Question 1

If aggregate demand shifts right, then eventually price level expectations rise. This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Refer to U.S. Financial Crisis. U.S. net exports would

Accepted Answer

A)   rise which by itself would increase aggregate demand.
B)   rise which by itself would decrease aggregate demand.
C)   fall which by itself would increase aggregate demand.
D)   fall which by itself would decrease aggregate demand.E) C) and D)
F) None of the above

Question 4

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Accepted Answer

A)   short-run fluctuations in the economy.
B)   the effects of macroeconomic policy on the prices of individual goods.
C)   the long-run effects of international trade policies.
D)   productivity and economic growth.E) None of the above
F) All of the above

Question 5

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level

Accepted Answer

A)   and output are higher than in the original long-run equilibrium.
B)   and output are lower than in the original long-run equilibrium.
C)   is lower and output is the same as the original long-run equilibrium.
D)   is the same and output is lower than in the original long-run equilibrium.E) All of the above
F) C) and D)

Question 6

If the government repeals 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)   real GDP and the price level rise.
D)   real GDP and the price level fall.E) C) and D)
F) B) and D)

Question 7

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

Question 8

The long-run aggregate supply curve shifts left if

Accepted Answer

A)   the capital stock increases.
B)   there is a natural disaster.
C)   the government removes some environmental regulations that limit production methods.
D)   None of the above is correct.E) A) and D)
F) A) and C)

Question 9

During the 2008-2009 recession real GDP fell by about

Accepted Answer

A)   2%
B)   4%
C)   6%
D)   8%E) A) and B)
F) A) and C)

Question 10

Changes in the price of oil

Accepted Answer

A)   can only lead to recessions.
B)   have not contributed much to output fluctuations in the United States.
C)   change the economy principally by changing aggregate demand.
D)   created both inflation and recession in the United States in the 1970s.E) A) and B)
F) A) and C)

Question 11

When the price level falls

Accepted Answer

A)   households want to lend less.
B)   the interest rate rises.
C)   firms want to spend less on investment goods.
D)   None of the above are correct.E) A) and C)
F) B) and D)

Question 12

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) B) and D)

Question 13

Figure 33-4 
-Refer to Figure 33-4. If the economy starts at A and there is a fall in aggregate demand, the economy moves

Accepted Answer

A)   back to A in the long run.
B)   to B in the long run.
C)   to C in the long run.
D)   to D in the long run.E) A) and D)
F) A) and B)

Question 14

During periods of stagflation, what happens to output and prices in the economy?

Accepted Answer

Output fal...

Question 15

Other things the same, as the price level rises, the real value of a dollar

Accepted Answer

A)   rises, and interest rates rise.
B)   rises, and interest rates fall.
C)   falls, and interest rates rise.
D)   falls, and interest rates fall.E) A) and D)
F) C) and D)

Question 16

The quantity of money has no real impact on things people really care about like whether or not they have a job. Most economists would agree that this statement is appropriate concerning

Accepted Answer

A)   both the short run and the long run.
B)   the short run, but not the long run.
C)   the long run, but not the short run.
D)   neither the long run nor the short run.E) A) and B)
F) B) and D)

Question 17

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

Accepted Answer

A)   a decrease in the actual price level
B)   an increase in the actual price level
C)   a decrease in the expected price level
D)   an increase in the expected price levelE) A) and C)
F) B) and C)

Question 18

Which of the following is correct?

Accepted Answer

A)   Economic fluctuations are easily predicted by competent economists.
B)   Recessions have never occurred very close together.
C)   Spending, income, and production do not fluctuate closely with real GDP.
D)   None of the above is correct.E) B) and C)
F) None of the above

Question 19

During the last half of 2012, the U.S. unemployment rate was just under 8 percent. Historical experience suggests that this is

Accepted Answer

A)   above the natural rate, so real GDP growth was likely low.
B)   above the natural rate, so real GDP growth was likely high.
C)   below the natural rate, so real GDP growth was likely low.
D)   below the natural rate, so real GDP growth was likely high.E) A) and B)
F) All of the above

Question 20

Who said about classical economic theory: "the long run is a misleading guide to current affairs. In the long run we are all dead"?

Accepted Answer

The answer of Who said about classical economic theory: "the...

Exam 23: Aggregate Demand and Aggregate Supply

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts left if

Correct AnswerverifiedShow Answer

Other things the same, as the price level rises, the real value of a dollar

Correct AnswerverifiedShow Answer

If aggregate demand shifts right, then eventually price level expectations rise. This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Correct AnswerverifiedShow Answer

Who said about classical economic theory: "the long run is a misleading guide to current affairs. In the long run we are all dead"?

Correct AnswerverifiedShow Answer

Figure 33-4 -Refer to Figure 33-4. If the economy starts at A and there is a fall in aggregate demand, the economy moves

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Which of the following is correct?

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If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level

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During the 2008-2009 recession real GDP fell by about

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As the price level falls

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When the price level falls

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During the last half of 2012, the U.S. unemployment rate was just under 8 percent. Historical experience suggests that this is

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

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

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During periods of stagflation, what happens to output and prices in the economy?

Correct AnswerverifiedOutput fal...View AnswerShow Answer

Changes in the price of oil

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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

The quantity of money has no real impact on things people really care about like whether or not they have a job. Most economists would agree that this statement is appropriate concerning

Correct AnswerverifiedShow Answer

Refer to U.S. Financial Crisis. U.S. net exports would

Correct AnswerverifiedShow Answer

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Output fal...
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The short run and lo...
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