Question 1

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Accepted Answer

A) True 
 B)False

Question 2

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 3

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

Which of the following did not happen during the onset of the Great Depression?

Accepted Answer

A)   The money supply fell as households took money out of bank deposits.
B)   The Fed conducted expansionary monetary policy.
C)   Stock prices fell about 90 percent.
D)   Disruption of the banking system made it difficult for some firms to obtain funds for investment.E) B) and D)
F) B) and C)

Question 6

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, then 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) C) and D)

Question 7

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 8

In the long-run, an increase in aggregate demand increases the price level, but not real GDP.

Accepted Answer

A) True 
 B)False

Question 9

Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run,

Accepted Answer

A)   real GDP will rise and the price level might rise, fall, or stay the same. In the long-run, real GDP will rise and the price level might rise, fall, or stay the same.
B)   the price level will fall, and real GDP might rise, fall, or stay the same. In the long-run, real GDP and the price level will be unaffected.
C)   the price level will rise, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.
D)   the price level will fall, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.E) A) and B)
F) A) and C)

Question 10

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

Question 11

If there are floods or droughts or a decrease in the availability of raw materials

Accepted Answer

A)   aggregate supply shifts right.
B)   output falls in the short run.
C)   prices fall in the short run.
D)   None of the above is correct.E) B) and C)
F) B) and D)

Question 12

In 2001, 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 investment spendingE) A) and D)
F) A) and B)

Question 13

Other things the same, if the long-run aggregate supply curve shifts right, prices

Accepted Answer

A)   and output both increase.
B)   and output both decrease.
C)   increase and output decreases.
D)   decrease and output increases.E) C) and D)
F) B) and C)

Question 14

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Accepted Answer

A)   nominal wages are slow to adjust to changing economic conditions
B)   as the price level falls, the exchange rate falls
C)   an increase in the money supply lowers the interest rate
D)   an increase in the interest rate increases investment spendingE) A) and B)
F) A) and C)

Question 15

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 16

A decrease in the expected price level shifts

Accepted Answer

A)   only the long-run aggregate supply curve right.
B)   only the short-run aggregate supply curve right.
C)   both the short-run and the long-run aggregate supply curve right.
D)   Neither the short-run nor the long-run aggregate supply curve right.E) A) and B)
F) B) and C)

Question 17

The aggregate-demand curve

Accepted Answer

A)   has a slope that is explained in the same way as the slope of the demand curve for a particular product.
B)   is vertical in the long run.
C)   shows an inverse relation between the price level and the quantity of all goods and services demanded.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 18

The misperceptions theory of the short-run aggregate supply curve says that if the price level is higher than people expected, then some firms believe that the relative price of what they produce has

Accepted Answer

A)   decreased, so they increase production.
B)   decreased, so they decrease production.
C)   increased, so they increase production.
D)   increased, so they decrease production.E) A) and B)
F) A) and C)

Question 19

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

Accepted Answer

A)   increases by less than expected so that firms believe the relative price of their output has increased.
B)   increases by less than expected so that firms believe the relative price of their output has decreased.
C)   increases by more than expected so that firms believe the relative price of their output has increased.
D)   increases by more than expected so that firms believe the relative price of their output has decreased.E) A) and D)
F) C) and D)

Question 20

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

Accepted Answer

A)   higher than desired prices which leads to an increase in the aggregate quantity of goods and services supplied.
B)   higher than desired prices which leads to a decrease in the aggregate quantity of goods and services supplied.
C)   lower than desired prices which leads to an increase in the aggregate quantity of goods and services supplied.
D)   lower than desired prices which leads to a decrease in the aggregate quantity of goods and services supplied.E) A) and D)
F) B) and C)

Exam 15: Aggregate Demand and Aggregate Supply

Which of the following did not happen during the onset of the Great Depression?

Correct Answer
verified

The aggregate-demand curve

Correct Answer
verified

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

Tax cuts shift aggregate demand

Correct Answer
verified

Other things the same, if the long-run aggregate supply curve shifts right, prices

Correct Answer
verified

If there are floods or droughts or a decrease in the availability of raw materials

Correct Answer
verified

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Correct Answer
verified

In the long-run, an increase in aggregate demand increases the price level, but not real GDP.

Correct Answer
verified

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, then we would expect that in the short-run,

Correct Answer
verified

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Correct Answer
verified

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

Correct Answer
verified

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

Correct Answer
verified

Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run,

Correct Answer
verified

A decrease in the expected price level shifts

Correct Answer
verified

In 2001, the United States was in recession. Which of the following things would you not expect to have happened?

Correct Answer
verified

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

Correct Answer
verified

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Correct Answer
verified

The misperceptions theory of the short-run aggregate supply curve says that if the price level is higher than people expected, then some firms believe that the relative price of what they produce has

Correct Answer
verified

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Correct Answer
verified

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

Correct Answer
verified

Exam 15: Aggregate Demand and Aggregate Supply

Which of the following did not happen during the onset of the Great Depression?

Correct AnswerverifiedShow Answer

The aggregate-demand curve

Correct AnswerverifiedShow Answer

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

Tax cuts shift aggregate demand

Correct AnswerverifiedShow Answer

Other things the same, if the long-run aggregate supply curve shifts right, prices

Correct AnswerverifiedShow Answer

If there are floods or droughts or a decrease in the availability of raw materials

Correct AnswerverifiedShow Answer

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Correct AnswerverifiedShow Answer

In the long-run, an increase in aggregate demand increases the price level, but not real GDP.

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, then we would expect that in the short-run,

Correct AnswerverifiedShow Answer

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Correct AnswerverifiedShow Answer

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will increase if the price level

Correct AnswerverifiedShow Answer

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run,

Correct AnswerverifiedShow Answer

A decrease in the expected price level shifts

Correct AnswerverifiedShow Answer

In 2001, the United States was in recession. Which of the following things would you not expect to have happened?

Correct AnswerverifiedShow Answer

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

Correct AnswerverifiedShow Answer

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Correct AnswerverifiedShow Answer

The misperceptions theory of the short-run aggregate supply curve says that if the price level is higher than people expected, then some firms believe that the relative price of what they produce has

Correct AnswerverifiedShow Answer

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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