Question 1

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following shifts the short-run aggregate supply curve to the right?

Accepted Answer

A)   an increase in the money supply
B)   an increase in the price level
C)   a decrease in the expected price level
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 3

If the price level falls, the real value of a dollar

Accepted Answer

A)   rises, so people will want to buy more.
B)   rises, so people will want to buy less.
C)   falls, so people will want to buy more.
D)   falls, so people will want to buy less.E) A) and B)
F) B) and D)

Question 4

Other things the same, if the price level rises, people

Accepted Answer

A)   increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases.
B)   increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.
C)   decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases.
D)   decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.E) All of the above
F) None of the above

Question 5

Which of the following has been suggested as a cause of the Great Depression?

Accepted Answer

A)   a decline in the money supply
B)   a decrease in stock prices
C)   the collapse of the banking system
D)   All of the above are correct.E) A) and D)
F) A) and B)

Question 6

Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time.
-Refer to Optimism. In the short run what happens to the price level and real GDP?

Accepted Answer

A)   both the price level and real GDP rise.
B)   both the price level and real GDP fall.
C)   the price level rises and real GDP falls.
D)   the price level falls and real GDP rises.E) C) and D)
F) A) and B)

Question 7

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Accepted Answer

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

Question 8

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

Question 9

Other things the same, as the price level falls,

Accepted Answer

A)   the money supply falls.
B)   interest rates rise.
C)   a dollar buys more domestic goods.
D)   the aggregate-demand curve shifts right.E) C) and D)
F) A) and B)

Question 10

Name two macroeconomic variables that decline when an economy goes into recession, and name one macroeconomic variable that rises.

Accepted Answer

Real GDP and investm...

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases,

Accepted Answer

A)   the real value of money decreases; in turn, the real value of the dollar increases in foreign exchange markets, which decreases net exports.
B)   the real value of money decreases; in turn, interest rates increase, which decreases net exports.
C)   households increase their holdings of money; in turn, interest rates decrease, which reduces spending on investment goods.
D)   households increase their holdings of money; in turn, interest rates increase, which reduces spending on investment goods.E) C) and D)
F) A) and D)

Question 13

Other things the same, as the price level decreases it induces greater spending on

Accepted Answer

A)   both net exports and investment.
B)   net exports but not investment.
C)   investment but not net exports.
D)   neither net exports nor investment.E) A) and D)
F) B) and C)

Question 14

The economic boom of the early 1940s resulted mostly from

Accepted Answer

A)   increased government expenditures.
B)   falling prices of oil and other natural resources.
C)   an increase in the growth rate of the money supply.
D)   rapid developments in transportation, electronics, and communication.E) A) and B)
F) C) and D)

Question 15

An economic expansion 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) B) and C)
F) C) and D)

Question 16

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Accepted Answer

A)   the price level to rise and real GDP to fall.
B)   the price level to fall and real GDP to rise.
C)   the price level and real GDP both to stay the same.
D)   All of the above are possible.E) A) and C)
F) None of the above

Question 17

Which of the following would cause stagflation?

Accepted Answer

A)   rising government expenditures
B)   rising oil prices
C)   a falling money supply
D)   technical progressE) A) and B)
F) A) and C)

Question 18

The Stock Market Boom of 2015
Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time.
-Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

Accepted Answer

A)   The expected price level falls. Bargains are struck for higher wages.
B)   The expected price level falls. Bargains are struck for lower wages.
C)   The expected price level rises. Bargains are struck for higher wages.
D)   The expected price level rises. Bargains are struck for lower wages.E) None of the above
F) C) and D)

Question 19

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

Accepted Answer

A)   both sticky price theory and sticky wage theory
B)   sticky price theory but not sticky wage theory
C)   sticky wage theory but not sticky price theory
D)   neither sticky wage theory nor sticky price theoryE) A) and B)
F) None of the above

Question 20

When the price level falls

Accepted Answer

A)   people want to hold more money.
B)   the interest rate rises.
C)   investment spending rises.
D)   All of the above are correct.E) C) and D)
F) B) and D)

Exam 15: Aggregate Demand and Aggregate Supply

Which of the following shifts the short-run aggregate supply curve to the right?

Correct Answer
verified

Which of the following has been suggested as a cause of the Great Depression?

Correct Answer
verified

The Stock Market Boom of 2015 Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. -Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

Correct Answer
verified

If the price level falls, the real value of a dollar

Correct Answer
verified

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases,

Correct Answer
verified

Correct Answer
verified

Name two macroeconomic variables that decline when an economy goes into recession, and name one macroeconomic variable that rises.

Correct Answer
verified
Real GDP and investm...
View Answer

Other things the same, as the price level decreases it induces greater spending on

Correct Answer
verified

Other things the same, if the price level rises, people

Correct Answer
verified

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Correct Answer
verified

When the price level falls

Correct Answer
verified

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

Correct Answer
verified

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Correct Answer
verified

Other things the same, as the price level falls,

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The economic boom of the early 1940s resulted mostly from

Correct Answer
verified

Which of the following would cause stagflation?

Correct Answer
verified

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

Correct Answer
verified

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Correct Answer
verified

Exam 15: Aggregate Demand and Aggregate Supply

Which of the following shifts the short-run aggregate supply curve to the right?

Correct AnswerverifiedShow Answer

Which of the following has been suggested as a cause of the Great Depression?

Correct AnswerverifiedShow Answer

The Stock Market Boom of 2015 Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. -Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

Correct AnswerverifiedShow Answer

If the price level falls, the real value of a dollar

Correct AnswerverifiedShow Answer

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Name two macroeconomic variables that decline when an economy goes into recession, and name one macroeconomic variable that rises.

Correct AnswerverifiedReal GDP and investm...View AnswerShow Answer

Other things the same, as the price level decreases it induces greater spending on

Correct AnswerverifiedShow Answer

Other things the same, if the price level rises, people

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Correct AnswerverifiedShow Answer

When the price level falls

Correct AnswerverifiedShow Answer

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

Correct AnswerverifiedShow Answer

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Correct AnswerverifiedShow Answer

Other things the same, as the price level falls,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The economic boom of the early 1940s resulted mostly from

Correct AnswerverifiedShow Answer

Which of the following would cause stagflation?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Real GDP and investm...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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