Question 1

The recession of 2008-2009 was preceded by

Accepted Answer

A)   a sharp decline in housing prices.
B)   large losses among financial institutions that owned mortgage-backed securities.
C)   rises in mortgage defaults and home foreclosures.
D)   all of the aboveE) B) and C)
F) A) and B)

Question 2

Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

Accepted Answer

A)   Reducing either the minimum wage or the time and cost to open a business would have no effect on the long- run aggregate supply curve.
B)   Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right.
C)   Reducing the minimum wage would shift long-run aggregate supply to the right. Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve.
D)   Reducing the minimum wage would have no affect on the long-run aggregate supply curve. Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right.E) B) and C)
F) All of the above

Question 3

Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

Accepted Answer

A)   decrease consumption, shown as a movement to the left along a given aggregate-demand curve.
B)   increase consumption, shown as a movement to the right along a given aggregate-demand curve.
C)   decrease consumption, shown by shifting the aggregate-demand curve to the left.
D)   increase consumption, shown by shifting the aggregate-demand curve to the right.E) B) and C)
F) None of the above

Question 4

In which case can we be sure real GDP rises in the short run?

Accepted Answer

A)   foreign economies expand and government purchases rise.
B)   foreign economies expand and government purchases fall.
C)   foreign economies contract and government purchases fall.
D)   foreign economies contract and government purchases rise.E) A) and C)
F) A) and B)

Question 5

Menu costs help explain

Accepted Answer

A)   sticky-price theory.
B)   misperceptions theory.
C)   sticky-wage theory.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 6

Other things the same, continued technological progress and continued increases in the money supply would unambiguously lead to

Accepted Answer

A)   rising prices only.
B)   rising real GDP only.
C)   rising prices and rising real GDP.
D)   neither rising prices nor rising real GDP.E) A) and B)
F) All of the above

Question 7

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.E) All of the above
F) None of the above

Question 8

Aggregate demand includes

Accepted Answer

A)   only the quantity of goods and services households want to buy.
B)   only the quantity of goods and services households and firms want to buy.
C)   only the quantity of goods and services households, firms, and the government want to buy.
D)   the quantity of goods and services households, firms, the government, and customer abroad want to buy.E) All of the above
F) C) and D)

Question 9

According to classical macroeconomic theory, changes in the money supply change real GDP but not the price level.

Accepted Answer

A) True 
 B)False

Question 10

Other things the same, continued increases in technology lead to

Accepted Answer

A)   continued increases in the price level and real GDP.
B)   continued decreases in the price level and real GDP.
C)   continued increases in real GDP and continued increases in the price level.
D)   continued increases in real GDP and continued decreases in the price level.E) A) and D)
F) All of the above

Question 11

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 12

In the early 1930s in the United States, there was a

Accepted Answer

A)   large increase in output. In the early 1940s there was also a large increase in output.
B)   large increase in output. In the early 1940s there was a large decrease in output.
C)   large decrease in output. In the early 1940s there was a large increase in output.
D)   large decrease in output. In the early 1940s there was also a large decrease in output.E) None of the above
F) A) and B)

Question 13

The long-run aggregate supply curve would shift left if the amount of labor available

Accepted Answer

A)   increased or Congress made a substantial increase in the minimum wage.
B)   decreased or Congress abolished the minimum wage.
C)   increased or Congress abolished the minimum wage.
D)   decreased or Congress made a substantial increase in the minimum wage.E) B) and C)
F) A) and D)

Question 14

Suppose the economy is in long-run equilibrium. If there is an increase in the supply of labor as well as an increase in the money supply, then we would expect that in the short-run,

Accepted Answer

A)   real GDP will rise and the price level might rise, fall, or stay the same.
B)   real GDP will fall and the price level might rise, fall, or stay the same.
C)   the price level will rise, and real GDP might rise, fall, or stay the same.
D)   the price level will fall, and real GDP might rise, fall, or stay the same.E) C) and D)
F) A) and C)

Question 15

When the price level falls

Accepted Answer

A)   the interest rate rises, so the quantity of goods and services demand rises.
B)   the interest rate rises, so the quantity of goods and services demand falls.
C)   the interest rate falls, so the quantity of goods and services demand rises.
D)   the interest rate falls, so the quantity of goods and services demand falls.E) A) and D)
F) A) and C)

Question 16

Figure 33-10. 
-Refer to Figure 33-10. If the economy starts at point A, a short-run fall in output would be consistent with a movement to point

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) All of the above
F) B) and D)

Question 17

The sticky-price theory implies that

Accepted Answer

A)   the short-run aggregate-supply curve is upward-sloping.
B)   an unexpected fall in the price level induces firms to reduce the quantity of goods and services they produce.
C)   menu costs influence the speed of adjustment of prices.
D)   All of the above are correct.E) A) and C)
F) All of the above

Question 18

Figure 33-11. 
-Refer to Figure 33-11. A movement from P1 and Y2, to P2 and Y1 would be consistent with

Accepted Answer

A)   a decrease in consumption expenditures.
B)   stagflation.
C)   sticky-wages.
D)   an increase in net exports.E) B) and C)
F) C) and D)

Question 19

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

Question 20

According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had

Accepted Answer

A)   increased, so it would increase production.
B)   increased, so it would decrease production.
C)   decreased, so it would increase production.
D)   decreased, so it would decrease production.E) B) and D)
F) A) and B)

Exam 23: Aggregate Demand and Aggregate Supply

Aggregate demand includes

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The long-run aggregate supply curve would shift left if the amount of labor available

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The recession of 2008-2009 was preceded by

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Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

Correct AnswerverifiedShow Answer

Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

Correct AnswerverifiedShow Answer

In the early 1930s in the United States, there was a

Correct AnswerverifiedShow Answer

The sticky-price theory implies that

Correct AnswerverifiedShow Answer

According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had

Correct AnswerverifiedShow Answer

In which case can we be sure real GDP rises in the short run?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, continued technological progress and continued increases in the money supply would unambiguously lead to

Correct AnswerverifiedShow Answer

Menu costs help explain

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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.

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When the price level falls

Correct AnswerverifiedShow Answer

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

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According to classical macroeconomic theory, changes in the money supply change real GDP but not the price level.

Correct AnswerverifiedShow Answer

Figure 33-10. -Refer to Figure 33-10. If the economy starts at point A, a short-run fall in output would be consistent with a movement to point

Correct AnswerverifiedShow Answer

Other things the same, continued increases in technology lead to

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. If there is an increase in the supply of labor as well as an increase in the money supply, then we would expect that in the short-run,

Correct AnswerverifiedShow Answer

Figure 33-11. -Refer to Figure 33-11. A movement from P1 and Y2, to P2 and Y1 would be consistent with

Correct AnswerverifiedShow Answer

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