Question 1

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

Accepted Answer

A)   a decrease in the actual price level
B)   an increase in the actual price level
C)   a decrease in the expected price level
D)   an increase in the expected price levelE) C) and D)
F) All of the above

Question 2

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

Accepted Answer

A)   U.S. residents want to buy more foreign bonds. The real exchange rate rises.
B)   U.S. residents want to buy more foreign bonds. The real exchange rate falls.
C)   U.S. residents want to buy fewer foreign bonds. The real exchange rate rises.
D)   U.S. residents want to buy fewer foreign bonds. The real exchange rate falls.E) B) and D)
F) A) and B)

Question 3

A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run: 1. increase immigration from abroad 2. make trade more open between the US and other countries.

Accepted Answer

A)   1 and 2 both shift long-run aggregate supply right.
B)   1 and 2 both shift long-run aggregate supply left.
C)   1 shifts long-run aggregate supply right, 2 shifts long-run aggregate supply left.
D)   1 shifts long-run aggregate supply left, 2 shifts long-run aggregate supply right.E) All of the above
F) B) and C)

Question 4

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

Accepted Answer

A)   the supply of dollars would shift right and the exchange rate would rise.
B)   the supply of dollars would shift right and the exchange rate would fall.
C)   the supply of dollars would shift left and the exchange rate would rise.
D)   None of the above is correct.E) B) and C)
F) All of the above

Question 5

Suppose a country experiences a change in weather patterns that makes farming more difficult. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Accepted Answer

The short-run and lo...

Question 6

Other things the same, an increase in the price level makes the dollars people hold worth

Accepted Answer

A)   more, so they can buy more.
B)   more, so they can buy less.
C)   less, so they can buy more.
D)   less, so they can buy less.E) C) and D)
F) A) and B)

Question 7

Identify the variables that could cause shifts in both the short-run and long-run aggregate-supply curves.

Accepted Answer

labor, cap...

Question 8

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 9

During recessions investment

Accepted Answer

A)   falls by a larger percentage than GDP.
B)   falls by about the same percentage as GDP.
C)   falls by a smaller percentage than GDP.
D)   falls but the percentage change is sometimes much larger and sometimes much smaller.E) C) and D)
F) A) and D)

Question 10

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

Question 11

As the price level rises, the interest rate

Accepted Answer

A)   falls, so the supply of dollars in the market for foreign currency exchange shifts left.
B)   falls, so the supply of dollars in the market for foreign currency exchange shifts right.
C)   rises, so the supply of dollars in the market for foreign currency exchange shifts left.
D)   rises, so the supply of dollars in the market for foreign currency exchange shifts right.E) B) and C)
F) C) and D)

Question 12

Figure 33-1. 
-Refer to Figure 33-1. Line A is

Accepted Answer

A)   investment spending.
B)   real GDP.
C)   unemployment rate.
D)   CPI.E) C) and D)
F) None of the above

Question 13

When the price level falls

Accepted Answer

A)   households want to lend less.
B)   the interest rate rises.
C)   firms want to spend less on investment goods.
D)   None of the above are correct.E) B) and C)
F) A) and B)

Question 14

At a given price level, an increase in which of the following shifts aggregate demand to the right?

Accepted Answer

A)   consumption
B)   investment
C)   government expenditures
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 15

The model of aggregate demand and aggregate supply

Accepted Answer

A)   is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships.
B)   is different from the model of supply and demand for a particular market, in that we have to separate real and nominal variables in the aggregate model.
C)   is a straightforward extension of the model of supply and demand for a particular market, in which substitution of resources between markets is highlighted.
D)   is a straightforward extension of the model of supply and demand for a particular market, in which the interaction between real and nominal variables is highlighted.E) None of the above
F) All of the above

Question 16

Which of the following both shift aggregate demand left?

Accepted Answer

A)   a decrease in taxes and at a given price level consumers feel more wealthy
B)   a decrease in taxes and at a given price level consumers feel less wealthy
C)   an increase in taxes and at a given price level consumers feel more wealthy
D)   an increase in taxes and at a given price level consumers feel less wealthyE) B) and D)
F) C) and D)

Question 17

The long-run aggregate supply curve shifts right if

Accepted Answer

A)   either immigration from abroad increases or technology improves.
B)   immigration from abroad increases, but not if technology improves.
C)   technology improves, but not if immigration from abroad increases.
D)   None of the above are correct.E) All of the above
F) C) and D)

Question 18

The sticky-price theory helps explain what feature of the aggregate demand and aggregate supply model?

Accepted Answer

why the short run ag...

Question 19

Figure 33-7. 
-Refer to Optimism. What happens to the expected price level and what's the result for 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) C) and D)
F) A) and C)

Question 20

Historically, the change in real GDP during recessions has been

Accepted Answer

A)   mostly a change in investment spending.
B)   mostly a change in consumption spending.
C)   about equally divided between consumption and investment spending.
D)   sometimes mostly a change in consumption and sometimes mostly a change in investment.E) C) and D)
F) A) and B)

Exam 20: Aggregate Demand and Aggregate Supply

The model of aggregate demand and aggregate supply

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Which of the following both shift aggregate demand left?

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The long-run aggregate supply curve shifts right if

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Suppose a country experiences a change in weather patterns that makes farming more difficult. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

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

Historically, the change in real GDP during recessions has been

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

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As the price level rises, the interest rate

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Identify the variables that could cause shifts in both the short-run and long-run aggregate-supply curves.

Correct Answerverifiedlabor, cap...View AnswerShow Answer

Other things the same, an increase in the price level makes the dollars people hold worth

Correct AnswerverifiedShow Answer

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

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Figure 33-7. -Refer to Optimism. What happens to the expected price level and what's the result for wage bargaining?

Correct AnswerverifiedShow Answer

A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run: 1. increase immigration from abroad 2. make trade more open between the US and other countries.

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

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

Correct AnswerverifiedShow Answer

During recessions investment

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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

At a given price level, an increase in which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

Figure 33-1. -Refer to Figure 33-1. Line A is

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The sticky-price theory helps explain what feature of the aggregate demand and aggregate supply model?

Correct Answerverifiedwhy the short run ag...View AnswerShow Answer

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The short-run and lo...
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labor, cap...
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Variables that fall along with real GDP ...
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why the short run ag...
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