Question 1

Other things the same, if the U.S. price level rises, then

Accepted Answer

A)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises.
B)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls.
C)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises.
D)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.E) A) and C)
F) A) and B)

Question 2

Stagflation exists when prices

Accepted Answer

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

Question 3

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, the value of the dollar falls. 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) All of the above

Question 4

Other things the same, an increase in the price level makes consumers feel

Accepted Answer

A)  less wealthy, so the quantity of goods and services demanded falls.
B)  less wealthy, so the quantity of goods and services demanded rises.
C)  more wealthy, so the quantity of goods and services demanded rises.
D)  more wealthy, so the quantity of goods and services demanded falls.E) A) and C)
F) None of the above

Question 5

If banks and speculators in the U.S. decided to exchange U.S. dollars for the foreign currencies of other countries, but foreigners do not desire to increase their holdings of U.S. dollars, then U.S. net exports would

Accepted Answer

A)  rise and aggregate demand would shift left.
B)  rise and aggregate demand would shift right.
C)  fall and aggregate demand would shift left.
D)  fall and aggregate demand would shift right.E) A) and D)
F) A) and B)

Question 6

Technological progress shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 7

Other things the same, as the price level falls,

Accepted Answer

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

Question 8

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Accepted Answer

A)  prices and output both increased immediately.
B)  prices increased immediately while output remained unchanged.
C)  it took time for prices to rise; in the meantime output was lower.
D)  it took time for prices to rise; in the meantime output was higher.E) All of the above
F) A) and B)

Question 9

The effects of a higher than expected price level are shown by

Accepted Answer

A)  shifting the short-run aggregate supply curve right.
B)  shifting the short-run aggregate supply curve left.
C)  moving to the right along a given aggregate supply curve.
D)  moving to the left along a given aggregate supply curve.E) A) and D)
F) B) and C)

Question 10

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

Question 11

When output rises, unemployment falls.

Accepted Answer

A) True 
 B)False

Question 12

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

Accepted Answer

There are occasional short-lived periods...

Question 13

Other things the same, when the price level rises more than expected, some firms will have

Accepted Answer

A)  higher than desired prices which increases their sales.
B)  higher than desired prices which depresses their sales.
C)  lower than desired prices which increases their sales.
D)  lower than desired prices which depresses their sales.E) A) and C)
F) None of the above

Question 14

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level

Accepted Answer

A)  and output are higher than in the original long-run equilibrium.
B)  and output are lower than in the original long-run equilibrium.
C)  is lower and output is the same as the original long-run equilibrium.
D)  is the same and output is lower than in the original long-run equilibrium.E) A) and B)
F) None of the above

Question 15

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp decline in the stock market, a tax cut, an increase in the money supply and a decline in the value of the dollar. In the short run

Accepted Answer

A)  the price level and real GDP will both rise.
B)  the price level and real GDP will both fall.
C)  neither the price leave nor real GDP will change.
D)  All of the above are possible.E) B) and D)
F) All of the above

Question 16

The long-run aggregate supply curve shifts right if

Accepted Answer

A)  immigration from abroad increases.
B)  the capital stock increases.
C)  technology advances.
D)  All of the above are correct.E) C) and D)
F) A) and B)

Question 17

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  a decrease in the money supply
B)  increases in the profitability of capital due perhaps to technological progress.
C)  the repeal of an investment tax credit
D)  a decrease in the price levelE) A) and C)
F) B) and C)

Question 18

Stagflation results from continued decreases in aggregate demand.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following fall during a recession?

Accepted Answer

A)  both retail sales and employment
B)  retail sales but not employment
C)  employment but not retail sales
D)  neither employment nor retail salesE) A) and C)
F) C) and D)

Question 20

Which of the following would shift long-run aggregate supply to the right?

Accepted Answer

A)  increased immigration from abroad
B)  a decrease in the price of an imported natural resource
C)  opening the economy to international trade
D)  All of the above are correct.E) All of the above
F) A) and D)

Exam 20: Aggregate Demand and Aggregate Supply

If banks and speculators in the U.S. decided to exchange U.S. dollars for the foreign currencies of other countries, but foreigners do not desire to increase their holdings of U.S. dollars, then U.S. net exports would

Correct Answer
verified

The effects of a higher than expected price level are shown by

Correct Answer
verified

Other things the same, as the price level falls,

Correct Answer
verified

Which of the following would shift long-run aggregate supply to the right?

Correct Answer
verified

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level

Correct Answer
verified

When output rises, unemployment falls.

Correct Answer
verified

Stagflation results from continued decreases in aggregate demand.

Correct Answer
verified

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Correct Answer
verified

Stagflation exists when prices

Correct Answer
verified

Correct Answer
verified

Other things the same, when the price level rises more than expected, some firms will have

Correct Answer
verified

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, the value of the dollar falls. In the short-run

Correct Answer
verified

Which of the following fall during a recession?

Correct Answer
verified

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

Correct Answer
verified
There are occasional short-lived periods...
View Answer

Which of the following shifts aggregate demand to the right?

Correct Answer
verified

Technological progress shifts the long-run aggregate supply curve to the right.

Correct Answer
verified

Other things the same, an increase in the price level makes consumers feel

Correct Answer
verified

Other things the same, if the U.S. price level rises, then

Correct Answer
verified

The long-run aggregate supply curve shifts right if

Correct Answer
verified

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp decline in the stock market, a tax cut, an increase in the money supply and a decline in the value of the dollar. In the short run

Correct Answer
verified

Exam 20: Aggregate Demand and Aggregate Supply

If banks and speculators in the U.S. decided to exchange U.S. dollars for the foreign currencies of other countries, but foreigners do not desire to increase their holdings of U.S. dollars, then U.S. net exports would

Correct AnswerverifiedShow Answer

The effects of a higher than expected price level are shown by

Correct AnswerverifiedShow Answer

Other things the same, as the price level falls,

Correct AnswerverifiedShow Answer

Which of the following would shift long-run aggregate supply to the right?

Correct AnswerverifiedShow Answer

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level

Correct AnswerverifiedShow Answer

When output rises, unemployment falls.

Correct AnswerverifiedShow Answer

Stagflation results from continued decreases in aggregate demand.

Correct AnswerverifiedShow Answer

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Correct AnswerverifiedShow Answer

Stagflation exists when prices

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things the same, when the price level rises more than expected, some firms will have

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, the value of the dollar falls. In the short-run

Correct AnswerverifiedShow Answer

Which of the following fall during a recession?

Correct AnswerverifiedShow Answer

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

Correct AnswerverifiedThere are occasional short-lived periods...View AnswerShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

Technological progress shifts the long-run aggregate supply curve to the right.

Correct AnswerverifiedShow Answer

Other things the same, an increase in the price level makes consumers feel

Correct AnswerverifiedShow Answer

Other things the same, if the U.S. price level rises, then

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts right if

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp decline in the stock market, a tax cut, an increase in the money supply and a decline in the value of the dollar. In the short run

Correct AnswerverifiedShow Answer

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Correct Answer
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There are occasional short-lived periods...
View Answer

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Correct Answer
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