B)   and output both decrease.
C)   increase and output decreases.
D)   decrease and output increases.E) None of the above
F) All of the above

Question 20

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

Accepted Answer

A)   production is more profitable and employment rises.
B)   production is more profitable and employment falls.
C)   production is less profitable and employment rises.
D)   production is less profitable and employment falls.E) A) and B)
F) B) and C)

Exam 15: Aggregate Demand and Aggregate Supply

Most economists believe that in the long run, changes in the money supply

Correct Answer
verified

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

Correct Answer
verified

Suppose a recession overseas reduces a country's exports. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Correct Answer
verified
The aggregate-demand...
View Answer

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Correct Answer
verified

Correct Answer
verified

Other things the same, if the U.S. price level rises, then

Correct Answer
verified

In the early 1930s in the United States, there was a

Correct Answer
verified

Changes in the price of oil

Correct Answer
verified

An increase in the price level and a reduction in output would result from

Correct Answer
verified

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, taxes fall. In the short-run

Correct Answer
verified

An increase in the expected price level shifts the

Correct Answer
verified

Who is credited for the original development of the model of aggregate demand and aggregate supply?

Correct Answer
verified

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

Correct Answer
verified

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 Answer
verified

Other things the same, if the long-run aggregate supply curve shifts right, prices

Correct Answer
verified

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants increases the number of workers it employs. What could explain this?

Correct Answer
verified

The downward slope of the aggregate demand curve is based on logic that as the price level rises, consumption, investment, and net exports all fall.

Correct Answer
verified

Figure 33-16. Refer to Figure 33-16. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Correct Answer
verified

An increase in the expected price level shifts short-run aggregate supply to the

Correct Answer
verified

When taxes increase, consumption

Correct Answer
verified

Exam 15: Aggregate Demand and Aggregate Supply

Most economists believe that in the long run, changes in the money supply

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

Suppose a recession overseas reduces a country's exports. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Correct AnswerverifiedThe aggregate-demand...View AnswerShow Answer

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things the same, if the U.S. price level rises, then

Correct AnswerverifiedShow Answer

In the early 1930s in the United States, there was a

Correct AnswerverifiedShow Answer

Changes in the price of oil

Correct AnswerverifiedShow Answer

An increase in the price level and a reduction in output would result from

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, taxes fall. In the short-run

Correct AnswerverifiedShow Answer

An increase in the expected price level shifts the

Correct AnswerverifiedShow Answer

Who is credited for the original development of the model of aggregate demand and aggregate supply?

Correct AnswerverifiedShow Answer

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

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

Other things the same, if the long-run aggregate supply curve shifts right, prices

Correct AnswerverifiedShow Answer

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants increases the number of workers it employs. What could explain this?

Correct AnswerverifiedShow Answer

The downward slope of the aggregate demand curve is based on logic that as the price level rises, consumption, investment, and net exports all fall.

Correct AnswerverifiedShow Answer

Figure 33-16. Refer to Figure 33-16. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Correct AnswerverifiedShow Answer

An increase in the expected price level shifts short-run aggregate supply to the

Correct AnswerverifiedShow Answer

When taxes increase, consumption

Correct AnswerverifiedShow Answer

Correct Answer
verified

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Correct Answer
verified
The aggregate-demand...
View Answer

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Correct Answer
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