Question 1

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

Question 2

Sticky nominal wages can result in

Accepted Answer

A)  lower profits for firms when the price level is lower than expected.
B)  a decrease in real wages when the price level is lower than expected.
C)  a short-run aggregate-supply curve that is vertical.
D)  a long-run aggregate-supply curve that is upward-sloping.E) A) and B)
F) A) and C)

Question 3

Figure 33-15. 
-Refer to Figure 33-15. Suppose the economy begins at point A. Decreases in what four variables could result in a movement to point D?

Accepted Answer

consumption, investm...

Question 4

Which of the following will both make people buy more?

Accepted Answer

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

Question 5

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 6

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

Accepted Answer

A) True 
 B)False

Question 7

In 1986, OPEC countries increased their production of oil. This caused

Accepted Answer

A)  the price level to rise.
B)  aggregate supply to shift right.
C)  unemployment to rise.
D)  None of the above is correct.E) All of the above
F) A) and B)

Question 8

The aggregate demand and aggregate supply model helps us to understand both short-run economic fluctuations and how the economy moves from the short to the long run.

Accepted Answer

A) True 
 B)False

Question 9

The recessions associated with the business cycle come at regular intervals.

Accepted Answer

A) True 
 B)False

Question 10

Over the last fifty years both real GDP and prices have trended upward in most countries. Continuing real GDP growth and inflation can be explained by

Accepted Answer

A)  continuing technological progress alone.
B)  continuing increases in the money supply alone.
C)  continued technological progress and continuing increases in the money supply.
D)  None of the above can explain continuing real GDP growth and inflation.E) A) and C)
F) B) and C)

Question 11

Other things the same, if the U.S. price level rises, then

Accepted Answer

A)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises.
B)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls.
C)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises.
D)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.E) All of the above
F) A) and D)

Question 12

Menu costs help explain

Accepted Answer

A)  sticky-price theory.
B)  misperceptions theory.
C)  sticky-wage theory.
D)  All of the above are correct.E) None of the above
F) B) and C)

Question 13

The aggregate demand and aggregate supply model implies monetary neutrality

Accepted Answer

A)  only in the short run.
B)  only in the long run.
C)  in both the short run and the long run.
D)  in neither the short run nor long run.E) A) and D)
F) A) and C)

Question 14

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 B)
F) None of the above

Question 15

Other things the same, an increase in the price level induces less spending on ​

Accepted Answer

A)  ​investment and net exports.
B)  ​investment, but not net exports.
C)  ​net exports, but not investment.
D)  ​neither net exports nor investment.E) A) and B)
F) A) and C)

Question 16

Consider the exhibit below for the following questions.
Figure 33-4 
-Refer to Figure 33-4. In the short run, a favorable shift in aggregate supply would move the economy from

Accepted Answer

A)  A to B.
B)  B to C.
C)  C to D.
D)  D to A.E) None of the above
F) B) and D)

Question 17

Write the mathematical expression that summarizes the three alternative explanations for the upward slope of the short run aggregate supply curve.

Accepted Answer

Quantity of output s...

Question 18

The misperceptions theory of the short-run aggregate supply curve says that if the price level is higher than people 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) B) and D)
F) All of the above

Question 19

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

Question 20

Other things the same, a decrease in the price level motivates people to hold

Accepted Answer

A)  less money, so they lend less, and the interest rate rises.
B)  less money, so they lend more, and the interest rate falls.
C)  more money, so they lend more, and the interest rate rises.
D)  more money, so they lend less, and the interest rate falls.E) B) and C)
F) A) and B)

Exam 33: Aggregate Demand and Aggregate Supply

Which of the following will both make people buy more?

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Over the last fifty years both real GDP and prices have trended upward in most countries. Continuing real GDP growth and inflation can be explained by

Correct AnswerverifiedShow Answer

When the price level falls

Correct AnswerverifiedShow Answer

Sticky nominal wages can result in

Correct AnswerverifiedShow Answer

Other things the same, an increase in the price level induces less spending on ​

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Menu costs help explain

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Recession come at

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

Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4. In the short run, a favorable shift in aggregate supply would move the economy from

Correct AnswerverifiedShow Answer

Write the mathematical expression that summarizes the three alternative explanations for the upward slope of the short run aggregate supply curve.

Correct AnswerverifiedQuantity of output s...View AnswerShow Answer

In 1986, OPEC countries increased their production of oil. This caused

Correct AnswerverifiedShow Answer

The recessions associated with the business cycle come at regular intervals.

Correct AnswerverifiedShow Answer

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

Correct AnswerverifiedShow Answer

The aggregate demand and aggregate supply model implies monetary neutrality

Correct AnswerverifiedShow Answer

Other things the same, a decrease in the price level motivates people to hold

Correct AnswerverifiedShow Answer

The misperceptions theory of the short-run aggregate supply curve says that if the price level is higher than people expected, then some firms believe that the relative price of what they produce has

Correct AnswerverifiedShow Answer

Aggregate demand shifts right when the Federal Reserve

Correct AnswerverifiedShow Answer

Other things the same, if the U.S. price level rises, then

Correct AnswerverifiedShow Answer

Figure 33-15. -Refer to Figure 33-15. Suppose the economy begins at point A. Decreases in what four variables could result in a movement to point D?

Correct Answerverifiedconsumption, investm...View AnswerShow Answer

The aggregate demand and aggregate supply model helps us to understand both short-run economic fluctuations and how the economy moves from the short to the long run.

Correct AnswerverifiedShow Answer

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Other things the same, an increase in the price level induces less spending on

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Quantity of output s...
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consumption, investm...
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Correct Answer
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