Question 1

Keynes thought that the behavior of the economy in the short run was influenced by what he called "animal spirits." By this he meant that business people sometimes felt good about the economy, and carried out lots of investment, and at other times felt bad about the economy, and so cut back on their investment spending. Explain how such fluctuations in investment would lead to fluctuations in real GDP and prices.

Accepted Answer

Fluctuations in investment cause the agg...

Question 2

Which of the following shifts long-run aggregate supply right?

Accepted Answer

A)   an increase in either technology or the human capital stock.
B)   an increase in human capital but not technology.
C)   an increase in technology, but not the human capital stock.
D)   neither an increase in technology nor the human capital stock.E) B) and D)
F) A) and D)

Question 3

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

Accepted Answer

A) True 
 B)False

Question 4

A decrease in the availability of an important major resource such as oil shifts

Accepted Answer

A)   aggregate supply right.
B)   aggregate supply left.
C)   aggregate demand right.
D)   aggregate demand left.E) None of the above
F) B) and C)

Question 5

Other things the same, continued increases in technology lead to

Accepted Answer

A)   continued increases in the price level and real GDP.
B)   continued decreases in the price level and real GDP.
C)   continued increases in real GDP and continued increases in the price level.
D)   continued increases in real GDP and continued decreases in the price level.E) None of the above
F) C) and D)

Question 6

If aggregate demand shifts right then in the short run

Accepted Answer

A)   firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the right.
B)   firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the left.
C)   firms will decrease production. In the long run increased price expectations shift the short-run aggregate supply curve to the right.
D)   firms will decrease production. In the long run increased price expectations shift the short-run aggregate supply curve to the left.E) A) and C)
F) None of the above

Question 7

Which of the following statements concerning the aggregate demand and aggregate supply model is correct?

Accepted Answer

A)   The aggregate demand and aggregate supply model is nothing more than a large version of the model of market demand and supply.
B)   The price level and quantity of output adjust to bring aggregate demand and supply into balance.
C)   The aggregate supply curve shows the quantity of goods and services that households, firms, and the government want to buy at each price.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 8

Refer to Stock Market Boom 2015. 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) A) and D)
F) B) and C)

Question 9

During World War II,

Accepted Answer

A)   government purchases of goods and services increased fivefold.
B)   the economy's production increased about 25 percent.
C)   unemployment fell to about 5%.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 10

Misperceptions theory helps explain what feature of the aggregate demand and aggregate supply model?

Accepted Answer

why the short run ag...

Question 11

Imagine the U.S. economy is in long-run equilibrium. Then suppose the value of the U.S. dollar decreases. At the same time, people in the U.S. revise their expectations so that the expected price level rises. We would expect that in the short-run

Accepted Answer

A)   real GDP will rise and the price level might rise, fall, or stay the same.
B)   real GDP will fall and the price level might rise, fall, or stay the same.
C)   the price level will rise, and real GDP might rise, fall, or stay the same.
D)   the price level will fall, and real GDP might rise, fall, or stay the same.E) A) and B)
F) None of the above

Question 12

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 13

Other things the same, when the price level falls, interest rates

Accepted Answer

A)   rise, which means consumers will want to spend more on homebuilding.
B)   rise, which means consumers will want to spend less on homebuilding.
C)   fall, which means consumers will want to spend more on homebuilding.
D)   fall, which means consumers will want to spend less on homebuilding.E) All of the above
F) None of the above

Question 14

The effect of a change in the value of the dollar in the foreign exchange market due to a change in the price level helps explain the slope of aggregate demand, but does not shift it. The effects of a change in the value of the dollar in the foreign exchange market due to speculation is shown by shifting the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 15

When the price level falls the quantity of

Accepted Answer

A)   consumption goods demanded rises, while the quantity of net exports demanded falls.
B)   consumption goods demanded and the quantity of net exports demanded both rise.
C)   consumption goods demanded and the quantity of net exports demanded both fall.
D)   consumption goods demanded falls, while the quantity of net exports demand rises.E) B) and D)
F) B) and C)

Question 16

A decrease in the money supply causes the interest rate to rise so that investment falls.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

Other things the same, when the price level rises, interest rates

Accepted Answer

A)   rise, which means consumers will want to spend more on homebuilding.
B)   rise, which means consumers will want to spend less on homebuilding.
C)   fall, which means consumers will want to spend more on homebuilding.
D)   fall, which means consumers will want to spend less on homebuilding.E) All of the above
F) B) and C)

Question 19

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

Accepted Answer

A)   the real value of wealth
B)   the interest rate
C)   the value of currency in the market for foreign exchange
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 20

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   the Federal Reserve buys bonds.
B)   a decrease in net exports due to something other than a change in domestic prices.
C)   an increase in household saving.
D)   All of the above are correct.E) All of the above
F) C) and D)

Exam 33: Aggregate Demand and Aggregate Supply

Refer to Stock Market Boom 2015. In the short run what happens to the price level and real GDP?

Correct Answer
verified

Which of the following shifts long-run aggregate supply right?

Correct Answer
verified

Other things the same, when the price level rises, interest rates

Correct Answer
verified

Other things the same, continued increases in technology lead to

Correct Answer
verified

When the price level falls the quantity of

Correct Answer
verified

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

Correct Answer
verified

Correct Answer
verified
Fluctuations in investment cause the agg...
View Answer

A decrease in the availability of an important major resource such as oil shifts

Correct Answer
verified

Correct Answer
verified

During World War II,

Correct Answer
verified

The long-run aggregate supply curve

Correct Answer
verified

Imagine the U.S. economy is in long-run equilibrium. Then suppose the value of the U.S. dollar decreases. At the same time, people in the U.S. revise their expectations so that the expected price level rises. We would expect that in the short-run

Correct Answer
verified

Misperceptions theory helps explain what feature of the aggregate demand and aggregate supply model?

Correct Answer
verified
why the short run ag...
View Answer

If aggregate demand shifts right then in the short run

Correct Answer
verified

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

Correct Answer
verified

Other things the same, when the price level falls, interest rates

Correct Answer
verified

Which of the following shifts aggregate demand to the right?

Correct Answer
verified

A decrease in the money supply causes the interest rate to rise so that investment falls.

Correct Answer
verified

Which of the following statements concerning the aggregate demand and aggregate supply model is correct?

Correct Answer
verified

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

Correct Answer
verified
See graph. Over time, technological adv...
View Answer

Exam 33: Aggregate Demand and Aggregate Supply

Refer to Stock Market Boom 2015. In the short run what happens to the price level and real GDP?

Correct AnswerverifiedShow Answer

Which of the following shifts long-run aggregate supply right?

Correct AnswerverifiedShow Answer

Other things the same, when the price level rises, interest rates

Correct AnswerverifiedShow Answer

Other things the same, continued increases in technology lead to

Correct AnswerverifiedShow Answer

When the price level falls the quantity of

Correct AnswerverifiedShow Answer

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedFluctuations in investment cause the agg...View AnswerShow Answer

A decrease in the availability of an important major resource such as oil shifts

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

During World War II,

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve

Correct AnswerverifiedShow Answer

Imagine the U.S. economy is in long-run equilibrium. Then suppose the value of the U.S. dollar decreases. At the same time, people in the U.S. revise their expectations so that the expected price level rises. We would expect that in the short-run

Correct AnswerverifiedShow Answer

Misperceptions theory helps explain what feature of the aggregate demand and aggregate supply model?

Correct Answerverifiedwhy the short run ag...View AnswerShow Answer

If aggregate demand shifts right then in the short run

Correct AnswerverifiedShow Answer

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

Correct AnswerverifiedShow Answer

Other things the same, when the price level falls, interest rates

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

A decrease in the money supply causes the interest rate to rise so that investment falls.

Correct AnswerverifiedShow Answer

Which of the following statements concerning the aggregate demand and aggregate supply model is correct?

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Fluctuations in investment cause the agg...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
why the short run ag...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
See graph. Over time, technological adv...
View Answer