Question 1

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not a determinant of the long-run level of real GDP?

Accepted Answer

A)  the price level
B)  the supply of labor
C)  available natural resources
D)  available technologyE) C) and D)
F) A) and B)

Question 3

Although wages,incomes,and interest rates are most often discussed in nominal terms,what matters most are their real values.

Accepted Answer

A) True 
 B)False

Question 4

Explain how an increase in the price level changes interest rates.How does this change in interest rates lead to changes in investment and net exports?

Accepted Answer

When the price level increases,the purch...

Question 5

Wages tend to be sticky

Accepted Answer

A)  because of contracts,social norms,and notions of fairness.
B)  because of contracts,but not social norms or notions of fairness.
C)  because of social norms and notions of fairness,but not contracts.
D)  None of the above are correct.E) B) and D)
F) A) and B)

Question 6

Other things the same,a decrease in the price level causes real wealth to

Accepted Answer

A)  fall,interest rates to fall,and the dollar to appreciate.
B)  fall,interest rates to rise,and the dollar to depreciate.
C)  rise,interest rates to rise,and the dollar to appreciate.
D)  rise,interest rates to fall,and the dollar to depreciate.E) None of the above
F) All of the above

Question 7

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

Question 8

If the price level falls,the real value of the currency

Accepted Answer

A)  rises,so people will want to buy more.This response helps explain the slope of the aggregate demand curve.
B)  rises,so people will want to buy more.This response shifts aggregate demand to the right.
C)  falls,so people will want to buy less.This response helps explain the slope of the aggregate demand curve.
D)  falls,so people will want to buy less.This response shifts aggregate demand to the left.E) None of the above
F) A) and C)

Question 9

An increase in the actual price level does not shift the short-run aggregate supply curve,but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 10

Sticky nominal wages can result in

Accepted Answer

A)  lower profits for firms when the price level is lower than expected.
B)  a decrease in real wages when the price level is lower than expected.
C)  a short-run aggregate-supply curve that is vertical.
D)  a long-run aggregate-supply curve that is upward-sloping.E) A) and B)
F) None of the above

Question 11

What variables besides real GDP tend to decline during recessions?
 Given the definition of real GDP,argue that declines in these variables are to be expected.

Accepted Answer

Variables that fall along with real GDP ...

Question 12

Which of the following is correct?

Accepted Answer

A)  The short-run,but not the long-run,aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
B)  The long-run,but not the short-run,aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
C)  The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables.
D)  Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables.E) A) and D)
F) A) and C)

Question 13

Suppose that during the Great Depression long-run aggregate supply shifted left.To be consistent with what happened to the price level and output,what would have had to happen to aggregate demand?

Accepted Answer

A)  It would have to have shifted left by less than aggregate supply.
B)  It would have to have shifted left by more than aggregate supply.
C)  It would have to have shifted right by less than aggregate supply.
D)  It would have to have shifted right by more than aggregate supply.E) A) and C)
F) A) and D)

Question 14

Which of the following effects helps to explain the slope of the aggregate-demand curve?

Accepted Answer

A)  the exchange-rate effect
B)  the wealth effect
C)  the interest-rate effect
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 15

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) All of the above
F) A) and B)

Question 16

Policymakers who influence aggregate demand can potentially mitigate the severity of economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following decreases in response to the interest-rate effect from an increase in the price level?

Accepted Answer

A)  both investment and consumption
B)  consumption but not investment
C)  investment but not consumption
D)  neither investment nor consumptionE) A) and D)
F) B) and C)

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

Question 19

When the price level rises unexpectedly,some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

Accepted Answer

A) True 
 B)False

Question 20

What do most economists believe concerning the relation between the price level and real output?

Accepted Answer

Most economists believe that in the long...

Exam 34: Aggregate Demand and Aggregate Supply

Sticky nominal wages can result in

Correct AnswerverifiedShow Answer

Which of the following is not a determinant of the long-run level of real GDP?

Correct AnswerverifiedShow Answer

Which of the following decreases in response to the interest-rate effect from an increase in the price level?

Correct AnswerverifiedShow Answer

An increase in the actual price level does not shift the short-run aggregate supply curve,but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

The aggregate demand and aggregate supply graph has

Correct AnswerverifiedShow Answer

When the price level rises unexpectedly,some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

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

Which of the following effects helps to explain the slope of the aggregate-demand curve?

Correct AnswerverifiedShow Answer

Policymakers who influence aggregate demand can potentially mitigate the severity of economic fluctuations.

Correct AnswerverifiedShow Answer

Suppose that during the Great Depression long-run aggregate supply shifted left.To be consistent with what happened to the price level and output,what would have had to happen to aggregate demand?

Correct AnswerverifiedShow Answer

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP,argue that declines in these variables are to be expected.

Correct AnswerverifiedVariables that fall along with real GDP ...View AnswerShow Answer

What do most economists believe concerning the relation between the price level and real output?

Correct AnswerverifiedMost economists believe that in the long...View AnswerShow Answer

Explain how an increase in the price level changes interest rates.How does this change in interest rates lead to changes in investment and net exports?

Correct AnswerverifiedWhen the price level increases,the purch...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Although wages,incomes,and interest rates are most often discussed in nominal terms,what matters most are their real values.

Correct AnswerverifiedShow Answer

Wages tend to be sticky

Correct AnswerverifiedShow Answer

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Correct AnswerverifiedShow Answer

If the price level falls,the real value of the currency

Correct AnswerverifiedShow Answer

Other things the same,a decrease in the price level causes real wealth to

Correct AnswerverifiedShow Answer

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Variables that fall along with real GDP ...
View Answer

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Most economists believe that in the long...
View Answer

Correct Answer
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When the price level increases,the purch...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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