Question 1

In countries that have high minimum wages and require a lengthy and costly process to get permission to open a business

Accepted Answer

A)  Reducing either the minimum wage or the time and cost to open a business would have no effect on the long-run aggregate supply curve.
B)  Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right.
C)  Reducing the minimum wage would shift long-run aggregate supply to the right. Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve.
D)  Reducing the minimum wage would have no affect on the long-run aggregate supply curve. Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right.E) All of the above
F) A) and B)

Question 2

During recessions

Accepted Answer

A)  workers are laid off.
B)  factories are idle.
C)  firms may find they are unable to sell all they produce.
D)  All of the above are correct.E) None of the above
F) A) and D)

Question 3

Consider the exhibit below for the following questions.
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) B) and D)
F) A) and D)

Question 4

The short-run effects of an increase in the expected price level include

Accepted Answer

A)  a lower level of output and a lower price level.
B)  a lower level of output and a higher price level.
C)  a higher level of output and a lower price level.
D)  a higher level of output and a higher price level.E) B) and C)
F) A) and D)

Question 5

Consider the exhibit below for the following questions.
Figure 33-4 
-Refer to Figure 33-4. If the economy starts at A and moves to D in the short run, the economy

Accepted Answer

A)  moves to A in the long run.
B)  moves to B in the long run.
C)  moves to C in the long run.
D)  stays at D in the long run.E) A) and B)
F) A) and C)

Question 6

Which of the following is correct?

Accepted Answer

A)  An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left.
B)  An increase in stock prices reduces consumption spending so that aggregate demand shifts left.
C)  An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left.
D)  A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left.E) A) and B)
F) B) and D)

Question 7

Changes in what four variables will shift the long run aggregate supply curve?

Accepted Answer

Labor, capital, natu...

Question 8

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Accepted Answer

A)  prices and output both increased immediately.
B)  prices increased immediately while output remained unchanged.
C)  it took time for prices to rise; in the meantime output was lower.
D)  it took time for prices to rise; in the meantime output was higher.E) B) and D)
F) A) and D)

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

Question 10

The saying "Money is a veil." means that

Accepted Answer

A)  while nominal variables are the first thing we may observe about an economy, what's important are the real variables and the forces that determine them.
B)  money is the principal medium of exchange in most economies.
C)  the primary determinant of short-run economic fluctuations is not real variables, but rather changes in the money supply.
D)  in the long run money is of no importance to the determination of either real or nominal variables.E) A) and D)
F) None of the above

Question 11

The long-run aggregate supply curve shifts left if

Accepted Answer

A)  the capital stock increases.
B)  there is a natural disaster.
C)  the government removes some environmental regulations that limit production methods.
D)  None of the above is correct.E) A) and C)
F) None of the above

Question 12

If money is neutral, then changes in the quantity of money

Accepted Answer

A)  do not affect real output.
B)  affect both nominal and real output
C)  do not affect nominal output.
D)  affect neither nominal nor real output.E) B) and C)
F) A) and B)

Question 13

The classical dichotomy refers to the separation of

Accepted Answer

A)  prices and nominal interest rates.
B)  taxes and government spending.
C)  decisions made by the public and decisions made by the government.
D)  real and nominal variables.E) A) and C)
F) A) and B)

Question 14

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) All of the above
F) None of the above

Question 15

Policymakers who influence aggregate demand can potentially mitigate the severity of economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 16

As the price level rises, the exchange rate

Accepted Answer

A)  falls, so exports rise and imports fall.
B)  falls, so exports fall and imports rise.
C)  rises, so exports rise and imports fall.
D)  rises, so exports fall and imports rise.E) B) and C)
F) C) and D)

Question 17

The economic boom of the early 1940s resulted mostly from

Accepted Answer

A)  increased government expenditures.
B)  falling prices of oil and other natural resources.
C)  an increase in the growth rate of the money supply.
D)  rapid developments in transportation, electronics, and communication.E) A) and B)
F) C) and D)

Question 18

If wages are sticky, then a greater than expected increase in the price level

Accepted Answer

A)  raises the real costs of production, so the short-run aggregate supply curve shifts left.
B)  raises the real costs of production, so the aggregate quantity of goods and services declines.
C)  reduces the real costs of production, so the short-run aggregate supply curve shifts right.
D)  reduces the real costs of production, so the aggregate quantity of goods and services rises.E) A) and B)
F) A) and C)

Question 19

Figure 33-5. 1. C) indicates that Y1 is the natural rate of output. D) All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-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 B)
F) A) and D)

Question 20

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

Accepted Answer

A)  consumer wealth rises
B)  borrowing rises
C)  each dollar is worth more domestic goods
D)  the dollar appreciates relative to other currenciesE) A) and C)
F) None of the above

Exam 33: Aggregate Demand and Aggregate Supply

Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4. A decrease in taxes would move the economy from C to

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In countries that have high minimum wages and require a lengthy and costly process to get permission to open a business

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If wages are sticky, then a greater than expected increase in the price level

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The short-run effects of an increase in the expected price level include

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Which of the following is correct?

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

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The classical dichotomy refers to the separation of

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The saying "Money is a veil." means that

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Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

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

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Classical economist David Hume observed that as the money supply expanded after gold discoveries

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As the price level rises, the exchange rate

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Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4. If the economy starts at A and moves to D in the short run, the economy

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During recessions

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If money is neutral, then changes in the quantity of money

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The long-run aggregate supply curve shifts left if

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Changes in what four variables will shift the long run aggregate supply curve?

Correct AnswerverifiedLabor, capital, natu...View AnswerShow Answer

The economic boom of the early 1940s resulted mostly from

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Policymakers who influence aggregate demand can potentially mitigate the severity of economic fluctuations.

Correct AnswerverifiedShow Answer

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Labor, capital, natu...
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