Question 1

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the supply of labor, a major new discovery of oil, and new environmental regulations that raise the cost of electricity production. In the short run

Accepted Answer

A)   the price level will rise and real GDP will fall.
B)   the price level will fall and real GDP will rise.
C)   the price level and real GDP will both stay the same.
D)   All of the above are possible.E) A) and C)
F) All of the above

Question 2

In 1936, John Maynard Keynes published a book, The General Theory, which attempted to explain

Accepted Answer

A)   stagflation.
B)   the classical dichotomy.
C)   short-run economic fluctuations.
D)   how changes in the money supply had created the Great Depression.E) C) and D)
F) A) and B)

Question 3

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because

Accepted Answer

A)   monetary neutrality would mean that neither prices nor production should have risen.
B)   monetary neutrality would mean that production should have risen, but prices should not have.
C)   monetary neutrality would mean the prices should have risen, but production should not have changed.
D)   monetary neutrality would mean that prices and production should both have fallen.E) All of the above
F) C) and D)

Question 4

Figure 33-9. 
-Refer to Figure 33-9. Suppose the economy starts where LRAS = AD1 = SRAS1. A decrease in short-run aggregate supply would be consistent with the movement to

Accepted Answer

A)   P1, Y1.
B)   P2, Y1.
C)   P1, Y2.
D)   P3, Y2.E) C) and D)
F) B) and D)

Question 5

Which of the following did the Fed do during the recession of 2008-2009?

Accepted Answer

A)   lowered the federal funds rate and sold securities and loans
B)   lowered the federal funds rate and purchased securities and loans
C)   raised the federal funds rate and sold securities and loans
D)   raised the federal funds rate and purchased securities and loansE) A) and B)
F) A) and D)

Question 6

If banks and speculators in the U.S. decided to exchange U.S. dollars for the foreign currencies of other countries, but foreigners do not desire to increase their holdings of U.S. dollars, then U.S. net exports would

Accepted Answer

A)   rise and aggregate demand would shift left.
B)   rise and aggregate demand would shift right.
C)   fall and aggregate demand would shift left.
D)   fall and aggregate demand would shift right.E) B) and C)
F) A) and C) B

Question 7

Changes in the price level affect which components of aggregate demand?

Accepted Answer

A)   only consumption and investment
B)   only consumption and net exports
C)   only investment
D)   consumption, investment, and net exportsE) A) and B)
F) All of the above D

Question 8

The recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

Accepted Answer

A) True 
 B)False  True

Question 9

Figure 33-10. 
-Refer to Figure 33-10. If the economy starts at point C, stagflation would be consistent with point

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) C) and D)
F) A) and D)

Question 10

When the money supply decreases

Accepted Answer

A)   interest rates fall and so aggregate demand shifts right.
B)   interest rates fall and so aggregate demand shifts left.
C)   interest rates rise and so aggregate demand shifts right.
D)   interest rates rise and so aggregate demand shifts left.E) A) and B)
F) A) and C)

Question 11

The aggregate demand and aggregate supply graph has

Accepted Answer

A)   quantity of output on the horizontal axis. Output can be measured by the GDP deflator.
B)   quantity of output on the horizontal axis. Output can be measured by real GDP.
C)   quantity of output on the vertical axis. Output can be measured by the GDP deflator.
D)   quantity of output on the vertical axis. Output can be measured by real GDP.E) None of the above
F) C) and D)

Question 12

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

Accepted Answer

labor, cap...

Question 13

Which of the following would shift long-run aggregate supply to the right?

Accepted Answer

A)   increased immigration from abroad
B)   a decrease in the price of an imported natural resource
C)   opening the economy to international trade
D)   All of the above are correct.E) C) and D)
F) B) and D)

Question 14

Most economists believe that classical macroeconomic theory is a good description of the economy

Accepted Answer

A)   in neither the short nor long run.
B)   in the short run and in the long run.
C)   in the short run, but not in the long run.
D)   in the long run, but not in the short run.E) A) and D)
F) All of the above

Question 15

The long-run effect of an increase in household consumption 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) None of the above
F) B) and C)

Question 16

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) B) and C)

Question 17

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

Accepted Answer

A)   both the money supply increase and the investment tax credit
B)   the money supply increase but not the investment tax credit
C)   the investment tax credit but not the money supply increase
D)   neither the investment tax credit nor the money supply increaseE) None of the above
F) C) and D)

Question 18

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) All of the above
F) A) and D)

Question 19

An economic expansion caused by a shift in aggregate demand remedies itself over time as the expected price level

Accepted Answer

A)   falls, shifting aggregate demand right.
B)   rises, shifting aggregate demand left.
C)   falls, shifting aggregate supply right.
D)   rises, shifting aggregate supply left.E) A) and C)
F) All of the above

Question 20

Other things the same, which of the following is correct?

Accepted Answer

A)   A decrease in the price level causes the dollar to appreciate. Aggregate demand shifts right.
B)   A decrease in the price level causes the dollar to depreciate. Aggregate demand shifts right.
C)   If speculators lose confidence in the American economy, the dollar appreciates. Aggregate demand shifts right.
D)   If speculators lose confidence in the American economy, the dollar depreciates. Aggregate demand shifts right.E) B) and C)
F) None of the above

Exam 23: Aggregate Demand and Aggregate Supply

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the supply of labor, a major new discovery of oil, and new environmental regulations that raise the cost of electricity production. In the short run

Correct AnswerverifiedShow Answer

In 1936, John Maynard Keynes published a book, The General Theory, which attempted to explain

Correct AnswerverifiedShow Answer

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because

Correct AnswerverifiedShow Answer

Figure 33-9. -Refer to Figure 33-9. Suppose the economy starts where LRAS = AD1 = SRAS1. A decrease in short-run aggregate supply would be consistent with the movement to

Correct AnswerverifiedShow Answer

Which of the following did the Fed do during the recession of 2008-2009?

Correct AnswerverifiedShow Answer

If banks and speculators in the U.S. decided to exchange U.S. dollars for the foreign currencies of other countries, but foreigners do not desire to increase their holdings of U.S. dollars, then U.S. net exports would

Correct AnswerverifiedB

Changes in the price level affect which components of aggregate demand?

Correct AnswerverifiedD

The recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

Correct AnswerverifiedTrue

Figure 33-10. -Refer to Figure 33-10. If the economy starts at point C, stagflation would be consistent with point

Correct AnswerverifiedShow Answer

When the money supply decreases

Correct AnswerverifiedShow Answer

The aggregate demand and aggregate supply graph has

Correct AnswerverifiedShow Answer

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

Correct Answerverifiedlabor, cap...View AnswerShow Answer

Which of the following would shift long-run aggregate supply to the right?

Correct AnswerverifiedShow Answer

Most economists believe that classical macroeconomic theory is a good description of the economy

Correct AnswerverifiedShow Answer

The long-run effect of an increase in household consumption is to raise

Correct AnswerverifiedShow Answer

Which of the following would cause stagflation?

Correct AnswerverifiedShow Answer

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

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

An economic expansion caused by a shift in aggregate demand remedies itself over time as the expected price level

Correct AnswerverifiedShow Answer

Other things the same, which of the following is correct?

Correct AnswerverifiedShow Answer

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B

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D

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True

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labor, cap...
View Answer

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