Question 1

The investment component of GDP measures spending on

Accepted Answer

A)  financial assets such as stocks and bonds. During recessions it declines by a relatively large amount.
B)  residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively large amount
C)  Financial assets such as stocks and bonds. During recessions it declines by a relatively small amount.
D)  Residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively large amountE) A) and B)
F) A) and C)

Question 2

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

Question 3

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

Question 4

Which of the following is correct?

Accepted Answer

A)  Real GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations can be predicted with some accuracy.
B)  Real GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy.
C)  Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations can be predicted with some accuracy.
D)  Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy.E) B) and D)
F) All of the above

Question 5

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  an increase in the actual price level
B)  an increase in the expected price level
C)  an increase in the capital stock
D)  None of the above is correct.E) None of the above
F) All of the above

Question 7

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage. They may infer that the reward to working is

Accepted Answer

A)  temporarily low and so supply a smaller quantity of labor.
B)  temporarily low and so supply a larger quantity of labor.
C)  temporarily high and so supply a smaller quantity of labor.
D)  temporarily high and so supply a larger quantity of labor.E) A) and B)
F) None of the above

Question 8

The Stock Market Boom of 2015
Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time.
-Refer to Stock Market Boom 2015. How is the new long-run equilibrium different from the original one?

Accepted Answer

A)  the price level and real GDP are higher
B)  the price level and real GDP are lower.
C)  the price level is higher and real GDP is the same.
D)  the price level is the same and real GDP is higher.E) A) and B)
F) B) and C)

Question 9

The recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

Accepted Answer

A) True 
 B)False

Question 10

Other things the same, the aggregate quantity of output supplied will increase if the price level

Accepted Answer

A)  is lower than expected so that firms believe the relative price of their output has increased.
B)  is lower than expected so that firms believe the relative price of their output has decreased.
C)  is higher than expected so that firms believe the relative price of their output has increased.
D)  is higher than expected so that firms believe the relative price of their output has decreased.E) A) and D)
F) B) and C)

Question 11

During recessions unemployment typically rises

Accepted Answer

A)  little. As the recession ends, unemployment declines gradually.
B)  little. As the recession ends, unemployment declines rapidly.
C)  substantially. As the recession ends, unemployment declines gradually.
D)  substantially. As the recession ends, unemployment declines rapidly.E) B) and D)
F) A) and C)

Question 12

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

Accepted Answer

A) True 
 B)False

Question 13

An increase in the actual price level does not shift the short-run aggregate supply curve, but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 14

The long-run effect of an increase in government spending is to raise

Accepted Answer

A)  both real output and the price level.
B)  real output and lower the price level.
C)  real output and leave the price level unchanged.
D)  the price level and leave real output unchanged.E) All of the above
F) B) and D)

Question 15

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Tax cuts shift aggregate demand

Accepted Answer

A)  right as do increases in government spending.
B)  right while increases in government spending shift aggregate demand left.
C)  left as do increases in government spending.
D)  left while increases in government spending shift aggregate demand right.E) A) and B)
F) B) and D)

Question 18

The equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level) , where a is a positive number, represents

Accepted Answer

A)  an upward-sloping short-run aggregate supply curve
B)  a vertical short-run aggregate supply curve
C)  a downward-sloping aggregate demand curve
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 19

Make a list of expenditures whose sum equals GDP.

Accepted Answer

consumption, investm...

Question 20

Aggregate demand shifts to the left if the money supply increases.

Accepted Answer

A) True 
 B)False

Exam 20: Aggregate Demand and Aggregate Supply

Aggregate demand shifts to the left if the money supply increases.

Correct AnswerverifiedShow Answer

The Stock Market Boom of 2015 Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. -Refer to Stock Market Boom 2015. How is the new long-run equilibrium different from the original one?

Correct AnswerverifiedShow Answer

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage. They may infer that the reward to working is

Correct AnswerverifiedShow Answer

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Correct AnswerverifiedShow Answer

The equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level) , where a is a positive number, represents

Correct AnswerverifiedShow Answer

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

Correct AnswerverifiedShow Answer

Other things the same, the aggregate quantity of output supplied will increase if the price level

Correct AnswerverifiedShow Answer

Tax cuts shift aggregate demand

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

Correct AnswerverifiedShow Answer

If aggregate demand shifts right then in the short run

Correct AnswerverifiedShow Answer

The long-run effect of an increase in government spending is to raise

Correct AnswerverifiedShow Answer

Which of the following 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

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

During recessions unemployment typically rises

Correct AnswerverifiedShow Answer

An increase in the actual price level does not shift the short-run aggregate supply curve, but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Correct AnswerverifiedShow Answer

Make a list of expenditures whose sum equals GDP.

Correct Answerverifiedconsumption, investm...View AnswerShow Answer

The investment component of GDP measures spending on

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
consumption, investm...
View Answer

Correct Answer
verified