Question 1

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

Accepted Answer

A)   aggregate supply to the right.
B)   aggregate supply to the left.
C)   aggregate demand to the right.
D)   aggregate demand to the left.E) None of the above
F) All of the above

Question 2

Which of the following would cause investment spending to increase and aggregate demand to shift right?

Accepted Answer

A)   an increase in the money supply,but not an investment tax credit
B)   an investment tax credit,but not an increase in the money supply
C)   both an increase in the money supply and an investment tax credit
D)   None of the above are correct.E) A) and D)
F) B) and C)

Question 3

During World War II government expenditures increased almost five-fold and output almost doubled.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would increase the price level?

Accepted Answer

A)   an increase in the money supply.
B)   an increase in taxes.
C)   a decrease in the expected price level.
D)   a decrease in the natural rate of unemployment.E) A) and C)
F) B) and C)

Question 5

Suppose the expected price level increases.Which curves in the aggregate demand and aggregate supply model would be affected,and which way would they shift?

Accepted Answer

The short run aggreg...

Question 6

Figure 20-2. 
-Refer to Financial Crisis.In the long run,if the Fed does not respond,the change in price expectations created by the crisis shifts

Accepted Answer

A)   aggregate demand right.
B)   aggregate demand left.
C)   short-run aggregate supply right.
D)   short-run aggregate supply left.E) B) and C)
F) All of the above

Question 7

Imagine the U.S.economy is in long-run equilibrium.Then suppose the value of the U.S.dollar increases.At the same time,people in the U.S.revise their expectations so that the expected price level falls.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) A) and B)
F) A) and C)

Question 8

When taxes decrease,consumption

Accepted Answer

A)   decreases as shown by a movement to the left along a given aggregate-demand curve.
B)   decreases as shown by a shift of the aggregate demand curve to the left.
C)   increases as shown by a movement to the right along a given aggregate-demand curve.
D)   increases as shown by a shift of the aggregate demand curve to the right.E) None of the above
F) A) and B)

Question 9

Figure 20-2. 
-Refer to Stock Market Boom 2015.Which curve shifts and in which direction?

Accepted Answer

A)   aggregate demand shifts right
B)   aggregate demand shifts left
C)   aggregate supply shifts right
D)   aggregate supply shifts left.E) B) and C)
F) A) and B)

Question 10

According to classical macroeconomic theory,changes in the money supply affect

Accepted Answer

A)   nominal variables and real variables.
B)   nominal variables,but not real variables.
C)   real variables,but not nominal variables.
D)   neither nominal nor real variables.E) A) and C)
F) B) and C)

Question 11

As the price level rises

Accepted Answer

A)   people will want to hold more money,so the interest rate rises.
B)   people will want to hold more money,so the interest rate falls.
C)   people will want to hold less money,so the interest rate falls.
D)   people will want to hold less money,so the interest rate rises.E) A) and B)
F) None of the above

Question 12

Which of the following would cause prices to rise and real GDP to fall in the short run?

Accepted Answer

A)   an increase in the expected price level
B)   an increase in the capital stock
C)   an increase in the quantity of labor available
D)   All of the above are correct.E) All of the above
F) None of the above

Question 13

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.E) A) and B)
F) A) and C)

Question 14

Which of the following is not included in aggregate demand?

Accepted Answer

A)   purchases of stock and bonds
B)   purchases of services such as visits to the doctor
C)   purchases of capital goods such as equipment in a factory
D)   purchases by foreigners of consumer goods produced in the United StatesE) C) and D)
F) A) and B)

Question 15

Real and nominal variables are highly intertwined,and changes in the money supply change real GDP.Most economists would agree that this statement accurately describes

Accepted Answer

A)   both the short run and the long run.
B)   the short run,but not the long run.
C)   the long run,but not the short run.
D)   neither the long run nor the short run.E) B) and C)
F) C) and D)

Question 16

Most economists believe that classical theory describes the world

Accepted Answer

A)   in the short run.
B)   in the long run.
C)   in both the short run and the long run.
D)   in neither the short run nor the long run.E) C) and D)
F) A) and B)

Question 17

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 D)
F) None of the above

Question 18

The aggregate demand and aggregate supply graph has

Accepted Answer

A)   quantity of output on the horizontal axis.Output can be measured by the GDP deflator.
B)   quantity of output on the horizontal axis.Output can be measured by real GDP.
C)   quantity of output on the vertical axis.Output can be measured by the GDP deflator.
D)   quantity of output on the vertical axis.Output can be measured by real GDP.E) A) and B)
F) A) and C)

Question 19

Other things the same,the aggregate quantity of goods demanded decreases if

Accepted Answer

A)   real wealth falls.
B)   the interest rate rises.
C)   the dollar appreciates.
D)   All of the above are correct.E) B) and C)
F) C) and D)

Question 20

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

Exam 33: Aggregate Demand and Aggregate Supply

Which of the following would increase the price level?

Correct AnswerverifiedShow Answer

Other things the same,the aggregate quantity of goods demanded decreases if

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The aggregate demand and aggregate supply graph has

Correct AnswerverifiedShow Answer

When taxes decrease,consumption

Correct AnswerverifiedShow Answer

Imagine the U.S.economy is in long-run equilibrium.Then suppose the value of the U.S.dollar increases.At the same time,people in the U.S.revise their expectations so that the expected price level falls.We would expect that in the short-run

Correct AnswerverifiedShow Answer

Most economists believe that classical theory describes the world

Correct AnswerverifiedShow Answer

According to classical macroeconomic theory,changes in the money supply affect

Correct AnswerverifiedShow Answer

As the price level rises

Correct AnswerverifiedShow Answer

During World War II government expenditures increased almost five-fold and output almost doubled.

Correct AnswerverifiedShow Answer

Figure 20-2. -Refer to Stock Market Boom 2015.Which curve shifts and in which direction?

Correct AnswerverifiedShow Answer

Suppose the expected price level increases.Which curves in the aggregate demand and aggregate supply model would be affected,and which way would they shift?

Correct AnswerverifiedThe short run aggreg...View AnswerShow Answer

Which of the following is not included in aggregate demand?

Correct AnswerverifiedShow Answer

Real and nominal variables are highly intertwined,and changes in the money supply change real GDP.Most economists would agree that this statement accurately describes

Correct AnswerverifiedShow Answer

Which of the following would cause prices to rise and real GDP to fall in the short run?

Correct AnswerverifiedShow Answer

Which of the following would cause investment spending to increase and aggregate demand to shift right?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 20-2. -Refer to Financial Crisis.In the long run,if the Fed does not respond,the change in price expectations created by the crisis shifts

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 control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

Correct AnswerverifiedShow Answer

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The short run aggreg...
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