Question 1

Which of the following would raise the price level in both the short and long run?

Accepted Answer

A)   an increase in taxes
B)   an increase in government expenditures
C)   a decrease in the minimum wage
D)   an increase in the capital stockE) B) and D)
F) B) and C)

Question 2

If the government provides an investment tax credit and increases income taxes,

Accepted Answer

A)   real GDP rises,and the price level could rise,fall,or stay the same.
B)   real GDP falls,and the price level could rise,fall,or stay the same.
C)   the price level rises and real GDP could rise,fall or stay the same
D)   None of the above are necessarily correct.E) None of the above
F) A) and B)

Question 3

Which of the following has been suggested as a cause of the Great Depression?

Accepted Answer

A)   a decline in the money supply
B)   a decrease in stock prices
C)   the collapse of the banking system
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 4

As the price level falls

Accepted Answer

A)   people are more willing to lend,so interest rates rise.
B)   people are more willing to lend,so interest rates fall.
C)   people are less willing to lend,so interest rates fall.
D)   people are less willing to lend,so interest rates rise.E) C) and D)
F) None of the above

Question 5

Other things the same,when the price level rises,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) B) and C)
F) A) and D)

Question 6

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 7

According to classical macroeconomic theory,changes in the money supply affect

Accepted Answer

A)   nominal variables and real variables.
B)   nominal variables,but not real variables.
C)   real variables,but not nominal variables.
D)   neither nominal nor real variables.E) B) and C)
F) B) and D)

Question 8

During the 2008-2009 recession real GDP fell by about

Accepted Answer

A)   2%
B)   4%
C)   6%
D)   8%E) None of the above
F) B) and C)

Question 9

Which of the following would not be included in aggregate demand?

Accepted Answer

A)   additions of newly produced goods to inventory
B)   purchases of U.S.services by foreigners
C)   the purchase of newly produced capital goods
D)   government transfer payments such as Social Security paymentsE) A) and C)
F) A) and D)

Question 10

Which of the following adjust to bring aggregate supply and demand into balance?

Accepted Answer

A)   the price level and real output
B)   the real rate of interest and the money supply
C)   government expenditures and taxes
D)   the saving rate and net exportsE) A) and B)
F) All of the above

Question 11

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.To explain this

Accepted Answer

A)   it is only necessary that long-run aggregate supply shifts right over time.
B)   it is only necessary that aggregate demand shifts right over time.
C)   both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther.
D)   None of the above cases would produce rising prices and growing real GDP over time.E) C) and D)
F) B) and D)

Question 12

Which of the following would both shift aggregate demand right?

Accepted Answer

A)   the price level decreases and government expenditures increase
B)   the price level decreases and the government repeals an investment tax credit
C)   government expenditures increase and the money supply increases
D)   None of the above are correct.E) A) and B)
F) B) and C)

Question 13

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) All of the above
F) A) and B)

Question 14

If countries that imported goods and services from the United States went into recession,we would expect that U.S.net exports would

Accepted Answer

A)   rise,making aggregate demand shift right.
B)   rise,making aggregate demand shift left.
C)   fall,making aggregate demand shift right.
D)   fall,making aggregate demand shift left.E) C) and D)
F) A) and D)

Question 15

If output is above its natural rate,then according to sticky-wage theory

Accepted Answer

A)   workers and firms will strike bargains for higher wages.This increase in wages shifts the short-run aggregate supply curve right.
B)   workers and firms will strike bargains for higher wages.This increase in wages shifts the short-run aggregate supply curve left.
C)   workers and firms will strike bargains for lower wages.This decrease in wages shifts the short-run aggregate supply curve right.
D)   workers and firms will strike bargains for lower wages.This decrease in wages shifts the short-run aggregate supply curve left.E) C) and D)
F) None of the above

Question 16

Other things the same,a decrease in the price level makes the interest rate decrease,which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

Accepted Answer

A) True 
 B)False

Question 19

According to classical macroeconomic theory,changes in the money supply affect

Accepted Answer

A)   real GDP and the price level.
B)   real GDP but not the price level.
C)   the price level,but not real GDP.
D)   neither the price level nor real GDP.E) A) and B)
F) A) and C)

Question 20

According to the misperceptions theory of aggregate supply,if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent,then the firm would believe that the relative price of what it produce had

Accepted Answer

A)   increased,so it would increase production.
B)   increased,so it would decrease production.
C)   decreased,so it would increase production.
D)   decreased,so it would decrease production.E) A) and B)
F) None of the above

Exam 23: Aggregate Demand and Aggregate Supply

Which of the following would raise the price level in both the short and long run?

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

As the price level falls

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the misperceptions theory of aggregate supply,if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent,then the firm would believe that the relative price of what it produce had

Correct AnswerverifiedShow Answer

Which of the following has been suggested as a cause of the Great Depression?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If countries that imported goods and services from the United States went into recession,we would expect that U.S.net exports would

Correct AnswerverifiedShow Answer

Which of the following would not be included in aggregate demand?

Correct AnswerverifiedShow Answer

According to classical macroeconomic theory,changes in the money supply affect

Correct AnswerverifiedShow Answer

Which of the following would both shift aggregate demand right?

Correct AnswerverifiedShow Answer

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.To explain this

Correct AnswerverifiedShow Answer

During the 2008-2009 recession real GDP fell by about

Correct AnswerverifiedShow Answer

According to classical macroeconomic theory,changes in the money supply affect

Correct AnswerverifiedShow Answer

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

Correct AnswerverifiedShow Answer

Which of the following adjust to bring aggregate supply and demand into balance?

Correct AnswerverifiedShow Answer

If output is above its natural rate,then according to sticky-wage theory

Correct AnswerverifiedShow Answer

If the government provides an investment tax credit and increases income taxes,

Correct AnswerverifiedShow Answer

Other things the same,a decrease in the price level makes the interest rate decrease,which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Correct AnswerverifiedShow Answer

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