Question 1

A change in the money supply changes only nominal variables in the long run.

Accepted Answer

A) True 
 B)False

Question 2

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) None of the above
F) All of the above

Question 3

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 Pessimism.How is the new long-run equilibrium different from the original one?

Accepted Answer

A)   both price and real GDP are higher.
B)   both price and real GDP are lower.
C)   the price level is the same and GDP is lower.
D)   the price level is lower and real GDP is the same.E) A) and B)
F) A) and C)

Question 4

When the price level falls

Accepted Answer

A)   the interest rate rises,so the quantity of goods and services demand rises.
B)   the interest rate rises,so the quantity of goods and services demand falls.
C)   the interest rate falls,so the quantity of goods and services demand rises.
D)   the interest rate falls,so the quantity of goods and services demand falls.E) C) and D)
F) B) and C)

Question 5

The aggregate-demand curve shows the quantity of domestic goods and services that households,firms,the government,and customers abroad want to buy at each price level.

Accepted Answer

A) True 
 B)False

Question 6

Assuming that a is positive,theories of short-run aggregate supply are expressed mathematically as

Accepted Answer

A)   quantity of output supplied = natural rate of output + a(actual price level - expected price level) .
B)   quantity of output supplied = natural rate of output + a(expected price level - actual price level) .
C)   quantity of output supplied = a(actual price level -expected price level) - natural rate of output.
D)   quantity of output supplied = a(expected price level - actual price level) - natural rate of output.E) All of the above
F) C) and D)

Question 7

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

Question 8

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

Question 9

Which of the following effects helps to explain the downward 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) A) and D)
F) A) and C)

Question 10

Like real GDP,investment fluctuates,but it fluctuates much less than real GDP..

Accepted Answer

A) True 
 B)False

Question 11

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

Question 12

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

Accepted Answer

A)   increases by less than expected so that firms believe the relative price of their output has increased.
B)   increases by less than expected so that firms believe the relative price of their output has decreased.
C)   increases by more than expected so that firms believe the relative price of their output has increased.
D)   increases by more than expected so that firms believe the relative price of their output has decreased.E) A) and B)
F) None of the above

Question 13

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)   an increase in the price level
B)   a decrease in the money supply
C)   an increase in net exports
D)   Congress passes a new investment tax creditE) A) and B)
F) All of the above

Question 14

As recessions begin,production

Accepted Answer

A)   and unemployment both rise.
B)   rises and unemployment falls.
C)   falls and unemployment rises.
D)   and unemployment both fall.E) A) and B)
F) C) and D)

Question 15

Other things the same,as the price level falls,the real value of a dollar

Accepted Answer

A)   rises,and interest rates rise.
B)   rises,and interest rates fall.
C)   falls,and interest rates rise.
D)   falls,and interest rates fall.E) A) and D)
F) All of the above

Question 16

In the short-run an increase in the costs of production makes

Accepted Answer

A)   output and prices rise.
B)   output rise and prices fall.
C)   output fall and prices rise.
D)   output and prices fall.E) B) and D)
F) B) and C)

Question 17

Consider the exhibit below for the following questions.
Figure 33-1 
-Refer to Figure 33-1.If the economy is in long-run equilibrium,then an adverse shift in aggregate supply would move the economy from

Accepted Answer

A)   A to B.
B)   C to D.
C)   B to A.
D)   D to C.E) All of the above
F) A) and C)

Question 18

Other things the same,if the money supply rises by 2% and people were expecting it to rise by 5%,then some firms have

Accepted Answer

A)   higher than desired prices which increases their sales.
B)   higher than desired prices which depresses their sales.
C)   lower than desired prices which increases their sales.
D)   lower than desired prices which depresses their sales.E) B) and C)
F) C) and D)

Question 19

Which of the following will reduce the price level and real output in the short run?

Accepted Answer

A)   an increase in the money supply
B)   an increase in oil prices
C)   a decrease in the money supply
D)   technical progressE) B) and C)
F) None of the above

Question 20

People will want to buy more when the

Accepted Answer

A)   price level rises,because the interest rate rises.
B)   price level rises,because the interest rate falls.
C)   price level falls,because the interest rate rises.
D)   price level falls,because the interest rate falls.E) All of the above
F) B) and C)

Exam 33: Aggregate Demand and Aggregate Supply

Investment is a

Correct Answer
verified

Like real GDP,investment fluctuates,but it fluctuates much less than real GDP..

Correct Answer
verified

In the short-run an increase in the costs of production makes

Correct Answer
verified

Other things the same,if the money supply rises by 2% and people were expecting it to rise by 5%,then some firms have

Correct Answer
verified

As recessions begin,production

Correct Answer
verified

Assuming that a is positive,theories of short-run aggregate supply are expressed mathematically as

Correct Answer
verified

Historically,the change in real GDP during recessions has been

Correct Answer
verified

Other things the same,as the price level falls,the real value of a dollar

Correct Answer
verified

The aggregate-demand curve shows the quantity of domestic goods and services that households,firms,the government,and customers abroad want to buy at each price level.

Correct Answer
verified

A change in the money supply changes only nominal variables in the long run.

Correct Answer
verified

Consider the exhibit below for the following questions. Figure 33-1 -Refer to Figure 33-1.If the economy is in long-run equilibrium,then an adverse shift in aggregate supply would move the economy from

Correct Answer
verified

People will want to buy more when the

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Which of the following shifts aggregate demand to the left?

Correct Answer
verified

When the price level falls

Correct Answer
verified

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

Correct Answer
verified

Which of the following will reduce the price level and real output in the short run?

Correct Answer
verified

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

Correct Answer
verified

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

Correct Answer
verified

Exam 33: Aggregate Demand and Aggregate Supply

Investment is a

Correct AnswerverifiedShow Answer

Like real GDP,investment fluctuates,but it fluctuates much less than real GDP..

Correct AnswerverifiedShow Answer

In the short-run an increase in the costs of production makes

Correct AnswerverifiedShow Answer

Other things the same,if the money supply rises by 2% and people were expecting it to rise by 5%,then some firms have

Correct AnswerverifiedShow Answer

As recessions begin,production

Correct AnswerverifiedShow Answer

Assuming that a is positive,theories of short-run aggregate supply are expressed mathematically as

Correct AnswerverifiedShow Answer

Historically,the change in real GDP during recessions has been

Correct AnswerverifiedShow Answer

Other things the same,as the price level falls,the real value of a dollar

Correct AnswerverifiedShow Answer

The aggregate-demand curve shows the quantity of domestic goods and services that households,firms,the government,and customers abroad want to buy at each price level.

Correct AnswerverifiedShow Answer

A change in the money supply changes only nominal variables in the long run.

Correct AnswerverifiedShow Answer

Consider the exhibit below for the following questions. Figure 33-1 -Refer to Figure 33-1.If the economy is in long-run equilibrium,then an adverse shift in aggregate supply would move the economy from

Correct AnswerverifiedShow Answer

People will want to buy more when the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

When the price level falls

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following will reduce the price level and real output in the short run?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

Correct AnswerverifiedShow Answer

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