Question 1

Other things the same, as the price level falls, which of the following increases?

Accepted Answer

A)   lending and investment spending
B)   lending, but not investment spending
C)   investment spending, but not lending
D)   neither investment spending nor lendingE) C) and D)
F) B) and C)

Question 2

According to classical macroeconomic theory, changes in the money supply affect

Accepted Answer

A)   unemployment and the price level.
B)   unemployment but not the price level.
C)   the price level, but not unemployment.
D)   neither the price level nor unemployment.E) A) and B)
F) A) and C)

Question 3

Suppose a country experiences an increase in its capital stock. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Accepted Answer

The short-run and lo...

Question 4

Figure 33-8. 
-Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P1 and Y1 , then it must be the case that

Accepted Answer

A)   short run aggregate supply has decreased.
B)   short run aggregate supply has increased.
C)   aggregate demand has increased.
D)   aggregate demand has decreased.E) A) and B)
F) A) and D)

Question 5

The recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

Accepted Answer

A) True 
 B)False

Question 6

Figure 33-12. 
-Refer to Figure 33-12. Explain how the aggregate demand and aggregate supply model changed during periods 1 and 2.

Accepted Answer

The aggregate-demand...

Question 7

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

Question 8

Stagflation results from continued decreases in aggregate demand.

Accepted Answer

A) True 
 B)False

Question 9

When the dollar depreciates, U.S.

Accepted Answer

A)   net exports rise, which increases the aggregate quantity of goods and services demanded.
B)   net exports rise, which decreases the aggregate quantity of goods and services demanded.
C)   net exports fall, which increases the aggregate quantity of goods and services demanded.
D)   net exports fall, which decreases the aggregate quantity of goods and services demanded.E) C) and D)
F) A) and D)

Question 10

If there are floods or droughts or a decrease in the availability of raw materials

Accepted Answer

A)   aggregate supply shifts right.
B)   output falls in the short run.
C)   prices fall in the short run.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 11

The aggregate quantity of goods and services demanded changes as the price level falls because

Accepted Answer

A)   real wealth falls, interest rates rise, and the dollar appreciates.
B)   real wealth falls, interest rates rise, and the dollar depreciates.
C)   real wealth rises, interest rates fall, and the dollar appreciates.
D)   real wealth rises, interest rates fall, and the dollar depreciates.E) B) and C)
F) A) and C)

Question 12

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

Question 13

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

Accepted Answer

A)   rise, so firms increase investment.
B)   rise, so firms decrease investment.
C)   fall, so firms increase investment.
D)   fall, so firms decrease investment.E) C) and D)
F) A) and B)

Question 14

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

Accepted Answer

A)   real GDP and the price level are lower in country B.
B)   real GDP, but not the price level, is lower in country B.
C)   the price level, but not real GDP is lower in country B.
D)   neither the price level or real GDP is lower in country B.E) A) and B)
F) A) and C)

Question 15

In the aggregate demand and aggregate supply model, sticky wages, sticky prices, and misperceptions about relative prices

Accepted Answer

A)   have temporary effects.
B)   explain why the short run aggregate supply curve might shift.
C)   explain why the aggregate demand curve is downward sloping.
D)   explain monetary neutrality.E) A) and B)
F) None of the above

Question 16

Figure 33-7. 
-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) All of the above
F) A) and B)

Question 17

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Accepted Answer

A)   long-run aggregate supply shifts right
B)   long-run aggregate supply shifts left
C)   aggregate demand shifts right
D)   aggregate demand shifts leftE) None of the above
F) A) and D)

Question 18

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 19

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 20

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Accepted Answer

A) True 
 B)False

Exam 20: Aggregate Demand and Aggregate Supply

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Correct AnswerverifiedShow Answer

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 recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

Correct AnswerverifiedShow Answer

Figure 33-12. -Refer to Figure 33-12. Explain how the aggregate demand and aggregate supply model changed during periods 1 and 2.

Correct AnswerverifiedThe aggregate-demand...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, as the price level falls, which of the following increases?

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

In the aggregate demand and aggregate supply model, sticky wages, sticky prices, and misperceptions about relative prices

Correct AnswerverifiedShow Answer

According to classical macroeconomic theory, changes in the money supply affect

Correct AnswerverifiedShow Answer

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

Correct AnswerverifiedShow Answer

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P1 and Y1 , then it must be the case that

Correct AnswerverifiedShow Answer

When the dollar depreciates, U.S.

Correct AnswerverifiedShow Answer

Stagflation results from continued decreases in aggregate demand.

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

The aggregate quantity of goods and services demanded changes as the price level falls because

Correct AnswerverifiedShow Answer

Figure 33-7. -Refer to Financial Crisis. If nominal wages are sticky, which of the following helps explains the change in output?

Correct AnswerverifiedShow Answer

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Correct AnswerverifiedShow Answer

Suppose a country experiences an increase in its capital stock. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Correct AnswerverifiedThe short-run and lo...View AnswerShow Answer

If there are floods or droughts or a decrease in the availability of raw materials

Correct AnswerverifiedShow Answer

A decrease in U.S. interest rates leads to

Correct AnswerverifiedShow Answer

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The aggregate-demand...
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A decrease in aggregate demand causes th...
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The short-run and lo...
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