Question 1

Which of the following would cause investment spending to decrease and aggregate demand to shift left?

Accepted Answer

A)   a decrease in the money supply and an investment tax credit.
B)   the repeal of an investment tax credit and an increase in the money supply.
C)   a decrease in the money supply and the repeal of an investment tax credit.
D)   an investment tax credit and an increase in the money supply.E) A) and D)
F) None of the above

Question 2

If wages are sticky, then a greater than expected increase in the price level

Accepted Answer

A)   raises the real costs of production, so the short-run aggregate supply curve shifts left.
B)   raises the real costs of production, so the aggregate quantity of goods and services declines.
C)   reduces the real costs of production, so the short-run aggregate supply curve shifts right.
D)   reduces the real costs of production, so the aggregate quantity of goods and services rises.E) C) and D)
F) B) and D)

Question 3

Figure 33-4 
-Refer to Figure 33-4. In the short run, a favorable shift in aggregate supply would move the economy from

Accepted Answer

A)   A to B.
B)   B to C.
C)   C to D.
D)   D to A.E) A) and C)
F) All of the above

Question 4

The effect of a change in the value of the dollar in the foreign exchange market due to a change in the price level helps explain the slope of aggregate demand, but does not shift it. The effects of a change in the value of the dollar in the foreign exchange market due to speculation is shown by shifting the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 5

Suppose the government raises taxes. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Accepted Answer

The aggreg...

Question 6

As recessions begin, income

Accepted Answer

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

Question 7

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

Accepted Answer

A)   rise, so firms increase investment.
B)   rise, so firms decrease investment.
C)   fall, so firms increase investment.
D)   fall, so firms decrease investment.E) A) and C)
F) A) and D)

Question 8

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   a decrease in the money supply
B)   increases in the profitability of capital due perhaps to technological progress.
C)   the repeal of an investment tax credit
D)   a decrease in the price levelE) None of the above
F) A) and C)

Question 9

Other things the same, as the price level decreases it induces greater spending on

Accepted Answer

A)   both net exports and investment.
B)   net exports but not investment.
C)   investment but not net exports.
D)   neither net exports nor investment.E) A) and B)
F) B) and C)

Question 10

Most economists believe that classical theory describes the world

Accepted Answer

A)   in the short run.
B)   in the long run.
C)   in both the short run and the long run.
D)   in neither the short run nor the long run.E) A) and B)
F) A) and C)

Question 11

When output rises, unemployment falls.

Accepted Answer

A) True 
 B)False

Question 12

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Accepted Answer

A)   as people revise their price-level expectations upward, firms and workers strike bargains for higher nominal wages.
B)   as people revise their price-level expectations upward, firms and workers strike bargains for lower nominal wages.
C)   as people revise their price-level expectations downward, firms and workers strike bargains for higher nominal wages.
D)   as people revise their price-level expectations downward, firms and workers strike bargains for lower nominal wages.E) A) and D)
F) A) and C)

Question 13

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major restrictions on logging removed. 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) A) and C)
F) C) and D)

Question 14

Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

Accepted Answer

The price level decr...

Question 15

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 16

According to the classical model, an increase in the money supply causes

Accepted Answer

A)   output to increase in the long run.
B)   the unemployment rate to fall in the long run.
C)   prices to rise in the long run.
D)   interest rates to fall in the long run.E) A) and B)
F) A) and C)

Question 17

The model of aggregate demand and aggregate supply

Accepted Answer

A)   is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships.
B)   is different from the model of supply and demand for a particular market, in that we have to separate real and nominal variables in the aggregate model.
C)   is a straightforward extension of the model of supply and demand for a particular market, in which substitution of resources between markets is highlighted.
D)   is a straightforward extension of the model of supply and demand for a particular market, in which the interaction between real and nominal variables is highlighted.E) All of the above
F) C) and D)

Question 18

What curve shows the quantity of goods and services that firms choose to produce and sell at each price level?

Accepted Answer

The aggreg...

Question 19

Other things the same, if the price level falls, domestic interest rates

Accepted Answer

A)   rise, so domestic residents will want to hold more foreign bonds.
B)   rise, so domestic residents will want to hold fewer foreign bonds.
C)   fall, so domestic residents will want to hold more foreign bonds.
D)   fall, so domestic residents will want to hold fewer foreign bonds.E) B) and C)
F) None of the above

Question 20

Figure 33-15. 
-Refer to Figure 33-15. Suppose the economy begins at point A. Decreases in what four variables could result in a movement to point D?

Accepted Answer

consumption, investm...

Exam 23: Aggregate Demand and Aggregate Supply

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

Correct Answer
verified

Figure 33-4 -Refer to Figure 33-4. In the short run, a favorable shift in aggregate supply would move the economy from

Correct Answer
verified

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Correct Answer
verified

As recessions begin, income

Correct Answer
verified

If wages are sticky, then a greater than expected increase in the price level

Correct Answer
verified

According to the classical model, an increase in the money supply causes

Correct Answer
verified

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Correct Answer
verified

Which of the following shifts aggregate demand to the right?

Correct Answer
verified

Suppose the government raises taxes. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Correct Answer
verified
The aggreg...
View Answer

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major restrictions on logging removed. In the short run

Correct Answer
verified

Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

Correct Answer
verified
The price level decr...
View Answer

Most economists believe that classical theory describes the world

Correct Answer
verified

Correct Answer
verified

What curve shows the quantity of goods and services that firms choose to produce and sell at each price level?

Correct Answer
verified
The aggreg...
View Answer

Which of the following would cause investment spending to decrease and aggregate demand to shift left?

Correct Answer
verified

Other things the same, as the price level decreases it induces greater spending on

Correct Answer
verified

Other things the same, if the price level falls, domestic interest rates

Correct Answer
verified

The model of aggregate demand and aggregate supply

Correct Answer
verified

When output rises, unemployment falls.

Correct Answer
verified

Figure 33-15. -Refer to Figure 33-15. Suppose the economy begins at point A. Decreases in what four variables could result in a movement to point D?

Correct Answer
verified
consumption, investm...
View Answer

Exam 23: Aggregate Demand and Aggregate Supply

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

Correct AnswerverifiedShow Answer

Figure 33-4 -Refer to Figure 33-4. In the short run, a favorable shift in aggregate supply would move the economy from

Correct AnswerverifiedShow Answer

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Correct AnswerverifiedShow Answer

As recessions begin, income

Correct AnswerverifiedShow Answer

If wages are sticky, then a greater than expected increase in the price level

Correct AnswerverifiedShow Answer

According to the classical model, an increase in the money supply causes

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

Suppose the government raises taxes. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Correct AnswerverifiedThe aggreg...View AnswerShow Answer

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major restrictions on logging removed. In the short run

Correct AnswerverifiedShow Answer

Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

Correct AnswerverifiedThe price level decr...View AnswerShow Answer

Most economists believe that classical theory describes the world

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What curve shows the quantity of goods and services that firms choose to produce and sell at each price level?

Correct AnswerverifiedThe aggreg...View AnswerShow Answer

Which of the following would cause investment spending to decrease and aggregate demand to shift left?

Correct AnswerverifiedShow Answer

Other things the same, as the price level decreases it induces greater spending on

Correct AnswerverifiedShow Answer

Other things the same, if the price level falls, domestic interest rates

Correct AnswerverifiedShow Answer

The model of aggregate demand and aggregate supply

Correct AnswerverifiedShow Answer

When output rises, unemployment falls.

Correct AnswerverifiedShow Answer

Figure 33-15. -Refer to Figure 33-15. Suppose the economy begins at point A. Decreases in what four variables could result in a movement to point D?

Correct Answerverifiedconsumption, investm...View AnswerShow Answer

Correct Answer
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The aggreg...
View Answer

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The price level decr...
View Answer

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The aggreg...
View Answer

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consumption, investm...
View Answer