Question 1

Stagflation exists when prices

Accepted Answer

A)  and output rise.
B)  rise and output falls.
C)  fall and output rises.
D)  and output fall.E) A) and D)
F) B) and C)

Question 2

Imagine the U.S.economy is in long-run equilibrium.Then suppose the value of the U.S.dollar increases.At the same time,people in the U.S.revise their expectations so that the expected price level falls.We would expect that in the short-run

Accepted Answer

A)  real GDP will rise and the price level might rise, fall, or stay the same.
B)  real GDP will fall and the price level might rise, fall, or stay the same.
C)  the price level will rise, and real GDP might rise, fall, or stay the same.
D)  the price level will fall, and real GDP might rise, fall, or stay the same.E) B) and C)
F) B) and D)

Question 3

Suppose the economy is in long-run equilibrium.In a short span of time,there is a large influx of skilled immigrants,a major new discovery of oil,and a major new technological advance in electricity production.In the short run,we would expect

Accepted Answer

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

Question 4

The model of short-run economic fluctuations focuses on the price level and

Accepted Answer

A)  real GDP.
B)  economic growth.
C)  the neutrality of money.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 5

Consider the exhibit below for the following questions.
Figure 33-1
 
-Refer to Figure 33-1.If the economy is at A and there is a fall in aggregate demand,in the short run the economy

Accepted Answer

A)  stays at a.
B)  moves to B.
C)  moves to C.
D)  moves to D.E) B) and C)
F) A) and D)

Question 6

In 2001,the United States was in recession.Which of the following things would you expect not to have happened?

Accepted Answer

A)  increased layoffs and firings
B)  a higher rate of bankruptcy
C)  increased claims for unemployment insurance
D)  increased investment spendingE) A) and D)
F) C) and D)

Question 7

An increase in which of the following,other things the same,shifts aggregate demand to the right?

Accepted Answer

A)  consumption
B)  investment
C)  government expenditures
D)  All of the above are correct.E) None of the above
F) B) and C)

Question 8

Aggregate demand shifts to the left if the money supply decreases.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

Accepted Answer

A)  consumer wealth rises
B)  borrowing rises
C)  each dollar is worth more domestic goods
D)  the dollar appreciates relative to other currenciesE) None of the above
F) A) and B)

Question 10

A change in the money supply changes only nominal variables in the long run.

Accepted Answer

A) True 
 B)False

Question 11

Other things the same,the aggregate quantity of output supplied will increase if the price level

Accepted Answer

A)  is lower than expected so that firms believe the relative price of their output has increased.
B)  is lower than expected so that firms believe the relative price of their output has decreased.
C)  is higher than expected so that firms believe the relative price of their output has increased.
D)  is higher than expected so that firms believe the relative price of their output has decreased.E) B) and C)
F) B) and D)

Question 12

A candidate for political office announces the following policies which,he says,economics clearly demonstrates will lead to higher output in the long run.1.reduce immigration from abroad 2.make trade more open between the US and other countries.

Accepted Answer

A)  1 and 2 both shift long-run aggregate supply right.
B)  1 and 2 both shift long-run aggregate supply left.
C)  1 shifts long-run aggregate supply right, 2 shifts long-run aggregate supply left.
D)  1 shifts long-run aggregate supply left, 2 shifts long-run aggregate supply right.E) A) and D)
F) A) and C)

Question 13

When output rises,unemployment falls.

Accepted Answer

A) True 
 B)False

Question 14

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

Question 15

The Central Bank of Libertina increases the money supply at the same time the Parliament of Libertina passes a new investment tax credit.Consider the effects of these policies on the Libertinian economy.The money supply increase

Accepted Answer

A)  and the investment tax credit each cause aggregate demand to shift right.
B)  and the investment tax credit each cause aggregate demand to shift left.
C)  causes aggregate demand to right, while the investment tax credit causes aggregate demand to shift left.
D)  causes aggregate demand to shift left, while the investment tax credit causes the aggregate demand curve to shift right.E) C) and D)
F) None of the above

Question 16

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 less than expected so that firms believe the relative price of their output has increased.
B)  increases less than expected so that firms believe the relative price of their output has decreased.
C)  increases more than expected so that firms believe the relative price of their output has increased.
D)  increases more than expected so that firms believe the relative price of their output has decreased.E) A) and D)
F) B) and C)

Question 17

In the early 1930s in the United States,there was a

Accepted Answer

A)  large increase in output.In the early 1940s there was also a large increase in output.
B)  large increase in output.In the early 1940s there was a large decrease in output.
C)  large decrease in output.In the early 1940s there was a large increase in output.
D)  large decrease in output.In the early 1940s there was also a large decrease in output.E) A) and B)
F) A) and C)

Question 18

Wages tend to be sticky

Accepted Answer

A)  because of contracts, social norms, and notions of fairness.
B)  because of contracts, but not social norms or notions of fairness.
C)  because of social norms and notions of fairness, but not contracts.
D)  but not because of social norms, notions of fairness or contracts.E) B) and C)
F) A) and B)

Question 19

Which of the following did not happen during the onset of the Great Depression?

Accepted Answer

A)  The money supply fell as households took money out of bank deposits.
B)  The Fed conducted expansionary monetary policy.
C)  Stock prices fell about 90 percent.
D)  Disruption of the banking system made it difficult for some firms to obtain funds for investment.E) B) and C)
F) None of the above

Question 20

Investment is a

Accepted Answer

A)  small part of real GDP, so it accounts for a small share of the fluctuation in real GDP.
B)  small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP.
C)  large part of real GDP, so it accounts for a large share of the fluctuation in real GDP.
D)  large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.E) B) and C)
F) All of the above

Exam 33: Aggregate Demand and Aggregate Supply

An increase in which of the following,other things the same,shifts aggregate demand to the right?

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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

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

A candidate for political office announces the following policies which,he says,economics clearly demonstrates will lead to higher output in the long run.1.reduce immigration from abroad 2.make trade more open between the US and other countries.

Correct AnswerverifiedShow Answer

Stagflation exists when prices

Correct AnswerverifiedShow Answer

The Central Bank of Libertina increases the money supply at the same time the Parliament of Libertina passes a new investment tax credit.Consider the effects of these policies on the Libertinian economy.The money supply increase

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Aggregate demand shifts to the left if the money supply decreases.

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The model of short-run economic fluctuations focuses on the price level and

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A change in the money supply changes only nominal variables in the long run.

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In 2001,the United States was in recession.Which of the following things would you expect not to have happened?

Correct AnswerverifiedShow Answer

In the early 1930s in the United States,there was a

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Investment is a

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Which of the following did not happen during the onset of the Great Depression?

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Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

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Other things the same,the aggregate quantity of output supplied will increase if the price level

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Consider the exhibit below for the following questions. Figure 33-1 -Refer to Figure 33-1.If the economy is at A and there is a fall in aggregate demand,in the short run the economy

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When output rises,unemployment falls.

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium.In a short span of time,there is a large influx of skilled immigrants,a major new discovery of oil,and a major new technological advance in electricity production.In the short run,we would expect

Correct AnswerverifiedShow Answer

Wages tend to be sticky

Correct AnswerverifiedShow Answer

Imagine the U.S.economy is in long-run equilibrium.Then suppose the value of the U.S.dollar increases.At the same time,people in the U.S.revise their expectations so that the expected price level falls.We would expect that in the short-run

Correct AnswerverifiedShow Answer

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