Question 1

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

Question 2

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

Accepted Answer

A)   either an increase in the price of imported natural resources or opening up international trade
B)   neither an increase in the price of imported natural resources or opening up international trade
C)   an increase in the price of imported natural resources, but not opening up international trade
D)   opening up international trade, but not an increase in the price of imported natural resourcesE) B) and D)
F) None of the above

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) None of the above
F) All of the above

Question 4

As the price level falls

Accepted Answer

A)   people will want to hold more money, so the interest rate rises.
B)   people will want to hold more money, so the interest rate falls.
C)   people will want to hold less money, so the interest rate falls.
D)   people will want to hold less money, so the interest rate rises.E) A) and D)
F) A) and C)

Question 5

According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to

Accepted Answer

A)   increases in both the price level and real GDP.
B)   an increase in real GDP but does not change the price level.
C)   an increase in the price level but does not change real GDP.
D)   no change in either the price level or real GDP.E) A) and D)
F) None of the above

Question 6

The model of short-run economic fluctuations focuses on the price level and

Accepted Answer

A)   real GDP.
B)   economic growth.
C)   the neutrality of money.
D)   None of the above is correct.E) B) and D)
F) B) and C)

Question 7

Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

Accepted Answer

A)   decrease consumption, shown as a movement to the left along a given aggregate-demand curve.
B)   increase consumption, shown as a movement to the right along a given aggregate-demand curve.
C)   decrease consumption, shown by shifting the aggregate-demand curve to the left.
D)   increase consumption, shown by shifting the aggregate-demand curve to the right.E) None of the above
F) A) and B)

Question 8

An economic contraction caused by a shift in aggregate demand remedies itself over time as the expected price level

Accepted Answer

A)   rises, shifting aggregate demand right.
B)   rises, shifting aggregate demand left.
C)   falls, shifting aggregate supply right.
D)   falls, shifting aggregate supply left.E) B) and C)
F) A) and D)

Question 9

If aggregate demand shifts right, then eventually price level expectations rise. The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.

Accepted Answer

A) True 
 B)False

Question 10

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)   6 percent, 0 percent
B)   3 percent, 10 percent
C)   -1 percent, 6 percent
D)   -3 percent, 2 percentE) None of the above
F) A) and B)

Question 11

Other things the same, the aggregate quantity of goods demanded in the U.S. increases if

Accepted Answer

A)   real wealth rises.
B)   the interest rate rises.
C)   the dollar appreciates.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 12

The long-run aggregate supply curve

Accepted Answer

A)   is vertical.
B)   is a graphical representation of the classical dichotomy.
C)   indicates monetary neutrality in the long run.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 13

Other things the same, an increase in the price level causes the interest rate to

Accepted Answer

A)   increase, the dollar to depreciate, and net exports to increase.
B)   increase, the dollar to appreciate, and net exports to decrease.
C)   decrease, the dollar to depreciate, and net exports to increase.
D)   decrease, the dollar to appreciate, and net exports to decrease.E) A) and B)
F) A) and C)

Question 14

Explain how an increase in the price level changes interest rates. How does this change in interest rates lead to changes in investment and net exports?

Accepted Answer

When the price level increases, the purc...

Question 15

Figure 15-1
 
-Refer to Figure 15-1. If the economy starts at C, an increase in the money supply moves the economy

Accepted Answer

A)   to A in the long run.
B)   to B in the long run.
C)   back to C in the long run.
D)   to D in the long run.E) All of the above
F) None of the above

Question 16

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 improvementsE) None of the above
F) All of the above

Question 17

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Accepted Answer

A) True 
 B)False

Question 18

When the actual change in the price level differs from its expected change, which of the following can explain why firms might change their production?

Accepted Answer

A)   both menu costs and mistaking a price level change for a change in relative prices
B)   menu costs but not mistaking a price level change for a change in relative prices
C)   mistaking a price level change for a change in relative price but not menu costs
D)   neither menu costs nor mistaking a price level change for a change in relative pricesE) A) and B)
F) All of the above

Question 19

Which of the following typically rises during a recession?

Accepted Answer

A)   consumption
B)   unemployment
C)   corporate profits
D)   automobile salesE) All of the above
F) A) and B)

Question 20

Which of the following would increase the price level?

Accepted Answer

A)   an increase in the money supply.
B)   an increase in taxes.
C)   a decrease in the expected price level.
D)   a decrease in the natural rate of unemployment.E) None of the above
F) All of the above

Exam 15: Aggregate Demand and Aggregate Supply

Figure 15-1 -Refer to Figure 15-1. If the economy starts at C, an increase in the money supply moves the economy

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Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

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

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

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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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As the price level falls

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When the actual change in the price level differs from its expected change, which of the following can explain why firms might change their production?

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Other things the same, an increase in the price level causes the interest rate to

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The recessions of the 1970s are often attributed to

Correct AnswerverifiedShow Answer

According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to

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Which of the following typically rises during a recession?

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

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The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

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The model of short-run economic fluctuations focuses on the price level and

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Other things the same, the aggregate quantity of goods demanded in the U.S. increases if

Correct AnswerverifiedShow Answer

If aggregate demand shifts right, then eventually price level expectations rise. The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.

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An economic contraction caused by a shift in aggregate demand remedies itself over time as the expected price level

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Which of the following would increase the price level?

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Explain how an increase in the price level changes interest rates. How does this change in interest rates lead to changes in investment and net exports?

Correct AnswerverifiedWhen the price level increases, the purc...View AnswerShow Answer

The long-run aggregate supply curve

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When the price level increases, the purc...
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