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 C)
F) B) and C)

Question 2

Economic expansions in Europe and China would cause

Accepted Answer

A)   the U.S. price level and real GDP to rise.
B)   the U.S. price level and real GDP to fall.
C)   the U.S. price level to rise and real GDP to fall.
D)   the U.S. price level to fall and real GDP to rise.E) A) and B)
F) A) and C)

Question 3

If aggregate demand and aggregate supply both shift right, we can be sure that the price level is higher in the short run.

Accepted Answer

A) True 
 B)False

Question 4

Aggregate demand includes

Accepted Answer

A)   only the quantity of goods and services households want to buy.
B)   only the quantity of goods and services households and firms want to buy.
C)   only the quantity of goods and services households, firms, and the government want to buy.
D)   the quantity of goods and services households, firms, the government, and customer abroad want to buy.E) None of the above
F) A) and B)

Question 5

Which of the following is not included in aggregate demand?

Accepted Answer

A)   purchases of stock and bonds
B)   purchases of services such as visits to the doctor
C)   purchases of capital goods such as equipment in a factory
D)   purchases by foreigners of consumer goods produced in the United StatesE) A) and B)
F) All of the above

Question 6

If the price level rises above what was expected and nominal wages are fixed, then

Accepted Answer

A)   production becomes less profitable so firms will hire fewer workers.
B)   production becomes less profitable so firms will hire more workers.
C)   production becomes more profitable so firms will hire fewer workers.
D)   production becomes more profitable so firms will hire more workers.E) None of the above
F) All of the above

Question 7

According to the "In the News" article, macroprudential tools

Accepted Answer

A)   allow a central bank to alter lending for specific industries.
B)   allow a central bank to alter taxes.
C)   limit a central bank's power to act independently of the political process.
D)   limit the policy tools available to a central bank.E) C) and D)
F) A) and C)

Question 8

Most macroeconomic variables that measure some type of income, spending, or production fluctuate closely together.

Accepted Answer

A) True 
 B)False

Question 9

In 2008, the United States was in recession. Which of the following things would you not expect to have happened?

Accepted Answer

A)   increased layoffs and firings.
B)   a higher rate of bankruptcy.
C)   increased claims for unemployment insurance.
D)   increased real GDP.E) A) and C)
F) All of the above

Question 10

As the price level falls

Accepted Answer

A)   people will want to buy more bonds, so the interest rate rises.
B)   people will want to buy fewer bonds, so the interest rate falls.
C)   people will want to buy more bonds, so the interest rate falls.
D)   people will want to buy fewer bonds, so the interest rate rises.E) None of the above
F) All of the above

Question 11

The aggregate demand curve shifts left 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) A) and B)
F) A) and C)

Question 12

When output rises, unemployment falls.

Accepted Answer

A) True 
 B)False

Question 13

Suppose a nation experiences increased immigration from abroad. 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 14

Which of the following is correct?

Accepted Answer

A)   The short-run, but not the long-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
B)   The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
C)   The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables.
D)   Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables.E) A) and B)
F) All of the above

Question 15

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 16

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp rise in the stock market, an increase in government purchases, an increase in the money supply and a decline in the value of the dollar. In the short run

Accepted Answer

A)   the price level and real GDP will both rise.
B)   the price level and real GDP will both fall.
C)   neither the price leave nor real GDP will change.
D)   All of the above are possible.E) A) and B)
F) A) and C)

Question 17

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will 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 service 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 suppliedE) A) and B)
F) B) and D)

Question 18

Which of the following would cause prices and real GDP 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 C)
F) B) and D)

Question 19

In the aggregate demand and aggregate supply model, sticky wages, sticky prices, and misperceptions about relative prices

Accepted Answer

A)   have temporary effects.
B)   explain why the short run aggregate supply curve might shift.
C)   explain why the aggregate demand curve is downward sloping.
D)   explain monetary neutrality.E) A) and D)
F) None of the above

Question 20

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

Accepted Answer

A)   both an increase in the capital stock and technological improvements
B)   an increase in the capital stock but not technological improvements
C)   an increase in the capital stock but not technological improvements.
D)   neither an increase in the capital stock nor an technological improvements.E) A) and C)
F) None of the above

Exam 15: Aggregate Demand and Aggregate Supply

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp rise in the stock market, an increase in government purchases, an increase in the money supply and a decline in the value of the dollar. In the short run

Correct AnswerverifiedShow Answer

If aggregate demand and aggregate supply both shift right, we can be sure that the price level is higher in the short run.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have

Correct AnswerverifiedShow Answer

Aggregate demand includes

Correct AnswerverifiedShow Answer

Which of the following would cause prices and real GDP to rise in the short run?

Correct AnswerverifiedShow Answer

If the price level rises above what was expected and nominal wages are fixed, then

Correct AnswerverifiedShow Answer

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the "In the News" article, macroprudential tools

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

When output rises, unemployment falls.

Correct AnswerverifiedShow Answer

The aggregate demand curve shifts left if either

Correct AnswerverifiedShow Answer

Economic expansions in Europe and China would cause

Correct AnswerverifiedShow Answer

Suppose a nation experiences increased immigration from abroad. 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

Most macroeconomic variables that measure some type of income, spending, or production fluctuate closely together.

Correct AnswerverifiedShow Answer

Which of the following is not included in aggregate demand?

Correct AnswerverifiedShow Answer

In the aggregate demand and aggregate supply model, sticky wages, sticky prices, and misperceptions about relative prices

Correct AnswerverifiedShow Answer

In 2008, the United States was in recession. Which of the following things would you not expect to have happened?

Correct AnswerverifiedShow Answer

As the price level falls

Correct AnswerverifiedShow Answer

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The short run and lo...
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