Question 1

Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

Accepted Answer

The price level decr...

Question 2

The position of the long-run aggregate supply curve

Accepted Answer

A)   is determined by resource usage and technology.
B)   is at the point where the unemployment rate is zero.
C)   shifts to the right when the money supply increases.
D)   is at the point where the economy would cease to grow.E) A) and D)
F) A) and C)

Question 3

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in short-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would raise the price level in both the short and long run?

Accepted Answer

A)   an increase in taxes
B)   an increase in government expenditures
C)   a decrease in the minimum wage
D)   an increase in the capital stockE) A) and B)
F) A) and C)

Question 5

Suppose a nation experiences increased immigration from abroad. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Accepted Answer

The short run and lo...

Question 6

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

Accepted Answer

A)   both an increase in the price level that is greater than expected and an increase in the expected price level.
B)   an increase in the price level that is greater than expected, but not an increase in the expected price level.
C)   an increase in the expected price level, but not an increase in the price level that is greater than expected.
D)   neither an increase in the price level that is greater than expected nor an increase in the expected price level.E) B) and D)
F) B) and C)

Question 7

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 8

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

Question 9

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 D)

Question 10

Explain the short-run effects on output and the price level from a decrease in the aggregate-demand curve.

Accepted Answer

The price ...

Question 11

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

Accepted Answer

A)   increase foreign bond purchases, so the dollar appreciates.
B)   increase foreign bond purchases, so the dollar depreciates.
C)   increase domestic bond purchases, so the dollar appreciates.
D)   increase domestic bond purchases, so the dollar depreciates.E) A) and B)
F) C) and D)

Question 12

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

Accepted Answer

A)   the price level.
B)   the amount of capital used by firms.
C)   available stock of human capital.
D)   available technologyE) A) and C)
F) A) and B)

Question 13

Other things the same, as the price level rises,

Accepted Answer

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

Question 14

Real GDP

Accepted Answer

A)   moves in the opposite direction as unemployment.
B)   increases as production falls.
C)   falls when households save a smaller fraction of their income.
D)   All of the above are correct.E) All of the above
F) C) and D)

Question 15

When taxes decrease, consumption

Accepted Answer

A)   increases, so aggregate demand shifts right.
B)   increases, so aggregate supply shifts right.
C)   decreases, so aggregate demand shifts left.
D)   decreases, so aggregate supply shifts left.E) A) and C)
F) None of the above

Question 16

Which of the following is included in the aggregate demand for goods and services?

Accepted Answer

A)   consumption demand
B)   investment demand
C)   net exports
D)   All of the above are correct.E) All of the above
F) A) and C)

Question 17

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 18

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 19

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

Accepted Answer

A) True 
 B)False

Question 20

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 D)
F) B) and D)

Exam 20: Aggregate Demand and Aggregate Supply

Real GDP

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

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When taxes decrease, consumption

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

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Which of the following would raise the price level in both the short and long run?

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Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

Correct AnswerverifiedThe price level decr...View AnswerShow Answer

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

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The position of the long-run aggregate supply curve

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

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Explain the short-run effects on output and the price level from a decrease in the aggregate-demand curve.

Correct AnswerverifiedThe price ...View AnswerShow Answer

Other things the same, as the price level rises,

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Menu costs help explain

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

Correct AnswerverifiedShow Answer

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in short-run aggregate supply.

Correct AnswerverifiedShow Answer

Which of the following is not included in aggregate demand?

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

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Suppose a nation experiences increased immigration from abroad. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Correct AnswerverifiedThe short run and lo...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is included in the aggregate demand for goods and services?

Correct AnswerverifiedShow Answer

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The price level decr...
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The price ...
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The short run and lo...
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