Question 1

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) A) and B)
F) B) and D)

Question 2

The initial impact of the repeal of an investment tax credit is to shift

Accepted Answer

A)   aggregate demand right.
B)   aggregate demand left.
C)   aggregate supply right.
D)   aggregate supply left.E) None of the above
F) B) and C)

Question 3

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S.bonds,

Accepted Answer

A)   the dollar would appreciate which would cause aggregate demand to shift right.
B)   the dollar would appreciate which would cause aggregate demand to shift left.
C)   the dollar would depreciate which would cause aggregate demand to shift right.
D)   the dollar would depreciate which would cause aggregate demand to shift left.E) A) and B)
F) A) and C)

Question 4

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 B)
F) B) and C)

Question 5

If there are sticky wages,and the price level is greater than what was expected,then

Accepted Answer

A)   the quantity of aggregate goods and services supplied falls,which is shown by a shift of the short-run aggregate supply curve to the left.
B)   the quantity of aggregate goods and services supplied falls,as shown by a movement to the left along the short-run aggregate supply curve.
C)   the quantity of aggregate goods and services supplied rises,as shown by a shift of the short-run aggregate supply curve to the right.
D)   the quantity of aggregate goods and services supplied rises,as shown by a movement to the right along the short-run aggregate supply curve.E) B) and D)
F) A) and C)

Question 6

Figure 20-1 
-Refer to Figure 20-1.If the economy is in long-run equilibrium,then an adverse shift in aggregate supply would move the economy from

Accepted Answer

A)   A to B.
B)   C to D.
C)   B to A.
D)   D to C.E) A) and B)
F) B) and D)

Question 7

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

Accepted Answer

A)   an increase in the money supply
B)   an increase in the price level
C)   a decrease in the expected price level
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 8

During recessions investment

Accepted Answer

A)   falls by a larger percentage than GDP.
B)   falls by about the same percentage as GDP.
C)   falls by a smaller percentage than GDP.
D)   falls but the percentage change is sometimes much larger and sometimes much smaller.E) A) and B)
F) All of the above

Question 9

Other things the same,when the price level rises,interest rates

Accepted Answer

A)   rise,which means consumers will want to spend more on homebuilding.
B)   rise,which means consumers will want to spend less on homebuilding.
C)   fall,which means consumers will want to spend more on homebuilding.
D)   fall,which means consumers will want to spend less on homebuilding.E) B) and C)
F) A) and B)

Question 10

If aggregate demand shifts right,then eventually price level expectations rise.This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Accepted Answer

A) True 
 B)False

Question 11

We depart from the assumptions of classical economics when we focus on the relationship between

Accepted Answer

A)   the quantity of output and the price level.
B)   the quantity of output and the unemployment rate.
C)   the price level and the inflation rate.
D)   inflation and the nominal interest rate.E) B) and C)
F) C) and D)

Question 12

Figure 20-1 
-Refer to Figure 20-1.The economy would be moving to long-run equilibrium if it started at

Accepted Answer

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

Question 13

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 14

In order to understand how the economy works in the short run,we need to

Accepted Answer

A)   study the classical model.
B)   study a model in which real and nominal variables interact.
C)   understand that "money is a veil."
D)   understand that money is neutral in the short run.E) All of the above
F) A) and B)

Question 15

Suppose technology advances within a nation.Which curves in the aggregate demand and aggregate supply model would be affected,and which way would they shift?

Accepted Answer

The short run and lo...

Question 16

When the price level rises unexpectedly,some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   an increase in the money supply
B)   an increase in net exports due to something other than a change in domestic prices
C)   an investment tax credit
D)   All of the above are correct.E) B) and D)
F) A) and B)

Question 18

A decrease in U.S.interest rates leads to

Accepted Answer

A)   a depreciation of the dollar that leads to greater net exports.
B)   a depreciation of the dollar that leads to smaller net exports.
C)   an appreciation of the dollar that leads to greater net exports.
D)   an appreciation of the dollar that leads to smaller net exports.E) B) and C)
F) A) and D)

Question 19

People had been expecting the price level to be 220 but it turns out to be 223.In response Green Leaf Paper Company increases the number of workers it employs.What could explain this?

Accepted Answer

A)   both sticky price theory and sticky wage theory
B)   sticky price theory but not sticky wage theory
C)   sticky wage theory but not sticky price theory
D)   neither sticky wage theory nor sticky price theoryE) B) and C)
F) A) and D)

Question 20

Other things the same,an increase in the expected price level shifts

Accepted Answer

A)   short-run aggregate supply right.
B)   short-run aggregate supply left.
C)   aggregate-demand right.
D)   aggregated-demand left.E) A) and B)
F) A) and C)

Exam 33: Aggregate Demand and Aggregate Supply

People had been expecting the price level to be 220 but it turns out to be 223.In response Green Leaf Paper Company increases the number of workers it employs.What could explain this?

Correct AnswerverifiedShow Answer

Suppose technology advances within a nation.Which curves in the aggregate demand and aggregate supply model would be affected,and which way would they shift?

Correct AnswerverifiedThe short run and lo...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

If there are sticky wages,and the price level is greater than what was expected,then

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

We depart from the assumptions of classical economics when we focus on the relationship between

Correct AnswerverifiedShow Answer

Other things the same,when the price level rises,interest rates

Correct AnswerverifiedShow Answer

When the price level rises unexpectedly,some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

Correct AnswerverifiedShow Answer

The aggregate demand and aggregate supply model implies monetary neutrality

Correct AnswerverifiedShow Answer

The initial impact of the repeal of an investment tax credit is to shift

Correct AnswerverifiedShow Answer

In order to understand how the economy works in the short run,we need to

Correct AnswerverifiedShow Answer

A decrease in U.S.interest rates leads to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same,an increase in the expected price level shifts

Correct AnswerverifiedShow Answer

During recessions investment

Correct AnswerverifiedShow Answer

Figure 20-1 -Refer to Figure 20-1.The economy would be moving to long-run equilibrium if it started at

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If aggregate demand shifts right,then eventually price level expectations rise.This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Correct AnswerverifiedShow Answer

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S.bonds,

Correct AnswerverifiedShow Answer

Figure 20-1 -Refer to Figure 20-1.If the economy is in long-run equilibrium,then an adverse shift in aggregate supply would move the economy from

Correct AnswerverifiedShow Answer

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The short run and lo...
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