Question 1

Policymakers who influence aggregate demand can potentially mitigate the severity of economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 2

As the price level falls,

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.

Question 3

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

Accepted Answer

A) True 
 B)False

Question 4

Figure 15-1
 
-Refer to Figure 15-1. 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.

Question 5

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

Accepted Answer

A)   an increase in either the physical or human capital stock
B)   an increase in the human but not the physical capital stock
C)   an increase in the physical capital stock, but no the human capital stock
D)   neither an increase in the physical capital stock or the human capital stock

Question 6

The average price level is measured by

Accepted Answer

A)   any real variable.
B)   the rate of inflation.
C)   the level of the money supply.
D)   the CPI or the GDP deflator.

Question 7

Which of the following rises when the U.S. price level falls?

Accepted Answer

A)   interest rates
B)   the value of the dollar in the market for foreign-currency exchange
C)   real wealth
D)   All of the above are correct.

Question 8

Other things the same, a decrease in the price level motivates people to hold

Accepted Answer

A)   less money, so they lend less, and the interest rate rises.
B)   less money, so they lend more, and the interest rate falls.
C)   more money, so they lend more, and the interest rate rises.
D)   more money, so they lend less, and the interest rate falls.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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.

Question 11

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Accepted Answer

A) True 
 B)False

Question 12

Make a list of things that would shift the aggregate demand curve to the right.

Accepted Answer

Examples (and variations on examples) in...

Question 13

Which of the following is a lesson concerning shifts in aggregate demand?

Accepted Answer

A)   they contribute to fluctuations in output.
B)   in the long-run they change real output, but not the price level.
C)   policymakers are unable to mitigate the severity of economic fluctuations.
D)   All of the above are correct.

Question 14

Stagflation exists when prices

Accepted Answer

A)   and output rise.
B)   rise and output falls.
C)   fall and output rises.
D)   and output fall.

Question 15

Most economists believe that in the short run

Accepted Answer

A)   real and nominal variables are determined independently and that money cannot move real GDP away from its long-run trend.
B)   real and nominal variables are determined independently but that money can temporarily move real GDP away from its long-run trend.
C)   real and nominal variables are highly intertwined but that money cannot move real GDP away from its long-run trend.
D)   real and nominal variables are highly intertwined and that money can temporarily move real GDP away from its long-run trend.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)   a decrease in the actual price level
B)   an increase in the actual price level
C)   a decrease in the expected price level
D)   an increase in the expected price level

Question 18

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 19

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because

Accepted Answer

A)   monetary neutrality would mean that neither prices nor production should have risen.
B)   monetary neutrality would mean that production should have risen, but prices should not have.
C)   monetary neutrality would mean the prices should have risen, but production should not have changed.
D)   monetary neutrality would mean that prices and production should both have fallen.

Question 20

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

Accepted Answer

A)   the real value of wealth
B)   the interest rate
C)   the value of currency in the market for foreign exchange
D)   All of the above are correct.

Exam 15: Aggregate Demand and Aggregate Supply

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

Correct AnswerverifiedShow Answer

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

Correct AnswerverifiedShow Answer

Policymakers who influence aggregate demand can potentially mitigate the severity of economic fluctuations.

Correct AnswerverifiedShow Answer

Which of the following is a lesson concerning shifts in aggregate demand?

Correct AnswerverifiedShow Answer

Figure 15-1 -Refer to Figure 15-1. If the economy is at A and there is a fall in aggregate demand, in the short run the economy

Correct AnswerverifiedShow Answer

Which of the following rises when the U.S. price level falls?

Correct AnswerverifiedShow Answer

The average price level is measured by

Correct AnswerverifiedShow Answer

Most economists believe that in the short run

Correct AnswerverifiedShow Answer

Make a list of things that would shift the aggregate demand curve to the right.

Correct AnswerverifiedExamples (and variations on examples) in...View AnswerShow Answer

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

Correct AnswerverifiedShow Answer

Other things the same, a decrease in the price level motivates people to hold

Correct AnswerverifiedShow Answer

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because

Correct AnswerverifiedShow Answer

As the price level falls,

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

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

Correct AnswerverifiedShow Answer

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Stagflation exists when prices

Correct AnswerverifiedShow Answer

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Examples (and variations on examples) in...
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