Question 1

Other things the same, if the U.S. price level rises, then

Accepted Answer

A)   the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises.
B)   the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls.
C)   the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises.
D)   the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.E) A) and C)
F) C) and D)

Question 2

Figure 33-17. 
-Refer to Figure 33-17. Suppose the economy starts at P3 and Y2. Explain how government purchases would need to change to move the economy to P2 and Y1. What about taxes?

Accepted Answer

decrease in governme...

Question 3

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

Question 4

Most economists believe that classical macroeconomic theory is a good description of the economy

Accepted Answer

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

Question 5

Which of the following would help explain why the aggregate demand curve slopes downward?

Accepted Answer

A)   An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services.
B)   A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports.
C)   A higher price level increases real wealth, which stimulates spending on consumption.
D)   A lower price level reduces the interest rate, which encourages greater spending on investment goods.E) B) and C)
F) A) and B)

Question 6

Figure 33-10. 
-Refer to Figure 33-10. If the economy starts at point C, stagflation would be consistent with point

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) A) and D)
F) A) and C)

Question 7

During recessions employment typically

Accepted Answer

A)   falls substantially. As the recession ends, employment rises rapidly.
B)   rises substantially. As the recession ends, employment declines gradually.
C)   falls substantially. As the recession ends, employment rises gradually.
D)   rises substantially. As the recession ends, employment declines rapidly.E) A) and B)
F) B) and D)

Question 8

Other things the same, if technology increases, then in the long run

Accepted Answer

A)   both output and prices are higher.
B)   output is higher and prices are lower.
C)   output is lower and prices are higher.
D)   both output and prices are lower.E) B) and C)
F) A) and B)

Question 9

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

Accepted Answer

Expected price level changes w...

Question 10

Other things the same, an increase in the price level induces people to hold

Accepted Answer

A)   less money, so they lend less, and the interest rate rises.
B)   less money, so they lend more, and the interest rate falls.
C)   more money, so they lend more, and the interest rate falls.
D)   more money, so they lend less, and the interest rate rises.E) C) and D)
F) All of the above

Question 11

The aggregate quantity of goods and services demanded changes as the price level rises because

Accepted Answer

A)   real wealth falls, interest rates rise, and the dollar appreciates.
B)   real wealth falls, interest rates rise, and the dollar depreciates.
C)   real wealth rises, interest rates fall, and the dollar appreciates.
D)   real wealth rises, interest rates fall, and the dollar depreciates.E) A) and D)
F) All of the above

Question 12

Suppose that during World War II the long-run aggregate supply curve shifted right. In order for price and output to have changed in the direction they did, what would have to have happened to aggregate demand?

Accepted Answer

A)   It would have to have shifted left by less than aggregate supply shifted
B)   It would have to have to shifted left by more than aggregate supply shifted.
C)   It would have to have shifted right by less than aggregate supply shifted
D)   It would have to have to shifted right by more than aggregate supply shifted.E) A) and B)
F) A) and C)

Question 13

Economic expansions in Europe and China 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 B)
F) A) and C)

Question 14

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Accepted Answer

A)   the price level to rise and real GDP to fall.
B)   the price level to fall and real GDP to rise.
C)   the price level and real GDP both to stay the same.
D)   All of the above are possible.E) A) and B)
F) C) and D)

Question 15

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 16

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

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) None of the above
F) A) and C)

Question 17

When the price level falls

Accepted Answer

A)   the interest rate rises, so the quantity of goods and services demand rises.
B)   the interest rate rises, so the quantity of goods and services demand falls.
C)   the interest rate falls, so the quantity of goods and services demand rises.
D)   the interest rate falls, so the quantity of goods and services demand falls.E) A) and D)
F) None of the above

Question 18

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Accepted Answer

A) True 
 B)False

Question 19

Figure 33-4 
-Refer to Figure 33-4. A decrease in taxes would move the economy from C to

Accepted Answer

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

Question 20

Technological progress shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Exam 20: Aggregate Demand and Aggregate Supply

Other things the same, an increase in the price level induces people to hold

Correct AnswerverifiedShow Answer

Figure 33-10. -Refer to Figure 33-10. If the economy starts at point C, stagflation would be consistent with point

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Suppose that during World War II the long-run aggregate supply curve shifted right. In order for price and output to have changed in the direction they did, what would have to have happened to aggregate demand?

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Other things the same, if the U.S. price level rises, then

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Other things the same, if technology increases, then in the long run

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Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

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The aggregate quantity of goods and services demanded changes as the price level rises because

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During recessions employment typically

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Figure 33-4 -Refer to Figure 33-4. A decrease in taxes would move the economy from C to

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Which of the following would help explain why the aggregate demand curve slopes downward?

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Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

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When the price level falls

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Figure 33-17. -Refer to Figure 33-17. Suppose the economy starts at P3 and Y2. Explain how government purchases would need to change to move the economy to P2 and Y1. What about taxes?

Correct Answerverifieddecrease in governme...View AnswerShow Answer

Technological progress shifts the long-run aggregate supply curve to the right.

Correct AnswerverifiedShow Answer

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

Correct AnswerverifiedExpected price level changes w...View AnswerShow Answer

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Correct AnswerverifiedShow Answer

Most economists believe that classical macroeconomic theory is a good description of the economy

Correct AnswerverifiedShow Answer

Economic expansions in Europe and China would cause

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.

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When the price level falls

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decrease in governme...
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Expected price level changes w...
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