Question 1

Recessions in China and India would cause

Accepted Answer

A)   the U.S. price level and real GDP to rise.
B)   the U.S. price level and real GDP to fall.
C)   the U.S. price level to rise and real GDP to fall.
D)   the U.S. price level to fall and real GDP to rise.E) A) and B)
F) All of the above

Question 2

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

Question 3

We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

Accepted Answer

A) True 
 B)False

Question 4

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Accepted Answer

A)   prices and output both increased immediately.
B)   prices increased immediately while output remained unchanged.
C)   it took time for prices to rise; in the meantime output was lower.
D)   it took time for prices to rise; in the meantime output was higher.E) A) and B)
F) A) and C)

Question 5

Other things the same, as the price level rises, the real value of money

Accepted Answer

A)   and the exchange rate rise.
B)   and the exchange rate fall.
C)   rises and the exchange rate falls.
D)   falls and the exchange rate rises.E) None of the above
F) B) and C) D

Question 6

An increase in the interest rate causes investment to

Accepted Answer

A)   rise and the exchange rate to appreciate.
B)   fall and the exchange rate to depreciate.
C)   rise and the exchange rate to depreciate.
D)   fall and the exchange rate to appreciate.E) A) and D)
F) A) and C)

Question 7

An increase in the money supply causes the interest rate to fall, investment spending to rise, and aggregate demand to shift right.

Accepted Answer

A) True 
 B)False

Question 8

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 sales.
C)   Recessions come at regular intervals and are easy to predict.
D)   When real GDP falls, the rate of unemployment rises.E) All of the above
F) A) and D)

Question 9

Make a list of things that would shift the long-run aggregate supply curve to the right.

Accepted Answer

Examples in the text (or variations) inc...

Question 10

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

Question 11

The aggregate quantity of goods and services demanded changes as the price level rises 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) None of the above
F) All of the above A

Question 12

If the actual price level is 165, but people had been expecting it to be 160, then

Accepted Answer

A)   the quantity of output supplied rises, but only in the short run.
B)   the quantity of output supplied rises in the short run and the long run.
C)   the quantity of output supplied falls, but only in the short run.
D)   the quantity of output supplied falls in the short run and the long run.E) None of the above
F) All of the above

Question 13

The economic boom of the early 1940s resulted mostly from

Accepted Answer

A)   increased government expenditures.
B)   falling prices of oil and other natural resources.
C)   an increase in the growth rate of the money supply.
D)   rapid developments in transportation, electronics, and communication.E) A) and C)
F) B) and C)

Question 14

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

Accepted Answer

A)   the dollar would appreciate which would cause aggregate demand to shift right.
B)   the dollar would appreciate which would cause aggregate demand to shift left.
C)   the dollar would depreciate which would cause aggregate demand to shift right.
D)   the dollar would depreciate which would cause aggregate demand to shift left.E) C) and D)
F) B) and D)

Question 15

If the price level rises above what was expected and nominal wages are fixed, then

Accepted Answer

A)   production becomes less profitable so firms will hire fewer workers.
B)   production becomes less profitable so firms will hire more workers.
C)   production becomes more profitable so firms will hire fewer workers.
D)   production become more profitable so firms will hire more workers.E) A) and D)
F) A) and B)

Question 16

Which of the following explains why production rises in most years?

Accepted Answer

A)   increases in the labor force
B)   increases in the capital stock
C)   advances in technological knowledge
D)   All of the above are correct.E) None of the above
F) A) and B) D

Question 17

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

Question 18

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) B) and D)
F) None of the above

Question 19

The long-run aggregate supply curve would shift right if the government were to

Accepted Answer

A)   increase the minimum-wage.
B)   make unemployment benefits more generous.
C)   raise taxes on investment spending.
D)   None of the above is correct.E) A) and B)
F) B) and C)

Question 20

As the price level rises,

Accepted Answer

A)   the exchange rate falls, so net exports fall.
B)   the exchange rate falls, so net exports rise.
C)   the exchange rate rises, so net exports fall.
D)   the exchange rate rises, so net exports rise.E) C) and D)
F) A) and D)

Exam 15: Aggregate Demand and Aggregate Supply

Recessions in China and India would cause

Correct AnswerverifiedShow Answer

An increase in the expected price level shifts the

Correct AnswerverifiedShow Answer

We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

Correct AnswerverifiedShow Answer

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Correct AnswerverifiedShow Answer

Other things the same, as the price level rises, the real value of money

Correct AnswerverifiedD

An increase in the interest rate causes investment to

Correct AnswerverifiedShow Answer

An increase in the money supply causes the interest rate to fall, investment spending to rise, and aggregate demand to shift right.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Make a list of things that would shift the long-run aggregate supply curve to the right.

Correct AnswerverifiedExamples in the text (or variations) inc...View AnswerShow Answer

People will buy more if the price level

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA

If the actual price level is 165, but people had been expecting it to be 160, then

Correct AnswerverifiedShow Answer

The economic boom of the early 1940s resulted mostly from

Correct AnswerverifiedShow Answer

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

Correct AnswerverifiedShow Answer

If the price level rises above what was expected and nominal wages are fixed, then

Correct AnswerverifiedShow Answer

Which of the following explains why production rises in most years?

Correct AnswerverifiedD

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

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

The long-run aggregate supply curve would shift right if the government were to

Correct AnswerverifiedShow Answer

As the price level rises,

Correct AnswerverifiedShow Answer

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D

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Examples in the text (or variations) inc...
View Answer

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A

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D

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