Question 1

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) None of the above
F) All of the above

Question 2

Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

Accepted Answer

The price level decr...

Question 3

Changes in what four variables will shift the long run aggregate supply curve?

Accepted Answer

Labor, capital, natu...

Question 4

If wages are sticky, then a greater than expected increase in the price level

Accepted Answer

A)   raises the real costs of production, so the short-run aggregate supply curve shifts left.
B)   raises the real costs of production, so the aggregate quantity of goods and services declines.
C)   reduces the real costs of production, so the short-run aggregate supply curve shifts right.
D)   reduces the real costs of production, so the aggregate quantity of goods and services rises.E) A) and B)
F) None of the above

Question 5

Which of the following shifts both short-run and long-run aggregate supply left?

Accepted Answer

A)   a decrease in the actual price level
B)   a decrease in the expected price level
C)   a decrease in the capital stock
D)   a decrease in the money supplyE) None of the above
F) A) and C)

Question 6

When the price level falls

Accepted Answer

A)   people want to hold less money.
B)   the interest rate falls.
C)   investment spending rises.
D)   All of the above are correct.E) A) and C)
F) None of the above

Question 7

Consider the exhibit below for the following questions.
Figure 33-4 
-Refer to Figure 33-4. If the economy is at A and there is a fall in aggregate demand, in the short run the economy

Accepted Answer

A)   stays at A.
B)   moves to B.
C)   moves to C.
D)   moves to D.E) A) and C)
F) A) and B)

Question 8

Aggregate demand includes

Accepted Answer

A)   the quantity of goods and services the government, households, firms, and customers abroad want to buy.
B)   neither the quantity of goods and services the government, households, nor firms want to buy nor the quantity of goods and services customers abroad want to buy.
C)   the quantity of goods and service the government wants to buy, but not the quantity of goods and services households, firms, or customers abroad want to buy.
D)   the quantity of goods and services households and firms want to buy, but not the quantity of goods and services the government wants to buy.E) A) and D)
F) A) and C)

Question 9

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

Accepted Answer

There are occasional short-lived periods...

Question 10

Aggregate demand includes

Accepted Answer

A)   only the quantity of goods and services households want to buy.
B)   only the quantity of goods and services households and firms want to buy.
C)   only the quantity of goods and services households, firms, and the government want to buy.
D)   the quantity of goods and services households, firms, the government, and customer abroad want to buy.E) A) and D)
F) A) and B)

Question 11

Refer to Stock Market Boom 2015. In the long run, the change in price expectations created by the stock market boom shifts

Accepted Answer

A)   long-run aggregate supply right.
B)   long-run aggregate supply left.
C)   short-run aggregate supply right.
D)   short-run aggregate supply left.E) A) and D)
F) All of the above

Question 12

People will buy more if the price level

Accepted Answer

A)   rises because rising prices increase the real value of a dollar.
B)   rises because rising prices decrease the real value of a dollar.
C)   falls because falling prices increase the real value of a dollar.
D)   falls because falling prices decrease the real value of a dollar.E) B) and D)
F) C) and D)

Question 13

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

Accepted Answer

A)   aggregate supply to the right.
B)   aggregate supply to the left.
C)   aggregate demand to the right.
D)   aggregate demand to the left.E) None of the above
F) C) and D)

Question 14

When the price level falls

Accepted Answer

A)   the interest rate rises, so the quantity of goods and services demand rises.
B)   the interest rate rises, so the quantity of goods and services demand falls.
C)   the interest rate falls, so the quantity of goods and services demand rises.
D)   the interest rate falls, so the quantity of goods and services demand falls.E) C) and D)
F) B) and C)

Question 15

Briefly state the three key facts about economic fluctuations.

Accepted Answer

(1) Economic fluctuations are ...

Question 16

Which of the following is correct?

Accepted Answer

A)   The short-run, but not the long-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
B)   The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
C)   The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables.
D)   Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables.E) B) and C)
F) None of the above

Question 17

Figure 33-11. 
-Refer to Figure 33-11. A movement from P1 and Y2, to P2 and Y1 would be consistent with

Accepted Answer

A)   a decrease in consumption expenditures.
B)   stagflation.
C)   sticky-wages.
D)   an increase in net exports.E) B) and D)
F) All of the above

Question 18

The classical dichotomy refers to the separation of

Accepted Answer

A)   prices and nominal interest rates.
B)   taxes and government spending.
C)   decisions made by the public and decisions made by the government.
D)   real and nominal variables.E) C) and D)
F) B) and C)

Question 19

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major restrictions on logging removed. 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) All of the above
F) C) and D)

Question 20

In the context of aggregate demand and aggregate supply, the wealth effect refers to the idea that, when the price level decreases, the real wealth of households

Accepted Answer

A)   increases and as a result consumption spending increases. This effect contributes to the downward slope of the aggregate-demand curve.
B)   decreases and as a result consumption spending increases. This effect contributes to the upward slope of the aggregate-supply curve.
C)   increases and as a result households increase their money holdings; in turn, interest rates increase and investment spending decreases. This effect contributes to the downward slope of the aggregate-demand curve.
D)   decreases and as a result households increase their money holdings; in turn, interest rates increase and investment spending decreases. This effect contributes to the upward slope of the aggregate-supply curve.E) None of the above
F) A) and D)

Exam 33: Aggregate Demand and Aggregate Supply

Aggregate demand includes

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Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major restrictions on logging removed. In the short run

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

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When the price level falls

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Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

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Changes in what four variables will shift the long run aggregate supply curve?

Correct AnswerverifiedLabor, capital, natu...View AnswerShow Answer

Briefly state the three key facts about economic fluctuations.

Correct Answerverified(1) Economic fluctuations are ...View AnswerShow Answer

Figure 33-11. -Refer to Figure 33-11. A movement from P1 and Y2, to P2 and Y1 would be consistent with

Correct AnswerverifiedShow Answer

Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

Correct AnswerverifiedThe price level decr...View AnswerShow Answer

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

Correct AnswerverifiedThere are occasional short-lived periods...View AnswerShow Answer

Refer to Stock Market Boom 2015. In the long run, the change in price expectations created by the stock market boom shifts

Correct AnswerverifiedShow Answer

In the context of aggregate demand and aggregate supply, the wealth effect refers to the idea that, when the price level decreases, the real wealth of households

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Aggregate demand includes

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People will buy more if the price level

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The classical dichotomy refers to the separation of

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When the price level falls

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Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4. If the economy is at A and there is a fall in aggregate demand, in the short run the economy

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Which of the following is correct?

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If wages are sticky, then a greater than expected increase in the price level

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Which of the following shifts both short-run and long-run aggregate supply left?

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Labor, capital, natu...
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(1) Economic fluctuations are ...
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The price level decr...
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There are occasional short-lived periods...
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Correct Answer
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Correct Answer
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