Question 1

A change in the money supply changes only nominal variables in the long run.

Accepted Answer

A) True 
 B)False

Question 2

An economic expansion caused by a shift in aggregate demand causes prices to

Accepted Answer

A)   rise in the short run, and rise even more in the long run.
B)   rise in the short run, and fall back to their original level in the long run.
C)   fall in the short run, and fall even more in the long run.
D)   fall in the short run, and rise back to their original level in the long run.E) A) and B)
F) None of the above

Question 3

Historical evidence for the U.S. economy indicates that

Accepted Answer

A)   recessions have occurred roughly once every six years since the 1960s.
B)   the unemployment rate usually decreases during a recession and increases shortly after the recession ends.
C)   real GDP usually remains roughly constant during a recession and decreases shortly after the recession ends.
D)   changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle.E) B) and C)
F) None of the above

Question 4

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

Accepted Answer

A)   a decrease in the actual price level
B)   a decrease in the expected price level
C)   a decrease in the capital stock
D)   a decrease in the money supplyE) All of the above
F) A) and B)

Question 5

Which of the following is most commonly used to monitor short-run changes in economic activity?

Accepted Answer

A)   the inflation rate.
B)   real GDP.
C)   interest rates.
D)   value of the U.S. dollar in the foreign exchange market.E) A) and B)
F) A) and C)

Question 6

If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds

Accepted Answer

A)   the dollar would appreciate which would cause aggregate demand to shift right.
B)   the dollar would appreciate which would cause aggregate demand to shift left.
C)   the dollar would depreciate which would cause aggregate demand to shift right.
D)   the dollar would depreciate which would cause aggregate demand to shift left.E) C) and D)
F) A) and B)

Question 7

Figure 33-5. 
-Refer to Figure 33-5. The appearance of the long-run aggregate-supply LRAS)  curve

Accepted Answer

A)   is consistent with the concept of monetary neutrality.
B)   is consistent with the idea that point A represents a long-run equilibrium and a short-run equilibrium when the relevant short-run aggregate-supply curve is SRAS1.
C)   indicates that Y1 is the natural rate of output.
D)   All of the above are correct.E) A) and C)
F) None of the above

Question 8

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) A) and B)
F) All of the above

Question 9

Changes in the price level affect which components of aggregate demand?

Accepted Answer

A)   only consumption and investment
B)   only consumption and net exports
C)   only investment
D)   consumption, investment, and net exportsE) B) and C)
F) B) and D)

Question 10

The aggregate supply curve is

Accepted Answer

A)   vertical in the long run and slopes upward in the short run.
B)   upward sloping in the long run and vertical in the short run.
C)   vertical in the short run and in the long run.
D)   upward sloping in the short run and in the long run.E) A) and D)
F) A) and C)

Question 11

Illustrate the classical analysis of growth and inflation with aggregate demand and long-run aggregate supply curves.

Accepted Answer

See graph. <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Over time, technological adv...

Question 12

According to the classical model, an increase in the money supply causes

Accepted Answer

A)   output to increase in the long run.
B)   the unemployment rate to fall in the long run.
C)   prices to rise in the long run.
D)   interest rates to fall in the long run.E) A) and D)
F) None of the above

Question 13

Using the aggregate demand and aggregate supply model, a decrease of what curve is by itself consistent with the changes in prices and output that occurred during the onset of the Great Depression?

Accepted Answer

The answer of Using the aggregate demand and aggregate supply...

Question 14

If a central bank is independent,

Accepted Answer

A)   it has the ability to alter taxes.
B)   it allocates savings to firms.
C)   it restricts trade to increase domestic employment.
D)   it operations are not controlled by the political process.E) C) and D)
F) A) and B)

Question 15

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

Accepted Answer

A)   production is more profitable and employment rises.
B)   production is more profitable and employment falls.
C)   production is less profitable and employment rises.
D)   production is less profitable and employment falls.E) A) and C)
F) A) and B)

Question 16

During recessions which type of spending falls?

Accepted Answer

A)   consumption and investment
B)   investment but not consumption
C)   consumption but not investment
D)   neither consumption nor investmentE) C) and D)
F) None of the above

Question 17

Figure 33-5. 
-Refer to Figure 33-5. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience

Accepted Answer

A)   a falling price level and a falling level of output, as the economy moves to point C.
B)   a falling price level and a rising level of output, as the economy moves to point A.
C)   a rising price level and a falling level of output, as the economy moves to point A.
D)   a rising price level and a rising level of output, as the economy moves to point C.E) A) and B)
F) A) and C)

Question 18

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) All of the above
F) None of the above

Question 19

As the price level rises

Accepted Answer

A)   people are more willing to lend, so interest rates rise.
B)   people are more willing to lend, so interest rates fall.
C)   people are less willing to lend, so interest rates fall.
D)   people are less willing to lend, so interest rates rise.E) A) and B)
F) A) and C)

Question 20

In 2008, the United States was in recession. Which of the following things would you not expect to have happened?

Accepted Answer

A)   increased layoffs and firings.
B)   a higher rate of bankruptcy.
C)   increased claims for unemployment insurance.
D)   increased real GDP.E) B) and C)
F) A) and B)

Exam 20: Aggregate Demand and Aggregate Supply

Which of the following is most commonly used to monitor short-run changes in economic activity?

Correct AnswerverifiedShow Answer

Illustrate the classical analysis of growth and inflation with aggregate demand and long-run aggregate supply curves.

Correct AnswerverifiedSee graph. Over time, technological adv...View AnswerShow Answer

Changes in the price level affect which components of aggregate demand?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A change in the money supply changes only nominal variables in the long run.

Correct AnswerverifiedShow Answer

According to the classical model, an increase in the money supply causes

Correct AnswerverifiedShow Answer

Figure 33-5. -Refer to Figure 33-5. The appearance of the long-run aggregate-supply LRAS) curve

Correct AnswerverifiedShow Answer

An economic expansion caused by a shift in aggregate demand causes prices to

Correct AnswerverifiedShow Answer

If a central bank is independent,

Correct AnswerverifiedShow Answer

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

Correct AnswerverifiedShow Answer

Using the aggregate demand and aggregate supply model, a decrease of what curve is by itself consistent with the changes in prices and output that occurred during the onset of the Great Depression?

Correct AnswerverifiedShow Answer

The aggregate supply curve is

Correct AnswerverifiedShow Answer

Historical evidence for the U.S. economy indicates that

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During recessions which type of spending falls?

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The long-run aggregate supply curve

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In 2008, the United States was in recession. Which of the following things would you not expect to have happened?

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If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds

Correct AnswerverifiedShow Answer

Figure 33-5. -Refer to Figure 33-5. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience

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

As the price level rises

Correct AnswerverifiedShow Answer

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See graph. Over time, technological adv...
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