Question 1

The aggregate supply curve represents levels of output that producers are willing to sell at

Accepted Answer

A)  each level of the real interest rate.
B)  each level of real GDP.
C)  each price level.
D)  each inflation rate.E) A) and B)
F) B) and C)

Question 2

Which of the following would NOT shift the aggregate demand curve to the left?

Accepted Answer

A)  an increase in money demand
B)  a cut in federal government spending
C)  a reduction in federal income taxes
D)  a decrease in consumption spendingE) A) and C)
F) B) and C)

Question 3

During the years from 1964 to 1969, inflation increased in the United States

Accepted Answer

A)  when the AD curve shifted up and to the right, even though the SRAS curve remained stable.
B)  when the SRAS curve shifted up and to the left, even though the AD curve remained stable.
C)  when the AD curve shifted up and to the right and the SRAS curve shifted up and to the left.
D)  despite the AD and SRAS curves remaining stable.E) All of the above
F) B) and C)

Question 4

Some economists have predicted that recent developments in energy production in the United States are estimated to result in all of the following EXCEPT:

Accepted Answer

A)  millions of new jobs
B)  the United States having the lowest energy costs of any country in the industrialized world
C)  a substantial increase in GDP over time
D)  significant increases in pollutionE) A) and C)
F) All of the above

Question 5

Which of the following would cause the long-run aggregate supply curve to shift?

Accepted Answer

A)  an increase in the price level
B)  a decrease in the expected price level
C)  an increase in labor productivity
D)  an autonomous increase in consumption spendingE) C) and D)
F) None of the above

Question 6

Make use of the misperceptions theory to explain why the short-run aggregate supply curve is upward sloping.

Accepted Answer

Assume that all prices in an economy ris...

Question 7

In comparing the views of economists on stabilization policy in the 1960s with the current views of economists on stabilization policy, one can say

Accepted Answer

A)  few economists in the 1960s favored stabilization policy, while most economists currently favor stabilization policy.
B)  economists' views on stabilization policy have changed very little since the 1960s.
C)  fewer economists currently believe it is possible to use stabilization policy to fine-tune the economy than in the 1960s.
D)  almost no economists in the currently believe stabilization policy should be used.E) C) and D)
F) A) and B)

Question 8

The aggregate demand curve illustrates the relationship between

Accepted Answer

A)  the aggregate expenditure for goods and services, and the real interest rate.
B)  the aggregate expenditure for goods and services, and the level of current output.
C)  the level of current output and the real interest rate.
D)  the aggregate expenditure for goods and services, and the price level.E) A) and B)
F) A) and C)

Question 9

A rise in the real interest rate will cause which of the components of aggregate demand to decline?

Accepted Answer

A)  Only C
B)  Only C and I
C)  Only C, I, and NX
D)  C, I, G, and NXE) A) and C)
F) None of the above

Question 10

In the aggregate demand-aggregate supply model, if entrepreneurs become convinced that future profitability of capital has increased,

Accepted Answer

A)  current output will fall, but the price level will rise.
B)  current output will rise, but the price level will fall.
C)  current output and the price level will both rise.
D)  current output and the price level will both fall.E) A) and C)
F) B) and D)

Question 11

Which of the following is NOT included in aggregate demand?

Accepted Answer

A)  Demand for goods and services for consumption
B)  Investment in business plant and equipment
C)  Net exports
D)  Investment in Treasury bondsE) All of the above
F) B) and D)

Question 12

The result of the supply shocks of 1973-1974 was to

Accepted Answer

A)  reduce aggregate output and raise the price level.
B)  reduce the price level and raise aggregate output.
C)  reduce both aggregate output and the price level.
D)  raise both aggregate output and the price level.E) A) and C)
F) A) and B)

Question 13

Suppose a company expects prices in general to rise by 5%, but the price of its product rises by 2%. How will the company respond to the price change?

Accepted Answer

A)  It will increase production since it's getting a higher price for the product.
B)  It will increase production more slowly since it's price is rising more slowly than average.
C)  It will reduce production since it perceives a relative decline in the demand for its product.
D)  It will stop production and shut down until prices rise more quickly.E) B) and C)
F) A) and D)

Question 14

If the expected price level increases at the same time that the federal government cuts taxes, in the short run

Accepted Answer

A)  aggregate output and the price level will both increase.
B)  aggregate output will increase, but the price level will fall.
C)  aggregate output and the price level will both fall.
D)  the price level will increase, but aggregate output may either increase or decrease.E) All of the above
F) C) and D)

Question 15

An increase in the price level reduces net exports because

Accepted Answer

A)  it leads indirectly to a higher exchange rate.
B)  it leads indirectly to a lower exchange rate.
C)  it leads indirectly to a lower real interest rate.
D)  it leads directly to higher real money balances.E) A) and B)
F) B) and D)

Question 16

If oil prices fall at the same time that the federal government increases its purchases, in the short run

Accepted Answer

A)  aggregate output and the price level will both increase.
B)  aggregate output will increase, but the price level will fall.
C)  aggregate output and the price level will both fall.
D)  aggregate output will increase, but the price level may either increase or decrease.E) B) and D)
F) A) and B)

Question 17

An expansionary monetary policy that successfully counteracts a recession has the side effect of

Accepted Answer

A)  lower investment spending than if no action had been taken.
B)  a larger government deficit than if no action had been taken.
C)  a higher price level than if no action had been taken.
D)  lower output than if no action had been taken.E) A) and B)
F) A) and D)

Question 18

According to the new classical view, when the actual price level is greater than the expected price level

Accepted Answer

A)  aggregate output is above the full employment level.
B)  aggregate output is below the full employment level.
C)  the aggregate supply curve will slope downward.
D)  the coefficient a is equal to zero.E) All of the above
F) None of the above

Question 19

Which of the following would shift the aggregate demand curve to the left?

Accepted Answer

A)  an increase in the money supply
B)  a cut in federal income taxes
C)  an expected decrease in future income
D)  an increase in the price levelE) A) and B)
F) A) and D)

Question 20

Which of the following was NOT cited as contributing to unusual uncertainty having an adverse effect on aggregate supply?

Accepted Answer

A)  the possibility that Congress may let the 2001, 2003 tax cuts to expire
B)  the Fed's limited use of monetary policy in fighting the recession
C)  the severity of the financial crisis
D)  concern that the Affordable Care Act would increase the cost of hiring workersE) C) and D)
F) A) and B)

Exam 17: Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

During the years from 1964 to 1969, inflation increased in the United States

Correct AnswerverifiedShow Answer

Some economists have predicted that recent developments in energy production in the United States are estimated to result in all of the following EXCEPT:

Correct AnswerverifiedShow Answer

According to the new classical view, when the actual price level is greater than the expected price level

Correct AnswerverifiedShow Answer

An expansionary monetary policy that successfully counteracts a recession has the side effect of

Correct AnswerverifiedShow Answer

The aggregate supply curve represents levels of output that producers are willing to sell at

Correct AnswerverifiedShow Answer

In the aggregate demand-aggregate supply model, if entrepreneurs become convinced that future profitability of capital has increased,

Correct AnswerverifiedShow Answer

Which of the following was NOT cited as contributing to unusual uncertainty having an adverse effect on aggregate supply?

Correct AnswerverifiedShow Answer

Which of the following is NOT included in aggregate demand?

Correct AnswerverifiedShow Answer

A rise in the real interest rate will cause which of the components of aggregate demand to decline?

Correct AnswerverifiedShow Answer

The result of the supply shocks of 1973-1974 was to

Correct AnswerverifiedShow Answer

Which of the following would shift the aggregate demand curve to the left?

Correct AnswerverifiedShow Answer

If oil prices fall at the same time that the federal government increases its purchases, in the short run

Correct AnswerverifiedShow Answer

Which of the following would cause the long-run aggregate supply curve to shift?

Correct AnswerverifiedShow Answer

Suppose a company expects prices in general to rise by 5%, but the price of its product rises by 2%. How will the company respond to the price change?

Correct AnswerverifiedShow Answer

Make use of the misperceptions theory to explain why the short-run aggregate supply curve is upward sloping.

Correct AnswerverifiedAssume that all prices in an economy ris...View AnswerShow Answer

If the expected price level increases at the same time that the federal government cuts taxes, in the short run

Correct AnswerverifiedShow Answer

The aggregate demand curve illustrates the relationship between

Correct AnswerverifiedShow Answer

An increase in the price level reduces net exports because

Correct AnswerverifiedShow Answer

Which of the following would NOT shift the aggregate demand curve to the left?

Correct AnswerverifiedShow Answer

In comparing the views of economists on stabilization policy in the 1960s with the current views of economists on stabilization policy, one can say

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Assume that all prices in an economy ris...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified