Question 1

Real GDP

Accepted Answer

A)   moves in the same direction as unemployment.
B)   is not adjusted for inflation.
C)   measures economic activity and real income.
D)   All of the above are correct.E) A) and C)
F) A) and B)

Question 2

Figure 33-2. 
-Refer to Figure 33-2.Point B represents

Accepted Answer

A)   a short-run equilibrium and a long-run equilibrium.
B)   a short-run equilibrium but not a long-run equilibrium.
C)   a long-run equilibrium but not a short-run equilibrium.
D)   neither a short-run equilibrium nor a long-run equilibrium.E) C) and D)
F) B) and D)

Question 3

The downward slope of the aggregate demand curve is based on logic that as the price level rises,consumption,investment,and net exports all fall.

Accepted Answer

A) True 
 B)False

Question 4

Suppose the economy is in long-run equilibrium.If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers,then in the short run,

Accepted Answer

A)   real GDP will rise and the price level might rise,fall,or stay the same.In the long-run,real GDP will rise and the price level might rise,fall,or stay the same.
B)   the price level will fall,and real GDP might rise,fall,or stay the same.In the long-run,real GDP and the price level will be unaffected.
C)   the price level will rise,and real GDP might rise,fall,or stay the same.In the long run,real GDP will rise and the price level will fall.
D)   the price level will fall,and real GDP might rise,fall,or stay the same.In the long run,real GDP will rise and the price level will fall.E) B) and C)
F) A) and D)

Question 5

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Accepted Answer

A) True 
 B)False

Question 6

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

Accepted Answer

A)   decreases the real value of money.
B)   increases the real value of the dollar in foreign exchange markets.
C)   decreases the interest rate.
D)   All of the above are correct.E) A) and D)
F) All of the above

Question 7

Which of the following both shift aggregate demand left?

Accepted Answer

A)   a decrease in taxes and at a given price level consumers feel more wealthy
B)   a decrease in taxes and at a given price level consumers feel less wealthy
C)   an increase in taxes and at a given price level consumers feel more wealthy
D)   an increase in taxes and at a given price level consumers feel less wealthyE) A) and B)
F) C) and D)

Question 8

Other things the same,a fall in an economy's overall level of prices tends to

Accepted Answer

A)   raise both the quantity demanded and supplied of goods and services.
B)   raise the quantity demanded of goods and services,but lower the quantity supplied.
C)   lower the quantity demanded of goods and services,but raise the quantity supplied.
D)   lower both the quantity demanded and the quantity supplied of goods and services.E) B) and D)
F) None of the above

Question 9

An economic contraction caused by a shift in aggregate demand causes prices to

Accepted Answer

A)   rise in the short run,and rise even more in the long run.
B)   rise in the short run,and fall back to their original level in the long run.
C)   fall in the short run,and fall even more in the long run.
D)   fall in the short run,and rise back to their original level in the long run.E) A) and B)
F) B) and C)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

Accepted Answer

A)   consumer wealth rises
B)   borrowing rises
C)   each dollar is worth more domestic goods
D)   the dollar appreciates relative to other currenciesE) None of the above
F) All of the above

Question 12

A decrease in U.S.interest rates leads to

Accepted Answer

A)   a depreciation of the dollar that leads to greater net exports.
B)   a depreciation of the dollar that leads to smaller net exports.
C)   an appreciation of the dollar that leads to greater net exports.
D)   an appreciation of the dollar that leads to smaller net exports.E) All of the above
F) A) and B)

Question 13

Other things the same as the price level rises,

Accepted Answer

A)   the dollar depreciates.
B)   the interest rate falls.
C)   people feel less wealthy.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 14

Which of the following will both make people spend more?

Accepted Answer

A)   wealth and interest rates rise.
B)   wealth rises and interest rates fall.
C)   wealth falls and interest rates rise.
D)   wealth falls and interest rates fall.E) B) and C)
F) A) and B)

Question 15

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 16

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Accepted Answer

A)   in the price level and output.
B)   in the price level,but not output.
C)   in output,but not the price level.
D)   in neither the price level nor output.E) A) and C)
F) B) and D)

Question 17

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

Accepted Answer

A)   an increase in the money supply.
B)   an increase in government expenditures.
C)   a fall in stock prices.
D)   bad weather in farm states.E) All of the above
F) B) and D)

Question 18

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) C) and D)
F) A) and C)

Question 19

If there are sticky wages,and the price level is greater than what was expected,then

Accepted Answer

A)   the quantity of aggregate goods and services supplied falls,which is shown by a shift of the short-run aggregate supply curve to the left.
B)   the quantity of aggregate goods and services supplied falls,as shown by a movement to the left along the short-run aggregate supply curve.
C)   the quantity of aggregate goods and services supplied rises,as shown by a shift of the short-run aggregate supply curve to the right.
D)   the quantity of aggregate goods and services supplied rises,as shown by a movement to the right along the short-run aggregate supply curve.E) C) and D)
F) B) and D)

Question 20

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Accepted Answer

When people expect the price l...

Exam 33: Aggregate Demand and Aggregate Supply

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Correct AnswerverifiedShow Answer

Other things the same,a fall in an economy's overall level of prices tends to

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

Correct AnswerverifiedShow Answer

Which of the following will both make people spend more?

Correct AnswerverifiedShow Answer

The downward slope of the aggregate demand curve is based on logic that as the price level rises,consumption,investment,and net exports all fall.

Correct AnswerverifiedShow Answer

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Correct AnswerverifiedWhen people expect the price l...View AnswerShow Answer

Suppose the economy is in long-run equilibrium.If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers,then in the short run,

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Correct AnswerverifiedShow Answer

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow 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

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

Correct AnswerverifiedShow Answer

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

Correct AnswerverifiedShow Answer

An economic contraction caused by a shift in aggregate demand causes prices to

Correct AnswerverifiedShow Answer

If there are sticky wages,and the price level is greater than what was expected,then

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Real GDP

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Figure 33-2. -Refer to Figure 33-2.Point B represents

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Other things the same as the price level rises,

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A decrease in U.S.interest rates leads to

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Which of the following both shift aggregate demand left?

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When people expect the price l...
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