Question 1

What do most economists believe concerning the relation between the price level and real output?

Accepted Answer

Most economists believe that in the long...

Question 2

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

Accepted Answer

A)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected.
B)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected.
C)  rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.
D)  fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.E) A) and D)
F) B) and C)

Question 3

Which of the following would cause stagflation?

Accepted Answer

A)  rising government expenditures
B)  rising oil prices
C)  a falling money supply
D)  technical progressE) B) and D)
F) All of the above

Question 4

Recessions in Canada and Mexico 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 D)
F) B) and C)

Question 5

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) None of the above A

Question 6

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 7

Other things the same, if the price level rises, people

Accepted Answer

A)  increase foreign bond purchases, so the dollar appreciates.
B)  increase foreign bond purchases, so the dollar depreciates.
C)  increase domestic bond purchases, so the dollar appreciates.
D)  increase domestic bond purchases, so the dollar depreciates.E) A) and D)
F) None of the above

Question 8

Suppose a recession overseas reduces a country's exports. Which curve(s) 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

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

Accepted Answer

A) True 
 B)False  False

Question 10

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

Question 11

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Accepted Answer

When people expect the price l...

Question 12

Aggregate demand includes

Accepted Answer

A)  the quantity of goods and services the government, households, firms, and customers abroad want to buy.
B)  neither the quantity of goods and services the government, households, nor firms want to buy nor the quantity of goods and services customers abroad want to buy.
C)  the quantity of goods and service the government wants to buy, but not the quantity of goods and services households, firms, or customers abroad want to buy.
D)  the quantity of goods and services households and firms want to buy, but not the quantity of goods and services the government wants to buy.E) All of the above
F) A) and C)

Question 13

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)  5 percent, 1 percent
B)  3 percent, 5 percent
C)  -1 percent, 3 percent
D)  -2 percent, 4 percentE) B) and C)
F) A) and D)

Question 14

Other things the same, continued technological progress and continued increases in the money supply would unambiguously lead to

Accepted Answer

A)  rising prices only.
B)  rising real GDP only.
C)  rising prices and rising real GDP.
D)  neither rising prices nor rising real GDP.E) B) and C)
F) All of the above

Question 15

Which of the following lists includes only changes that shift aggregate demand to the right?

Accepted Answer

A)  repeal of an investment tax credit, an increase in the money supply
B)  repeal of an investment tax credit, a decrease in the money supply
C)  passing of an investment tax credit, an increase in the money supply
D)  passing of an investment tax credit, a decrease in the money supplyE) A) and B)
F) A) and C) C

Question 16

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 17

Refer to Pessimism. In the short run what happens to the price level and real GDP?

Accepted Answer

A)  Both the price level and real GDP rise.
B)  Both the price level and real GDP fall.
C)  The price level rises and real GDP falls.
D)  The price level falls and real GDP rises.E) B) and D)
F) B) and C)

Question 18

Figure 33-5. 
-Refer to Figure 33-5. In Figure 33-5,

Accepted Answer

A)  Point B represents a short-run equilibrium and a long-run equilibrium.
B)  Point B represents a short-run equilibrium, and Point A represents a long-run equilibrium.
C)  Point B represents a long-run equilibrium, and Point A represents a short-run equilibrium.
D)  Point B represents a long-run equilibrium, and Point C represents a short-run equilibrium.E) A) and B)
F) None of the above

Question 19

The aggregate demand and aggregate supply graph has the

Accepted Answer

A)  quantity of output on the horizontal axis. Output is best measured by real GDP.
B)  quantity of output on the horizontal axis. Output is best measured by nominal GDP.
C)  quantity of output on the vertical axis. Output is best measured by real GDP.
D)  quantity of output on the vertical axis. Output is best measured by nominal GDP.E) A) and C)
F) A) and D)

Question 20

The curve that shows the quantity of goods and services that firms produce and sell

Accepted Answer

A)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-demand curve.
B)  as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-supply curve.
C)  as it relates to the overall price level is called the aggregate-demand curve.
D)  as it relates to the overall price level is called the aggregate-supply curve.E) A) and D)
F) A) and C)

Exam 33: Aggregate Demand and Aggregate Supply

What do most economists believe concerning the relation between the price level and real output?

Correct AnswerverifiedMost economists believe that in the long...View AnswerShow Answer

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

Correct AnswerverifiedShow Answer

Which of the following would cause stagflation?

Correct AnswerverifiedShow Answer

Recessions in Canada and Mexico would cause

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA

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

Other things the same, if the price level rises, people

Correct AnswerverifiedShow Answer

Suppose a recession overseas reduces a country's exports. Which curve(s) 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

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

Correct AnswerverifiedFalse

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

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Correct AnswerverifiedWhen people expect the price l...View AnswerShow Answer

Aggregate demand includes

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Other things the same, continued technological progress and continued increases in the money supply would unambiguously lead to

Correct AnswerverifiedShow Answer

Which of the following lists includes only changes that shift aggregate demand to the right?

Correct AnswerverifiedC

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Correct AnswerverifiedShow Answer

Refer to Pessimism. In the short run what happens to the price level and real GDP?

Correct AnswerverifiedShow Answer

Figure 33-5. -Refer to Figure 33-5. In Figure 33-5,

Correct AnswerverifiedShow Answer

The aggregate demand and aggregate supply graph has the

Correct AnswerverifiedShow Answer

The curve that shows the quantity of goods and services that firms produce and sell

Correct AnswerverifiedShow Answer

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Most economists believe that in the long...
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A

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The short run and lo...
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The aggregate-demand...
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False

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When people expect the price l...
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C

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