Question 1

Because the price level does not affect the long-run determinants of real GDP,the long-run aggregate-supply is vertical.

Accepted Answer

A) True 
 B)False

Question 2

An increase in the expected price level shifts short-run aggregate supply to the

Accepted Answer

A)   right,and an increase in the actual price level shifts short-run aggregate supply to the right.
B)   right,and an increase in the actual price level does not shift short-run aggregate supply.
C)   left,and an increase in the actual price level shifts short-run aggregate supply to the left.
D)   left,and an increase in the actual price level does not shift short-run aggregate supply.E) A) and B)
F) A) and C)

Question 3

Figure 20-1 
-Refer to Figure 20-1.If the economy starts at C,an increase in the money supply moves the economy

Accepted Answer

A)   to A in the long run.
B)   to B in the long run.
C)   back to C in the long run.
D)   to D in the long run.E) A) and B)
F) B) and C)

Question 4

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Accepted Answer

A)   short-run fluctuations in the economy.
B)   the effects of macroeconomic policy on the prices of individual goods.
C)   the long-run effects of international trade policies.
D)   productivity and economic growth.E) A) and B)
F) A) and C) A

Question 5

If wages are sticky,then a greater than expected increase in the price level

Accepted Answer

A)   raises the real costs of production,so the short-run aggregate supply curve shifts left.
B)   raises the real costs of production,so the aggregate quantity of goods and services declines.
C)   reduces the real costs of production,so the short-run aggregate supply curve shifts right.
D)   reduces the real costs of production,so the aggregate quantity of good and services rises.E) None of the above
F) B) and C) D

Question 6

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Accepted Answer

A)   nominal wages are slow to adjust to changing economic conditions
B)   as the price level falls,the exchange rate falls
C)   an increase in the money supply lowers the interest rate
D)   an increase in the interest rate increases investment spendingE) C) and D)
F) A) and B)

Question 7

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 B)
F) A) and C)

Question 8

Other things the same,if the capital stock increases,then in the long run

Accepted Answer

A)   both output and prices are higher.
B)   output is higher and prices are lower.
C)   output is lower and prices are higher.
D)   both output and prices are lower.E) C) and D)
F) B) and D) B

Question 9

If the price level is higher than expected,firms might raise their production in the short run if

Accepted Answer

A)   the nominal wage they pay their employees was set based on the expected price level.
B)   prices are costly to adjust and they have set their price at some time in the past but are not ready to change it.
C)   they believe that the price of their product has risen relative to the price of other products,when in fact the rise in the price of their product reflects an increase in the general price level.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 10

Investment is a

Accepted Answer

A)   small part of real GDP,so it accounts for a small share of the fluctuation in real GDP.
B)   small part of real GDP,yet it accounts for a large share of the fluctuation in real GDP.
C)   large part of real GDP,so it accounts for a large share of the fluctuation in real GDP.
D)   large part of real GDP,yet it accounts for a small share of the fluctuation in real GDP.E) A) and B)
F) None of the above

Question 11

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 12

Most economists believe that money neutrality holds

Accepted Answer

A)   in the short run but not the long run.
B)   in the long run but not the short run.
C)   in both the short run and the long run.
D)   in neither the short run nor the long run.E) A) and B)
F) B) and D)

Question 13

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases.Their reaction would initially shift

Accepted Answer

A)   aggregate demand right.
B)   aggregate demand left.
C)   aggregate supply right.
D)   aggregate supply left.E) B) and D)
F) B) and C)

Question 14

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) B) and D)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

The long-run effect of an increase in government spending is to raise

Accepted Answer

A)   both real output and the price level.
B)   real output and lower the price level.
C)   real output and leave the price level unchanged.
D)   the price level and leave real output unchanged.E) B) and C)
F) A) and B)

Question 17

When taxes increase,consumption

Accepted Answer

A)   decreases as shown by a movement to the left along a given aggregate-demand curve.
B)   decreases as shown by a shift of the aggregate demand curve to the left.
C)   increases as shown by a movement to the right along a given aggregate-demand curve.
D)   increases as shown by a shift of the aggregate demand curve to the right.E) All of the above
F) A) and D)

Question 18

Most macroeconomic variables that measure some type of income,spending,or production fluctuate closely together.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not correct?

Accepted Answer

A)   The model of aggregate demand and aggregate supply is used by most economists to analyze short-run fluctuations.
B)   During a recession firms cut back production and workers are laid off.
C)   A recession is a period of declining real incomes and declining unemployment.
D)   A depression is a severe recession.E) B) and C)
F) A) and B)

Question 20

Suppose that the economy is at long-run equilibrium.If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers,then 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) All of the above
F) B) and D)

Exam 33: Aggregate Demand and Aggregate Supply

Because the price level does not affect the long-run determinants of real GDP,the long-run aggregate-supply is vertical.

Correct AnswerverifiedShow Answer

An increase in the expected price level shifts short-run aggregate supply to the

Correct AnswerverifiedShow Answer

Figure 20-1 -Refer to Figure 20-1.If the economy starts at C,an increase in the money supply moves the economy

Correct AnswerverifiedShow Answer

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Correct AnswerverifiedA

If wages are sticky,then a greater than expected increase in the price level

Correct AnswerverifiedD

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same,if the capital stock increases,then in the long run

Correct AnswerverifiedB

If the price level is higher than expected,firms might raise their production in the short run if

Correct AnswerverifiedShow Answer

Investment is a

Correct AnswerverifiedShow 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

Most economists believe that money neutrality holds

Correct AnswerverifiedShow Answer

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases.Their reaction would initially shift

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts right if

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The long-run effect of an increase in government spending is to raise

Correct AnswerverifiedShow Answer

When taxes increase,consumption

Correct AnswerverifiedShow Answer

Most macroeconomic variables that measure some type of income,spending,or production fluctuate closely together.

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

Suppose that the economy is at long-run equilibrium.If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers,then in the short run

Correct AnswerverifiedShow Answer

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A

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B

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

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