Question 1

If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net exports

Accepted Answer

A)  increase which shifts aggregate demand right.
B)  increase which shifts aggregate demand left.
C)  decrease which shifts aggregate demand right.
D)  decrease which shifts aggregate demand left.E) A) and C)
F) A) and D)

Question 2

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

Question 3

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

Accepted Answer

A)  higher than desired prices which leads to an increase in the aggregate quantity of goods and services supplied.
B)  higher than desired prices which leads to a decrease in the aggregate quantity of goods and services supplied.
C)  lower than desired prices which leads to an increase in the aggregate quantity of goods and services supplied.
D)  lower than desired prices which leads to a decrease in the aggregate quantity of goods and services supplied.E) A) and C)
F) C) and D)

Question 4

We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following will both make people buy more?

Accepted Answer

A)  wealth and interest rates rise.
B)  wealth rises and interest rates fall.
C)  wealth falls and interest rates rise.
D)  wealth falls and interest rates fall.E) All of the above
F) C) and D)

Question 6

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift

Accepted Answer

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

Question 7

The aggregate demand curve shifts right if either

Accepted Answer

A)  speculators gain confidence in U.S. assets or foreign countries enter into recession.
B)  speculators gain confidence in U.S. assets or recessions in foreign countries end.
C)  speculators lose confidence in U.S. assets or foreign countries enter into recession.
D)  speculators lose confidence in U.S. assets or recessions in foreign countries end.E) None of the above
F) B) and D)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

When the price level falls

Accepted Answer

A)  people want to hold less money.
B)  the interest rate falls.
C)  investment spending rises.
D)  All of the above are correct.E) B) and D)
F) All of the above

Question 10

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Accepted Answer

A)  long-run aggregate supply shifts right
B)  long-run aggregate supply shifts left
C)  aggregate demand shifts right
D)  aggregate demand shifts leftE) A) and B)
F) B) and C)

Question 11

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

Accepted Answer

A)  short-run aggregate supply shifts right
B)  short-run aggregate supply shifts left
C)  aggregate demand shifts right
D)  aggregate demand shifts leftE) B) and D)
F) B) and C)

Question 12

Other things the same, an unexpected fall in the price level results in some firms having

Accepted Answer

A)  lower than desired prices which increases their sales.
B)  lower than desired prices which depresses their sales.
C)  higher than desired prices which increases their sales.
D)  higher than desired prices which depresses their sales.E) None of the above
F) All of the above

Question 13

Which of the following would cause stagflation?

Accepted Answer

A)  aggregate demand shifts right
B)  aggregate demand shifts left
C)  aggregate supply shifts right
D)  aggregate supply shifts leftE) A) and B)
F) A) and C)

Question 14

The saying "Money is a veil." means that

Accepted Answer

A)  while nominal variables are the first thing we may observe about an economy, what's important are the real variables and the forces that determine them.
B)  money is the principal medium of exchange in most economies.
C)  the primary determinant of short-run economic fluctuations is not real variables, but rather changes in the money supply.
D)  in the long run money is of no importance to the determination of either real or nominal variables.E) A) and B)
F) A) and C)

Question 15

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U. S. Which pair of GDP growth rates and unemployment rates is realistic?

Accepted Answer

A)  5 percent, 1 percent
B)  3 percent, 5 percent
C)  -1 percent, 3 percent
D)  -2 percent, 4 percentE) None of the above
F) B) and D)

Question 16

Political Instability Abroad
Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets.
-Refer to Political Instability Abroad. What would happen to the dollar?

Accepted Answer

A)  It would appreciate in foreign exchange markets making U.S goods more expensive compared to foreign goods.
B)  It would appreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods.
C)  It would depreciate in foreign exchange markets making U.S. goods more expensive compared to foreign goods.
D)  It would depreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods.E) A) and D)
F) A) and B)

Question 17

Other things the same, if the long-run aggregate supply curve shifts left, prices

Accepted Answer

A)  and output both increase.
B)  and output both decrease.
C)  increase and output decreases.
D)  decrease and output increases.E) B) and D)
F) A) and B)

Question 18

The aggregate quantity of goods and services demanded changes as the price level rises because

Accepted Answer

A)  real wealth falls, interest rates rise, and the dollar appreciates.
B)  real wealth falls, interest rates rise, and the dollar depreciates.
C)  real wealth rises, interest rates fall, and the dollar appreciates.
D)  real wealth rises, interest rates fall, and the dollar depreciates.E) A) and D)
F) B) and C)

Question 19

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Accepted Answer

A) True 
 B)False

Question 20

According to classical macroeconomic theory, changes in the money supply change nominal but not real variables.

Accepted Answer

A) True 
 B)False

Exam 20: Aggregate Demand and Aggregate Supply

The aggregate quantity of goods and services demanded changes as the price level rises because

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When the price level falls

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According to classical macroeconomic theory, changes in the money supply change nominal but not real variables.

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The aggregate demand curve shifts right if either

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Which of the following would cause stagflation?

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Political Instability Abroad Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets. -Refer to Political Instability Abroad. What would happen to the dollar?

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Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U. S. Which pair of GDP growth rates and unemployment rates is realistic?

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Which of the following will both make people buy more?

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Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift

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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

Other things the same, an unexpected fall in the price level results in some firms having

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We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

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The saying "Money is a veil." means that

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Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

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Which of the following, other things the same, would make the price level decrease and real GDP increase?

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

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If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net exports

Correct AnswerverifiedShow Answer

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

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Other things the same, if the long-run aggregate supply curve shifts left, prices

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

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