Question 1

Which of the following is correct?

Accepted Answer

A)   An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left.
B)   An increase in stock prices reduces consumption spending so that aggregate demand shifts left.
C)   An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left.
D)   A recession in other countries reduces U.S.net exports so that U.S.aggregate demand shifts left.E) A) and C)
F) A) and B)

Question 2

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,then 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) None of the above

Question 3

When the money supply increases

Accepted Answer

A)   interest rates fall and so aggregate demand shifts right.
B)   interest rates fall and so aggregate demand shifts left.
C)   interest rates rise and so aggregate demand shifts right.
D)   interest rates rise and so aggregate demand shifts left.E) A) and B)
F) C) and D)

Question 4

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Accepted Answer

A) True 
 B)False

Question 5

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 6

If speculators bid up the value of the U.S.dollar in the market for foreign exchange,then

Accepted Answer

A)   U.S.goods become more expensive relative to foreign goods so aggregate demand shifts right.
B)   U.S.goods become less expensive relative to foreign goods so aggregate demand shifts right.
C)   U.S.goods become more expensive relative to foreign goods so aggregate demand shifts left.
D)   U.S.goods become less expensive relative to foreign goods so aggregate demand shifts left.E) A) and C)
F) All of the above

Question 7

Because economists understand what things change GDP,they can predict recessions with a fair amount of accuracy.

Accepted Answer

A) True 
 B)False

Question 8

In the long-run,an increase in aggregate demand increases the price level,but not real GDP.

Accepted Answer

A) True 
 B)False

Question 9

Figure 20-2. 
-Refer to Pessimism.In the short run what happens to the price level and real GDP?

Accepted Answer

A)   Both the price level and real GDP rise.
B)   Both the price level and real GDP fall.
C)   The price level rises and real GDP falls.
D)   The price level falls and real GDP rises.E) C) and D)
F) All of the above

Question 10

Suppose speculators lost confidence in foreign economies and bought more U.S.bonds.How would this affect net exports in the U.S. ,and which way would this cause the aggregate demand curve to shift?

Accepted Answer

Net exports would fa...

Question 11

Aggregate demand shifts right if

Accepted Answer

A)   taxes rise and shifts left if stock prices rise.
B)   taxes rise and shifts left if stock prices fall.
C)   taxes fall and shifts left if stock prices rise.
D)   taxes fall and shifts left is stock prices fall.E) B) and C)
F) None of the above

Question 12

During periods of stagflation,what happens to output and prices in the economy?

Accepted Answer

Output fal...

Question 13

Which of the following shifts short-run aggregate supply right?

Accepted Answer

A)   an increase in the minimum wage
B)   an increase in immigration from abroad
C)   an increase in the price of oil
D)   an increase in the actual price levelE) All of the above
F) None of the above

Question 14

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Accepted Answer

A) True 
 B)False

Question 15

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Accepted Answer

A)   in the price level and output.
B)   in the price level,but not output.
C)   in output,but not the price level.
D)   in neither the price level nor output.E) None of the above
F) A) and B)

Question 16

Which of the following is most commonly used to monitor short-run changes in economic activity?

Accepted Answer

A)   the inflation rate
B)   real GDP
C)   aggregate demand
D)   aggregate supplyE) A) and D)
F) C) and D)

Question 17

The long-run aggregate supply curve shifts left if

Accepted Answer

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

Question 18

In the short-run an increase in the costs of production makes

Accepted Answer

A)   output and prices rise.
B)   output rise and prices fall.
C)   output fall and prices rise.
D)   output and prices fall.E) None of the above
F) B) and C)

Question 19

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

Question 20

Which part of real GDP fluctuates most over the course of the business cycle?

Accepted Answer

A)   consumption expenditures
B)   government expenditures
C)   investment expenditures
D)   net exportsE) B) and D)
F) None of the above

Exam 33: Aggregate Demand and Aggregate Supply

Which of the following is correct?

Correct AnswerverifiedShow Answer

When the money supply increases

Correct AnswerverifiedShow Answer

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Correct AnswerverifiedShow Answer

Which of the following is most commonly used to monitor short-run changes in economic activity?

Correct AnswerverifiedShow Answer

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Correct AnswerverifiedShow Answer

Aggregate demand shifts right if

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,then we would expect that in the short-run,

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

Figure 20-2. -Refer to Pessimism.In the short run what happens to the price level and real GDP?

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts left if

Correct AnswerverifiedShow Answer

Which of the following shifts short-run aggregate supply right?

Correct AnswerverifiedShow Answer

Which part of real GDP fluctuates most over the course of the business cycle?

Correct AnswerverifiedShow Answer

In the long-run,an increase in aggregate demand increases the price level,but not real GDP.

Correct AnswerverifiedShow Answer

Because economists understand what things change GDP,they can predict recessions with a fair amount of accuracy.

Correct AnswerverifiedShow Answer

If speculators bid up the value of the U.S.dollar in the market for foreign exchange,then

Correct AnswerverifiedShow Answer

In the short-run an increase in the costs of production makes

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Correct AnswerverifiedShow Answer

During periods of stagflation,what happens to output and prices in the economy?

Correct AnswerverifiedOutput fal...View AnswerShow Answer

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Correct AnswerverifiedShow Answer

Suppose speculators lost confidence in foreign economies and bought more U.S.bonds.How would this affect net exports in the U.S. ,and which way would this cause the aggregate demand curve to shift?

Correct AnswerverifiedNet exports would fa...View AnswerShow Answer

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Output fal...
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Net exports would fa...
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