Question 1

Stagflation exists when prices

Accepted Answer

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

Question 2

Other things the same, if the money supply rises by 2% and people were expecting it to rise by 5%, then some firms have

Accepted Answer

A)   higher than desired prices, which increases their sales.
B)   higher than desired prices, which depresses their sales.
C)   lower than desired prices, which increases their sales.
D)   lower than desired prices, which depresses their sales.E) B) and C)
F) B) and D)

Question 3

When the dollar appreciates, U.S.

Accepted Answer

A)   net exports rise, which increases the aggregate quantity of goods and services demanded.
B)   net exports rise, which decreases the aggregate quantity of goods and services demanded.
C)   net exports fall, which increases the aggregate quantity of goods and services demanded.
D)   net exports fall, which decreases the aggregate quantity of goods and services demanded.E) None of the above
F) A) and B)

Question 4

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) None of the above
F) B) and C)

Question 5

The recessions of the 1970s are often attributed to

Accepted Answer

A)   declining inflation expectations.
B)   an increase in oil prices.
C)   declines in the price of stock.
D)   decreases in the money supply.E) B) and D)
F) A) and B)

Question 6

Figure 33-6. 
-Refer to Figure 33-6. Which of the long-run aggregate-supply curves is consistent with a recession?

Accepted Answer

A)   LRAS1
B)   LRAS2
C)   LRAS3
D)   Both LRAS1 and LRAS3E) B) and D)
F) A) and B)

Question 7

If the price level falls, the real value of a dollar

Accepted Answer

A)   rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve.
B)   rises, so people will want to buy more. This response shifts aggregate demand to the right.
C)   falls, so people will want to buy less. This response helps explain the slope of the aggregate demand curve.
D)   falls, so people will want to buy less. This response shifts aggregate demand to the left.E) B) and D)
F) C) and D)

Question 8

Suppose a recession overseas reduces a country's exports. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Accepted Answer

The aggregate-demand...

Question 9

Which of the following shifts short-run aggregate supply left?

Accepted Answer

A)   an increase in price expectations
B)   an increase in the actual price level
C)   a decrease in the money supply
D)   a decrease in the price of oilE) B) and D)
F) B) and C)

Question 10

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 11

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants 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 D)
F) All of the above

Question 12

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   Congress reduces purchases of new weapons systems.
B)   The Fed buys bonds in the open market.
C)   The price level falls.
D)   Net exports fall.E) A) and B)
F) A) and C)

Question 13

When the price level falls the quantity of

Accepted Answer

A)   consumption goods demanded rises, while the quantity of net exports demanded falls.
B)   consumption goods demanded and the quantity of net exports demanded both rise.
C)   consumption goods demanded and the quantity of net exports demanded both fall.
D)   consumption goods demanded falls, while the quantity of net exports demand rises.E) B) and D)
F) A) and B)

Question 14

List the three reasons for why the aggregate-demand curve slopes downward.

Accepted Answer

The wealth effect, t...

Question 15

Make a list of expenditures whose sum equals GDP.

Accepted Answer

consumption, investm...

Question 16

Other things the same, when the price level rises more than expected, some firms will have

Accepted Answer

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

Question 17

Figure 33-7. 
-Refer to Optimism. Which curve shifts and in which direction?

Accepted Answer

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

Question 18

Other things the same, technological progress raises the price level.

Accepted Answer

A) True 
 B)False

Question 19

The classical dichotomy refers to the separation of

Accepted Answer

A)   prices and nominal interest rates.
B)   taxes and government spending.
C)   decisions made by the public and decisions made by the government.
D)   real and nominal variables.E) B) and C)
F) C) and D)

Question 20

Figure 33-7. 
-Refer to Optimism. How is the new long-run equilibrium different from the original one?

Accepted Answer

A)   both price and real GDP are higher
B)   both price and real GDP are lower.
C)   the price level is the same and GDP is higher.
D)   the price level is higher and real GDP is the same.E) B) and C)
F) A) and D)

Exam 20: Aggregate Demand and Aggregate Supply

Figure 33-7. -Refer to Optimism. How is the new long-run equilibrium different from the original one?

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List the three reasons for why the aggregate-demand curve slopes downward.

Correct AnswerverifiedThe wealth effect, t...View AnswerShow Answer

Which of the following shifts aggregate demand to the right?

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Other things the same, technological progress raises the price level.

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When the price level falls the quantity of

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Which of the following shifts short-run aggregate supply left?

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When the dollar appreciates, U.S.

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The classical dichotomy refers to the separation of

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Stagflation exists when prices

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Other things the same, if the money supply rises by 2% and people were expecting it to rise by 5%, then some firms have

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 33-6. -Refer to Figure 33-6. Which of the long-run aggregate-supply curves is consistent with a recession?

Correct AnswerverifiedShow Answer

If the price level falls, the real value of a dollar

Correct AnswerverifiedShow Answer

Other things the same, when the price level rises more than expected, some firms will have

Correct AnswerverifiedShow Answer

Figure 33-7. -Refer to Optimism. Which curve shifts and in which direction?

Correct AnswerverifiedShow Answer

Make a list of expenditures whose sum equals GDP.

Correct Answerverifiedconsumption, investm...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The recessions of the 1970s are often attributed to

Correct AnswerverifiedShow Answer

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants increases the number of workers it employs. What could explain this?

Correct AnswerverifiedShow Answer

Suppose a recession overseas reduces a country's exports. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Correct AnswerverifiedThe aggregate-demand...View AnswerShow Answer

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The wealth effect, t...
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consumption, investm...
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The aggregate-demand...
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