Question 1

As the price level falls,

Accepted Answer

A)   the exchange rate falls, so net exports fall.
B)   the exchange rate falls, so net exports rise.
C)   the exchange rate rises, so net exports fall.
D)   the exchange rate rises, so net exports rise.E) B) and C)
F) A) and D)

Question 2

Which of the following has been suggested as a cause of the Great Depression?

Accepted Answer

A)   a decline in the money supply
B)   a decrease in stock prices
C)   the collapse of the banking system
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 3

Suppose a boom in stock market prices helps make people feel wealthier. Using the model of aggregate demand and aggregate supply, identify the curves that are affected, and which way these curves would shift.

Accepted Answer

The aggregate demand...

Question 4

Which of the following shifts long-run aggregate supply right?

Accepted Answer

A)   an increase in either technology or the human capital stock.
B)   an increase in human capital but not technology.
C)   an increase in technology, but not the human capital stock.
D)   neither an increase in technology nor the human capital stock.E) A) and B)
F) None of the above

Question 5

When interest rates fall

Accepted Answer

A)   firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding.
B)   firms want to borrow more for new plants and equipment and households want to borrow less for homebuilding.
C)   firms want to borrow less for new plants and equipment and households want to borrow more for homebuilding.
D)   firms want to borrow less for new plants and equipment and households want to borrow less for homebuilding.E) None of the above
F) B) and C)

Question 6

An increase in the money supply

Accepted Answer

A)   and an investment tax credit both cause aggregate demand to shift right.
B)   and an investment tax credit both cause aggregate demand to shift left.
C)   causes aggregate demand to shift right, while an investment tax credit causes aggregate demand to shift left.
D)   causes aggregate demand to shift left, while an investment tax credit causes aggregate demand to shift right.E) B) and C)
F) C) and D)

Question 7

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained

Accepted Answer

A)   only by technological progress.
B)   only by money supply growth.
C)   by technological progress and money supply growth.
D)   None of the above is correct.E) C) and D)
F) B) and D)

Question 8

Figure 33-4 
-Refer to Figure 33-4. 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) C) and D)
F) A) and B)

Question 9

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

Question 10

Figure 33-7. 
-Refer to Pessimism. In the long run, the change in price expectations created by pessimism shifts

Accepted Answer

A)   long-run aggregate supply right.
B)   long-run aggregate supply left.
C)   short-run aggregate supply right.
D)   short-run aggregate supply left.E) All of the above
F) A) and D)

Question 11

Other things the same, an increase in the amount of capital firms wish to purchase 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) A) and C)

Question 12

Most economists believe that in the short run

Accepted Answer

A)   real and nominal variables are determined independently and that money cannot move real GDP away from its long-run trend.
B)   real and nominal variables are determined independently but that money can temporarily move real GDP away from its long-run trend.
C)   real and nominal variables are highly intertwined but that money cannot move real GDP away from its long- run trend.
D)   real and nominal variables are highly intertwined and that money can temporarily move real GDP away from its long-run trend.E) C) and D)
F) A) and B)

Question 13

From 1995 to 1999 there was a dramatic rise in stock prices. If this rise made people feel wealthier, then it would have shifted

Accepted Answer

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

Question 14

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 15

Figure 33-8. 
-Refer to Figure 33-8. Suppose the economy starts at Z. Stagflation would be consistent with the move to

Accepted Answer

A)   P1 and Y1 .
B)   P1 and Y3 .
C)   P3 and Y1 .
D)   P3 and Y3 .E) All of the above
F) C) and D)

Question 16

Which of the following is correct?

Accepted Answer

A)   An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left.
B)   An increase in stock prices reduces consumption spending so that aggregate demand shifts left.
C)   An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left.
D)   A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left.E) All of the above
F) B) and C)

Question 17

Figure 33-7. 
-Refer to Financial Crisis. Suppose the economy reaches long-run equilibrium without the Fed responding. Now suppose the financial crisis ends and the ability of banks to lend returns to normal. In which case is the price level lower compared to its value prior to the crisis?

Accepted Answer

A)   both after the economy reaches long-run equilibrium during the crisis and in the long-run equilibrium after the crisis is over
B)   after the economy reaches long-run equilibrium during the crisis but not in the long-run equilibrium after the crisis is over
C)   in the long-run equilibrium after the crisis is over but not after the economy reaches long-run equilibrium during the crisis
D)   neither after the economy reaches long-run equilibrium during the crisis nor in the long-run equilibrium after the crisis is overE) A) and B)
F) C) and D)

Question 18

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U.S. Which pair of GDP growth rates and unemployment rates is realistic?

Accepted Answer

A)   10 percent, 1 percent
B)   2 percent, 12 percent
C)   -1 percent, 8 percent
D)   -2 percent, 2 percentE) B) and C)
F) A) and C)

Question 19

Other things the same, if the price level is lower than expected, then some firms believe that the relative price of what they produce has

Accepted Answer

A)   decreased, so they increase production.
B)   decreased, so they decrease production.
C)   increased, so they increase production.
D)   increased, so they decrease production.E) C) and D)
F) B) and D)

Question 20

Figure 33-14. 
-Refer to Figure 33-14. Identify which long run aggregate-supply curves) would be consistent with long-run equilibrium.

Accepted Answer

The answer of Figure 33-14. 
-Refer to Figure 33-14. Identify...

Exam 20: Aggregate Demand and Aggregate Supply

Figure 33-7. -Refer to Financial Crisis. Suppose the economy reaches long-run equilibrium without the Fed responding. Now suppose the financial crisis ends and the ability of banks to lend returns to normal. In which case is the price level lower compared to its value prior to the crisis?

Correct AnswerverifiedShow Answer

Which of the following has been suggested as a cause of the Great Depression?

Correct AnswerverifiedShow Answer

Suppose a boom in stock market prices helps make people feel wealthier. Using the model of aggregate demand and aggregate supply, identify the curves that are affected, and which way these curves would shift.

Correct AnswerverifiedThe aggregate demand...View AnswerShow Answer

Other things the same, if the price level is lower than expected, then some firms believe that the relative price of what they produce has

Correct AnswerverifiedShow Answer

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained

Correct AnswerverifiedShow Answer

Figure 33-4 -Refer to Figure 33-4. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from

Correct AnswerverifiedShow Answer

Figure 33-7. -Refer to Pessimism. In the long run, the change in price expectations created by pessimism shifts

Correct AnswerverifiedShow Answer

When interest rates fall

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

From 1995 to 1999 there was a dramatic rise in stock prices. If this rise made people feel wealthier, then it would have shifted

Correct AnswerverifiedShow Answer

Other things the same, an increase in the amount of capital firms wish to purchase would initially shift

Correct AnswerverifiedShow Answer

Most economists believe that in the short run

Correct AnswerverifiedShow Answer

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. Stagflation would be consistent with the move to

Correct AnswerverifiedShow Answer

As the price level falls,

Correct AnswerverifiedShow Answer

Figure 33-14. -Refer to Figure 33-14. Identify which long run aggregate-supply curves) would be consistent with long-run equilibrium.

Correct AnswerverifiedShow Answer

An increase in the money supply

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U.S. Which pair of GDP growth rates and unemployment rates is realistic?

Correct AnswerverifiedShow Answer

Which of the following shifts long-run aggregate supply right?

Correct AnswerverifiedShow Answer

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The aggregate demand...
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