Question 1

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

Accepted Answer

A) True 
 B)False

Question 2

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) A) and B)
F) None of the above

Question 3

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases,

Accepted Answer

A)   the real value of money decreases; in turn, the real value of the dollar increases in foreign exchange markets, which decreases net exports.
B)   the real value of money decreases; in turn, interest rates increase, which decreases net exports.
C)   households increase their holdings of money; in turn, interest rates decrease, which reduces spending on investment goods.
D)   households increase their holdings of money; in turn, interest rates increase, which reduces spending on investment goods.E) A) and D)
F) None of the above

Question 4

In which case can we be sure real GDP rises in the short run?

Accepted Answer

A)   foreign economies expand and government purchases rise.
B)   foreign economies expand and government purchases fall.
C)   foreign economies contract and government purchases fall.
D)   foreign economies contract and government purchases rise.E) A) and B)
F) A) and C) A

Question 5

Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to

Accepted Answer

A)   rise. This rise in price expectations shifts the short-run aggregate supply curve to the right.
B)   rise. This rise in price expectations shifts the short-run aggregate supply curve to the left.
C)   fall. This fall in price expectations shifts the short-run aggregate supply curve to the right.
D)   fall. This fall in price expectations shifts the short-run aggregate supply curve to the left.E) A) and B)
F) B) and C)

Question 6

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   both an investment tax credit and a decrease in income tax rates
B)   an investment tax credit but not a decrease in income tax rates
C)   a decrease in income tax rates but not an investment tax credit
D)   neither an investment tax credit nor a decrease in income tax ratesE) A) and B)
F) A) and C)

Question 7

During recessions which type of spending falls?

Accepted Answer

A)   consumption and investment
B)   investment but not consumption
C)   consumption but not investment
D)   neither consumption nor investmentE) B) and D)
F) All of the above

Question 8

Figure 33-3. 
-Refer to Figure 33-3. The natural rate of output occurs at

Accepted Answer

A)   Y1.
B)   Y2.
C)   Y3.
D)   both Y1 and Y3.E) B) and C)
F) None of the above

Question 9

Refer to U.S. Financial Crisis. U.S. net exports would

Accepted Answer

A)   rise which by itself would increase aggregate demand.
B)   rise which by itself would decrease aggregate demand.
C)   fall which by itself would increase aggregate demand.
D)   fall which by itself would decrease aggregate demand.E) B) and D)
F) A) and B)

Question 10

During World War II government expenditures increased almost five-fold and output almost doubled.

Accepted Answer

A) True 
 B)False

Question 11

Figure 33-12. 
-Refer to Figure 33-12. Explain how the aggregate demand and aggregate supply model changed during periods 1 and 2.

Accepted Answer

The aggregate-demand...

Question 12

The effect of an increase in the price level on the aggregate-demand curve is represented by a

Accepted Answer

A)   shift to the right of the aggregate-demand curve.
B)   shift to the left of the aggregate-demand curve.
C)   movement to the left along a given aggregate-demand curve.
D)   movement to the right along a given aggregate-demand curve.E) None of the above
F) A) and D) C

Question 13

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

Accepted Answer

A decrease in aggregate demand causes th...

Question 14

When the price level falls, people want to

Accepted Answer

A)   hold more money and the quantity of aggregate goods and services demanded increases.
B)   hold more money and the quantity of aggregate goods and services demanded decreases.
C)   hold less money and the quantity of aggregate goods and services demanded increases.
D)   hold less money and the quantity of aggregate goods and services demanded decreases.E) All of the above
F) C) and D)

Question 15

Figure 33-16. 
-Refer to Figure 33-16. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Accepted Answer

The answer of Figure 33-16. 
-Refer to Figure 33-16. Suppose...

Question 16

Recession come at

Accepted Answer

A)   regular intervals. During recessions consumption spending falls relatively more than investment spending.
B)   regular intervals. During recessions investment spending falls relatively more than consumption spending.
C)   irregular intervals. During recessions consumption spending falls relatively more than investment spending.
D)   irregular intervals. During recessions investment spending falls relatively more than consumption spending.E) C) and D)
F) B) and D)

Question 17

The aggregate demand curve shifts left if either

Accepted Answer

A)   speculators gain confidence in U.S. assets or foreign countries enter into recession.
B)   speculators gain confidence in U.S. assets or recessions in foreign countries end.
C)   speculators lose confidence in U.S. assets or foreign countries enter into recession.
D)   speculators lose confidence in U.S. assets or recessions in foreign countries end.E) C) and D)
F) None of the above

Question 18

Other things the same, what happens to the price level and quantity of output when an adverse shift in the short run aggregate supply curve occurs?

Accepted Answer

Price leve...

Question 19

Aggregate demand shifts right when the Federal Reserve

Accepted Answer

A)   raises personal income taxes.
B)   increases the money supply.
C)   institutes an investment tax credit.
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 20

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 D)
F) None of the above B

Exam 33: Aggregate Demand and Aggregate Supply

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

Correct AnswerverifiedShow Answer

Which of the following both shift aggregate demand left?

Correct AnswerverifiedShow Answer

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases,

Correct AnswerverifiedShow Answer

In which case can we be sure real GDP rises in the short run?

Correct AnswerverifiedA

Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

During recessions which type of spending falls?

Correct AnswerverifiedShow Answer

Figure 33-3. -Refer to Figure 33-3. The natural rate of output occurs at

Correct AnswerverifiedShow Answer

Refer to U.S. Financial Crisis. U.S. net exports would

Correct AnswerverifiedShow Answer

During World War II government expenditures increased almost five-fold and output almost doubled.

Correct AnswerverifiedShow Answer

Figure 33-12. -Refer to Figure 33-12. Explain how the aggregate demand and aggregate supply model changed during periods 1 and 2.

Correct AnswerverifiedThe aggregate-demand...View AnswerShow Answer

The effect of an increase in the price level on the aggregate-demand curve is represented by a

Correct AnswerverifiedC

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

Correct AnswerverifiedA decrease in aggregate demand causes th...View AnswerShow Answer

When the price level falls, people want to

Correct AnswerverifiedShow Answer

Figure 33-16. -Refer to Figure 33-16. Suppose the economy starts at P3 and Y2. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

Correct AnswerverifiedShow Answer

Recession come at

Correct AnswerverifiedShow Answer

The aggregate demand curve shifts left if either

Correct AnswerverifiedShow Answer

Other things the same, what happens to the price level and quantity of output when an adverse shift in the short run aggregate supply curve occurs?

Correct AnswerverifiedPrice leve...View AnswerShow Answer

Aggregate demand shifts right when the Federal Reserve

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

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The aggregate-demand...
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C

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A decrease in aggregate demand causes th...
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Price leve...
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B