Question 1

Other things the same,if the price level 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) A) and B)

Question 2

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP,argue that declines in these variables are to be expected.

Accepted Answer

Variables that fall along with real GDP ...

Question 3

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 B)
F) A) and C)

Question 4

Which of the following would cause prices to rise and real GDP to fall in the short run?

Accepted Answer

A)  an increase in the expected price level
B)  an increase in the capital stock
C)  an increase in the quantity of labor available
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 5

Other things the same,if the price level falls,households

Accepted Answer

A)  increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases.
B)  increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.
C)  decrease foreign bond purchases, so the supply of dollars in market for foreign-currency exchange increases.
D)  decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.E) A) and C)
F) A) and D)

Question 6

Increased uncertainty and pessimism about the future of the economy decreases investment spending,shifting aggregate demand to the left.

Accepted Answer

A) True 
 B)False

Question 7

Because not all prices adjust instantly to changing circumstances,an unexpected fall in the price level leaves some firms with higher-than-desired prices,and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 8

The long-run aggregate supply curve shifts left if

Accepted Answer

A)  the capital stock increases.
B)  there is a hurricane.
C)  the government removes some environmental regulations that limit production methods.
D)  None of the above is correct.E) A) and C)
F) B) and C)

Question 9

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 10

The long-run effect of an increase in government spending 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) B) and C)
F) B) and D)

Question 11

Suppose a fall in stock prices makes people feel poorer.The decrease in wealth would induce people to

Accepted Answer

A)  decrease consumption, shown as a movement to the left along a given aggregate demand curve.
B)  increase consumption, shown as a movement to the right along a given aggregate demand curve.
C)  decrease consumption, shifting the aggregate demand curve to the left.
D)  increase consumption, shifting the aggregate demand curve to the right.E) A) and C)
F) A) and D)

Question 12

Other things the same,an increase in the price level makes consumers feel

Accepted Answer

A)  less wealthy, so the quantity of goods and services demanded falls.
B)  less wealthy, so the quantity of goods and services demanded rises.
C)  more wealthy, so the quantity of goods and services demanded rises.
D)  more wealthy, so the quantity of goods and services demanded falls.E) C) and D)
F) A) and D)

Question 13

The long-run aggregate supply curve would shift right if immigration from abroad

Accepted Answer

A)  increased or Congress made a substantial increase in the minimum wage.
B)  decreased or Congress abolished the minimum wage.
C)  increased or Congress abolished the minimum wage.
D)  decreased or Congress made a substantial increase in the minimum wage.E) B) and C)
F) B) and D)

Question 14

Other things the same,a decrease in the price level makes the dollars people hold worth

Accepted Answer

A)  more, so they are willing to spend more.
B)  more, so they are willing to spend less.
C)  less, so they are willing to spend more.
D)  less, so they are willing to spend less.E) A) and B)
F) A) and C)

Question 15

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 B)
F) A) and C)

Question 16

Most economists believe that classical theory explains the world in the short run,but not the long run.

Accepted Answer

A) True 
 B)False

Question 17

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers people become pessimistic regarding the future and retain that level of pessimism for some time.
-Refer to Pessimism.What happens to the expected price level and what's the result for wage bargaining?

Accepted Answer

A)  The expected price level rises.Bargains are struck for higher wages.
B)  The expected price level rises.Bargains are struck for lower wages.
C)  The expected price level falls.Bargains are struck for higher wages.
D)  The expected price level falls.Bargains are struck for lower wages.E) A) and D)
F) C) and D)

Question 18

The model of aggregate demand and aggregate supply explains the relationship between

Accepted Answer

A)  the price and quantity of a particular good.
B)  unemployment and output.
C)  wages and employment.
D)  real GDP and the price level.E) A) and D)
F) None of the above

Question 19

If the price level is higher than expected,firms might raise their production in the short run if

Accepted Answer

A)  the nominal wage they pay their employees was set based on the expected price level.
B)  prices are costly to adjust and they have set their price at some time in the past and are not ready to change it.
C)  they believe that the price of their product has risen relative to the price of other products, when in fact the rise in the price of their product reflects an increase in the general price level.
D)  All of the above are correct.E) B) and D)
F) All of the above

Question 20

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Exam 33: Aggregate Demand and Aggregate Supply

Other things the same,if the price level falls,households

Correct Answer
verified

Increased uncertainty and pessimism about the future of the economy decreases investment spending,shifting aggregate demand to the left.

Correct Answer
verified

Because not all prices adjust instantly to changing circumstances,an unexpected fall in the price level leaves some firms with higher-than-desired prices,and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Correct Answer
verified

The long-run aggregate supply curve shifts left if

Correct Answer
verified

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

Correct Answer
verified

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Correct Answer
verified

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 Answer
verified

Suppose a fall in stock prices makes people feel poorer.The decrease in wealth would induce people to

Correct Answer
verified

The long-run aggregate supply curve would shift right if immigration from abroad

Correct Answer
verified

Other things the same,a decrease in the price level makes the dollars people hold worth

Correct Answer
verified

The long-run effect of an increase in government spending is to raise

Correct Answer
verified

Correct Answer
verified

Other things the same,an increase in the price level makes consumers feel

Correct Answer
verified

If the price level is higher than expected,firms might raise their production in the short run if

Correct Answer
verified

The model of aggregate demand and aggregate supply explains the relationship between

Correct Answer
verified

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP,argue that declines in these variables are to be expected.

Correct Answer
verified
Variables that fall along with real GDP ...
View Answer

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Correct Answer
verified

Most economists believe that classical theory explains the world in the short run,but not the long run.

Correct Answer
verified

Historically,the change in real GDP during recessions has been

Correct Answer
verified

Which of the following would cause prices to rise and real GDP to fall in the short run?

Correct Answer
verified

Exam 33: Aggregate Demand and Aggregate Supply

Other things the same,if the price level falls,households

Correct AnswerverifiedShow Answer

Increased uncertainty and pessimism about the future of the economy decreases investment spending,shifting aggregate demand to the left.

Correct AnswerverifiedShow Answer

Because not all prices adjust instantly to changing circumstances,an unexpected fall in the price level leaves some firms with higher-than-desired prices,and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts left if

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Correct AnswerverifiedShow Answer

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

Suppose a fall in stock prices makes people feel poorer.The decrease in wealth would induce people to

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve would shift right if immigration from abroad

Correct AnswerverifiedShow Answer

Other things the same,a decrease in the price level makes the dollars people hold worth

Correct AnswerverifiedShow Answer

The long-run effect of an increase in government spending is to raise

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things the same,an increase in the price level makes consumers feel

Correct AnswerverifiedShow Answer

If the price level is higher than expected,firms might raise their production in the short run if

Correct AnswerverifiedShow Answer

The model of aggregate demand and aggregate supply explains the relationship between

Correct AnswerverifiedShow Answer

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP,argue that declines in these variables are to be expected.

Correct AnswerverifiedVariables that fall along with real GDP ...View AnswerShow Answer

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Correct AnswerverifiedShow Answer

Most economists believe that classical theory explains the world in the short run,but not the long run.

Correct AnswerverifiedShow Answer

Historically,the change in real GDP during recessions has been

Correct AnswerverifiedShow Answer

Which of the following would cause prices to rise and real GDP to fall in the short run?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Variables that fall along with real GDP ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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