Question 1

Other things the same,if the price level 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) A) and B)
F) B) and C)

Question 2

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

Accepted Answer

A)   increases by less than expected so that firms believe the relative price of their output has increased.
B)   increases by less than expected so that firms believe the relative price of their output has decreased.
C)   increases by more than expected so that firms believe the relative price of their output has increased.
D)   increases by more than expected so that firms believe the relative price of their output has decreased.E) All of the above
F) A) and B)

Question 3

When the dollar appreciates,U.S.

Accepted Answer

A)   exports decrease,while imports increase.
B)   exports and imports decrease.
C)   exports and imports increase.
D)   exports increase,while imports decrease.E) A) and B)
F) A) and C)

Question 4

Refer to Political Instability Abroad.What would the change in the exchange rate make happen to U.S.net exports and U.S.aggregate demand?

Accepted Answer

A)   Net exports would rise which by itself would increase U.S.aggregate demand.
B)   Net exports would rise which by itself would decrease U.S.aggregate demand.
C)   Net exports would fall which by itself would increase U.S.aggregate demand.
D)   Net exports would fall which by itself would decrease U.S.aggregate demand.E) A) and B)
F) A) and D)

Question 5

Refer to U.S.Financial Crisis.What would happen in the market for foreign-currency exchange?

Accepted Answer

A)   the supply of dollars would shift right and the exchange rate would rise.
B)   the supply of dollars would shift right and the exchange rate would fall.
C)   the supply of dollars would shift left and the exchange rate would rise.
D)   None of the above is correct.E) C) and D)
F) All of the above

Question 6

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

Accepted Answer

A)   increase foreign bond purchases,so the supply of dollars in the market for foreign-currency exchange increases.
B)   increase foreign bond purchases,so the supply of dollars in the market for foreign-currency exchange decreases.
C)   decrease foreign bond purchases,so the supply of dollars in the market for foreign-currency exchange increases.
D)   decrease foreign bond purchases,so the supply of dollars in the market for foreign-currency exchange decreases.E) A) and B)
F) A) and C)

Question 7

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Accepted Answer

A)   the price level and real output.
B)   real output and employment.
C)   employment and the inflation rate.
D)   the value of money and the price level.E) B) and C)
F) None of the above

Question 8

When the dollar depreciates,each dollar buys

Accepted Answer

A)   more foreign currency,and so buys more foreign goods.
B)   more foreign currency,and so buys fewer foreign goods.
C)   less foreign currency,and so buys more foreign goods.
D)   less foreign currency,and so buys fewer foreign goods.E) All of the above
F) B) and D)

Question 9

Over the last fifty years both real GDP and prices have trended upward in most countries.Continuing real GDP growth and inflation can be explained by

Accepted Answer

A)   continuing technological progress alone.
B)   continuing increases in the money supply alone.
C)   continued technological progress and continuing increases in the money supply.
D)   None of the above can explain continuing real GDP growth and inflation.E) A) and C)
F) A) and D)

Question 10

When the price level falls

Accepted Answer

A)   households want to lend more,so the interest rate rises making the quantity of goods and services demanded rise.
B)   households want to lend more,so the interest rate falls,making the quantity of goods and services demanded rise.
C)   households want to lend more,so the interest rate rises,making the quantity of goods and services demanded fall.
D)   None of the above are correct.E) All of the above
F) A) and B)

Question 11

An increase in the money supply causes the interest rate to fall,investment spending to rise,and aggregate demand to shift right.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following both shift aggregate demand left?

Accepted Answer

A)   a decrease in taxes and at a given price level consumers feel more wealthy
B)   a decrease in taxes and at a given price level consumers feel less wealthy
C)   an increase in taxes and at a given price level consumers feel more wealthy
D)   an increase in taxes and at a given price level consumers feel less wealthyE) All of the above
F) A) and C)

Question 13

Figure 20-2. 
-Refer to Pessimism.What happens to the expected price level and what's the result for wage bargaining?

Accepted Answer

A)   The expected price level rises.Bargains are struck for higher wages.
B)   The expected price level rises.Bargains are struck for lower wages.
C)   The expected price level falls.Bargains are struck for higher wages.
D)   The expected price level falls.Bargains are struck for lower wages.E) A) and B)
F) A) and C)

Question 14

Figure 20-2. 
-Refer to Pessimism.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 lower.
D)   the price level is lower and real GDP is the same.E) All of the above
F) B) and C)

Question 15

In the early 1930s in the United States,there was a

Accepted Answer

A)   large increase in output.In the early 1940s there was also a large increase in output.
B)   large increase in output.In the early 1940s there was a large decrease in output.
C)   large decrease in output.In the early 1940s there was a large increase in output.
D)   large decrease in output.In the early 1940s there was also a large decrease in output.E) A) and D)
F) B) and C)

Question 16

In 2009 Congress passed legislation providing states with funds to build roads and bridges.It also instituted tax cuts.Which of these shifts aggregate demand right?

Accepted Answer

A)   only the increased funding for states
B)   only the tax cuts
C)   both the increased funding for states and the tax cuts
D)   neither the increased funding for states nor the tax cutsE) B) and C)
F) None of the above

Question 17

The aggregate-demand curve shows that a decrease in the price level

Accepted Answer

A)   decreases the dollar value of goods and services demanded in the economy.
B)   decreases the real value of goods and services demanded in the economy.
C)   increases the dollar value of goods and services demanded in the economy.
D)   increases the real value of goods and services demanded in the economy.E) All of the above
F) A) and B)

Question 18

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left.If there is no policy response,then eventually

Accepted Answer

A)   because unemployment is low wages will be bid up and short-run aggregate supply will shift right.
B)   because unemployment is low wages will be bid down and short-run aggregate supply will shift right.
C)   because unemployment is high wages will be bid up and short-run aggregate supply will shift right.
D)   because unemployment is high wages will be bid down and short-run aggregate supply will shift right.E) A) and C)
F) None of the above

Question 19

The aggregate demand and aggregate supply graph has

Accepted Answer

A)   the price level on the horizontal axis.The price level can be measured by the GDP deflator.
B)   the price level on the horizontal axis.The price level can be measured by real GDP.
C)   the price level on the vertical axis.The price level can be measured by the GDP deflator.
D)   the price level on the vertical axis.The price level can be measured by GDP.E) A) and B)
F) All of the above

Question 20

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Accepted Answer

There are occasional short-lived periods...

Exam 33: Aggregate Demand and Aggregate Supply

When the dollar appreciates,U.S.

Correct AnswerverifiedShow Answer

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Correct AnswerverifiedThere are occasional short-lived periods...View AnswerShow Answer

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

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Refer to U.S.Financial Crisis.What would happen in the market for foreign-currency exchange?

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When the price level falls

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The aggregate demand and aggregate supply graph has

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When the dollar depreciates,each dollar buys

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

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Which of the following both shift aggregate demand left?

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The aggregate-demand curve shows that a decrease in the price level

Correct AnswerverifiedShow Answer

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Correct AnswerverifiedShow Answer

Figure 20-2. -Refer to Pessimism.How is the new long-run equilibrium different from the original one?

Correct AnswerverifiedShow Answer

Refer to Political Instability Abroad.What would the change in the exchange rate make happen to U.S.net exports and U.S.aggregate demand?

Correct AnswerverifiedShow Answer

In the early 1930s in the United States,there was a

Correct AnswerverifiedShow Answer

In 2009 Congress passed legislation providing states with funds to build roads and bridges.It also instituted tax cuts.Which of these shifts aggregate demand right?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left.If there is no policy response,then eventually

Correct AnswerverifiedShow Answer

An increase in the money supply causes the interest rate to fall,investment spending to rise,and aggregate demand to shift right.

Correct AnswerverifiedShow Answer

Figure 20-2. -Refer to Pessimism.What happens to the expected price level and what's the result for wage bargaining?

Correct AnswerverifiedShow Answer

Over the last fifty years both real GDP and prices have trended upward in most countries.Continuing real GDP growth and inflation can be explained by

Correct AnswerverifiedShow Answer

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There are occasional short-lived periods...
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