Question 1

An increase in the price level and a reduction in output would result from

Accepted Answer

A)   a fall in stock prices.
B)   a decrease in the supply of an important resource.
C)   an increase in government expenditures.
D)   an increase in taxes.

Question 2

If the price level is higher than expected, firms might raise their production in the short run if

Accepted Answer

A)   the nominal wage they pay their employees was set based on the expected price level.
B)   prices are costly to adjust and they have set their price at some time in the past but are not ready to change it.
C)   they believe that the price of their product has risen relative to the price of other products, when in fact the rise in the price of their product reflects an increase in the general price level.
D)   All of the above are correct.

Question 3

The long-run aggregate supply curve shifts right if

Accepted Answer

A)   the price level rises.
B)   the price level falls.
C)   the capital stock increases.
D)   the capital stock decreases.

Question 4

The long-run aggregate supply curve

Accepted Answer

A)   is vertical.
B)   is a graphical representation of the classical dichotomy.
C)   indicates monetary neutrality in the long run.
D)   All of the above are correct.

Question 5

A decrease in the expected price level shifts short-run aggregate supply to the

Accepted Answer

A)   right, and an increase in the actual price level shifts short-run aggregate supply to the right.
B)   right, and an increase in the actual price level does not shift short-run aggregate supply.
C)   left, and an increase in the actual price level shifts short-run aggregate supply to the left.
D)   left, and an increase in the actual price level does not shift short-run aggregate supply.

Question 6

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Accepted Answer

A)   the price level is higher than expected making production more profitable.
B)   the price level is higher than expected making production less profitable
C)   the price level is lower than expected making production more profitable.
D)   the price level is higher than expected making production less profitable.

Question 7

Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time.
-Refer to Figure 33-7. Suppose the economy starts at Y. If there is a fall in aggregate demand, then the economy moves to

Accepted Answer

A)   V in the long run.
B)   W in the long run.
C)   X in the long run.
D)   Z in the long run.

Question 8

Economic expansions in Europe and China 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.

Question 9

Figure 33-5. 
-Refer to Figure 33-5. In Figure 33-5,

Accepted Answer

A)   Point B represents a short-run equilibrium and a long-run equilibrium.
B)   Point B represents a short-run equilibrium, and Point A represents a long-run equilibrium.
C)   Point B represents a long-run equilibrium, and Point A represents a short-run equilibrium.
D)   Point B represents a long-run equilibrium, and Point C represents a short-run equilibrium.

Question 10

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.

Question 11

Which of the following would cause stagflation?

Accepted Answer

A)   aggregate demand shifts right
B)   aggregate demand shifts left
C)   aggregate supply shifts right
D)   aggregate supply shifts left

Question 12

In which case can we be sure that real GDP and the price level rise in the short run?

Accepted Answer

A)   foreign economies expand and taxes increase.
B)   foreign economies expand and taxes decrease.
C)   foreign economies contract and taxes decrease.
D)   foreign economies contract and taxes increase.

Question 13

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.

Question 14

Other things the same, an unexpected fall in the price level results in some firms having

Accepted Answer

A)   lower than desired prices, which increases their sales.
B)   lower than desired prices, which depresses their sales.
C)   higher than desired prices, which increases their sales.
D)   higher than desired prices, which depresses their sales.

Question 15

When the price level falls

Accepted Answer

A)   people want to hold more money.
B)   the interest rate rises.
C)   investment spending rises.
D)   All of the above are correct.

Question 16

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this

Accepted Answer

A)   it is only necessary that long-run aggregate supply shifts right over time.
B)   it is only necessary that aggregate demand shifts right over time.
C)   both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther.
D)   None of the above cases would produce rising prices and growing real GDP over time.

Question 17

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 18

The long-run aggregate supply curve shifts right if

Accepted Answer

A)   either immigration from abroad increases or technology improves.
B)   immigration from abroad increases, but not if technology improves.
C)   technology improves, but not if immigration from abroad increases.
D)   None of the above are correct.

Question 19

Which of the following adjust to bring aggregate supply and demand into balance?

Accepted Answer

A)   the price level and real output
B)   the real rate of interest and the money supply
C)   government expenditures and taxes
D)   the saving rate and net exports

Question 20

Other things the same, the aggregate quantity of output supplied will decrease if the price level

Accepted Answer

A)   is lower than expected so that firms believe the relative price of their output has increased.
B)   is lower than expected so that firms believe the relative price of their output has decreased.
C)   is higher than expected so that firms believe the relative price of their output has increased.
D)   is higher than expected so that firms believe the relative price of their output has decreased.

Exam 23: Aggregate Demand and Aggregate Supply

When the price level falls

Correct Answer
verified

If the price level is higher than expected, firms might raise their production in the short run if

Correct Answer
verified

In which case can we be sure that real GDP and the price level rise in the short run?

Correct Answer
verified

The long-run aggregate supply curve shifts right if

Correct Answer
verified

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Correct Answer
verified

The long-run aggregate supply curve

Correct Answer
verified

Economic expansions in Europe and China would cause

Correct Answer
verified

Figure 33-5. -Refer to Figure 33-5. In Figure 33-5,

Correct Answer
verified

The long-run aggregate supply curve shifts right if

Correct Answer
verified

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 Answer
verified

Which of the following would cause stagflation?

Correct Answer
verified

Other things the same, an unexpected fall in the price level results in some firms having

Correct Answer
verified

When the dollar depreciates, U.S.

Correct Answer
verified

Which of the following adjust to bring aggregate supply and demand into balance?

Correct Answer
verified

Correct Answer
verified

Other things the same, the aggregate quantity of output supplied will decrease if the price level

Correct Answer
verified

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

Correct Answer
verified

An increase in the price level and a reduction in output would result from

Correct Answer
verified

A decrease in the expected price level shifts short-run aggregate supply to the

Correct Answer
verified

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this

Correct Answer
verified

Exam 23: Aggregate Demand and Aggregate Supply

When the price level falls

Correct AnswerverifiedShow Answer

If the price level is higher than expected, firms might raise their production in the short run if

Correct AnswerverifiedShow Answer

In which case can we be sure that real GDP and the price level rise in the short run?

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts right if

Correct AnswerverifiedShow Answer

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve

Correct AnswerverifiedShow Answer

Economic expansions in Europe and China would cause

Correct AnswerverifiedShow Answer

Figure 33-5. -Refer to Figure 33-5. In Figure 33-5,

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts right if

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

Which of the following would cause stagflation?

Correct AnswerverifiedShow Answer

Other things the same, an unexpected fall in the price level results in some firms having

Correct AnswerverifiedShow Answer

When the dollar depreciates, U.S.

Correct AnswerverifiedShow Answer

Which of the following adjust to bring aggregate supply and demand into balance?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things the same, the aggregate quantity of output supplied will decrease if the price level

Correct AnswerverifiedShow Answer

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

Correct AnswerverifiedShow Answer

An increase in the price level and a reduction in output would result from

Correct AnswerverifiedShow Answer

A decrease in the expected price level shifts short-run aggregate supply to the

Correct AnswerverifiedShow Answer

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this

Correct AnswerverifiedShow Answer

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