Question 1

What curve shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level?

Accepted Answer

The aggreg...

Question 2

Other things the same, a decrease in the price level makes the dollars people hold worth

Accepted Answer

A)   more, so they can buy more.
B)   more, so they can buy less.
C)   less, so they can buy more.
D)   less, so they can buy less.E) A) and D)
F) B) and C)

Question 3

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 4

If aggregate demand shifts right, then eventually price level expectations rise. This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Accepted Answer

A) True 
 B)False

Question 5

Other things the same, if technology increases, then in the long run

Accepted Answer

A)   both output and prices are higher.
B)   output is higher and prices are lower.
C)   output is lower and prices are higher.
D)   both output and prices are lower.E) B) and C)
F) None of the above

Question 6

Which of the following is correct?

Accepted Answer

A)   Short run fluctuations in economic activity happen only in developing countries.
B)   During economic contractions most firms experience rising profits.
C)   Recessions come at irregular intervals and are easy to predict.
D)   When real GDP falls, the rate of unemployment rises.E) None of the above
F) A) and D)

Question 7

Refer to Optimism. In the long run, the change in price expectations created by optimism 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 B)
F) A) and C)

Question 8

When production costs rise,

Accepted Answer

A)   the short-run aggregate supply curve shifts to the right.
B)   the short-run aggregate supply curve shifts to the left.
C)   the aggregate demand curve shifts to the right.
D)   the aggregate demand curve shifts to the left.E) B) and D)
F) A) and B)

Question 9

Which of the following would not be included in aggregate demand?

Accepted Answer

A)   an increase in firms' inventories.
B)   purchases of goods by households.
C)   firms' purchases of newly produced machinery.
D)   government's tax collections.E) None of the above
F) A) and C)

Question 10

Which of the following shifts the long-run aggregate supply curve to the right?

Accepted Answer

A)   both an increase in the capital stock and technological improvements
B)   an increase in the capital stock but not technological improvements
C)   an increase in the capital stock but not technological improvements
D)   neither an increase in the capital stock nor an technological improvementsE) C) and D)
F) A) and B)

Question 11

According to classical macroeconomic theory, changes in the money supply change nominal but not real variables.

Accepted Answer

A) True 
 B)False

Question 12

The aggregate supply curve is upward sloping in

Accepted Answer

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

Question 13

The long-run aggregate supply curve shifts right if

Accepted Answer

A)   immigration from abroad increases.
B)   the capital stock increases.
C)   technology advances.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 14

In the first few years of the Great Depression, unemployment rose to about

Accepted Answer

A)   10 percent, and prices rose about 14 percent.
B)   15 percent, and prices rose about 22 percent.
C)   20 percent, and prices fell about 14 percent.
D)   25 percent, and prices fell about 22 percent.E) All of the above
F) None of the above

Question 15

The model of short-run economic fluctuations focuses on

Accepted Answer

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

Question 16

Suppose the economy is in long-run equilibrium. In a short span of time, there is an increase in the money supply, a tax decrease, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

Accepted Answer

A)   the price level and real GDP both to rise.
B)   the price level and real GDP both to fall.
C)   the price level and real GDP both to stay the same.
D)   All of the above are possible.E) B) and C)
F) A) and B)

Question 17

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to

Accepted Answer

A)   decrease consumption, which shifts aggregate supply left.
B)   decrease consumption, which shifts aggregate demand left.
C)   increase consumption, which shifts aggregate supply right.
D)   increase consumption, which shifts aggregate demand right.E) C) and D)
F) B) and C)

Question 18

The sticky-price theory helps explain what feature of the aggregate demand and aggregate supply model?

Accepted Answer

why the short run ag...

Question 19

Which of the following would help explain why the aggregate demand curve slopes downward?

Accepted Answer

A)   An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services.
B)   A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports.
C)   A higher price level increases real wealth, which stimulates spending on consumption.
D)   A lower price level reduces the interest rate, which encourages greater spending on investment goods.E) B) and D)
F) A) and C)

Question 20

If aggregate demand shifts right, then eventually price level expectations rise. The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.

Accepted Answer

A) True 
 B)False

Exam 33: Aggregate Demand and Aggregate Supply

According to classical macroeconomic theory, changes in the money supply change nominal but not real variables.

Correct AnswerverifiedShow Answer

The sticky-price theory helps explain what feature of the aggregate demand and aggregate supply model?

Correct Answerverifiedwhy the short run ag...View AnswerShow Answer

Which of the following would not be included in aggregate demand?

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If aggregate demand shifts right, then eventually price level expectations rise. This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

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Which of the following is correct?

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Other things the same, a decrease in the price level makes the dollars people hold worth

Correct AnswerverifiedShow Answer

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to

Correct AnswerverifiedShow Answer

In the first few years of the Great Depression, unemployment rose to about

Correct AnswerverifiedShow Answer

Other things the same, if technology increases, then in the long run

Correct AnswerverifiedShow Answer

What curve shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level?

Correct AnswerverifiedThe aggreg...View AnswerShow Answer

Which of the following would help explain why the aggregate demand curve slopes downward?

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Which of the following shifts the long-run aggregate supply curve to the right?

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Refer to Optimism. In the long run, the change in price expectations created by optimism shifts

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Suppose the economy is in long-run equilibrium. In a short span of time, there is an increase in the money supply, a tax decrease, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

Correct AnswerverifiedShow Answer

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Correct AnswerverifiedShow Answer

The aggregate supply curve is upward sloping in

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts right if

Correct AnswerverifiedShow Answer

If aggregate demand shifts right, then eventually price level expectations rise. The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.

Correct AnswerverifiedShow Answer

When production costs rise,

Correct AnswerverifiedShow Answer

The model of short-run economic fluctuations focuses on

Correct AnswerverifiedShow Answer

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why the short run ag...
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The aggreg...
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