Question 1

Which of the following would cause prices to rise and real GDP to fall in the short run?

Accepted Answer

A)   an increase in the expected price level
B)   an increase in the capital stock
C)   an increase in the quantity of labor available
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 2

When the dollar depreciates, U.S.

Accepted Answer

A)   exports and imports increase.
B)   exports increase, while imports decrease.
C)   exports decrease, while imports increase.
D)   exports and imports decrease.E) A) and B)
F) C) and D)

Question 3

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 4

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Accepted Answer

A)   the price level and real output.
B)   real output and employment.
C)   employment and the inflation rate.
D)   the value of money and the price level.E) A) and D)
F) B) and C)

Question 5

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) C) and D)
F) All of the above

Question 6

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

Accepted Answer

There are occasional short-lived periods...

Question 7

If the dollar appreciates because of speculation or government policy U.S.

Accepted Answer

A)   aggregate demand shifts left. U.S. aggregate demand also shifts left if other countries experience recessions.
B)   aggregate demand shifts left. U.S. aggregate demand shifts right if other countries experience recessions.
C)   aggregate demand shifts right. U.S. aggregate demand also shifts right if other countries experience recessions.
D)   aggregate demand shifts right. U.S. aggregate demand shifts left if other countries experience recessions.E) A) and D)
F) B) and C)

Question 8

Other things the same, an increase in the amount of capital firms wish to purchase would initially shift

Accepted Answer

A)   aggregate demand right.
B)   aggregate demand left.
C)   aggregate supply right.
D)   aggregate supply left.E) A) and B)
F) A) and C)

Question 9

Other things the same, a decrease in the price level makes consumers feel

Accepted Answer

A)   less wealthy, so the quantity of goods and services demanded falls.
B)   less wealthy, so the quantity of goods and services demanded rises.
C)   more wealthy, so the quantity of goods and services demanded rises.
D)   more wealthy, so the quantity of goods and services demanded falls.E) B) and C)
F) None of the above

Question 10

From 2006 to 2008 there was a dramatic fall in the price of houses. If this fall made people feel less wealthy, then it would have shifted

Accepted Answer

A)   aggregate demand right.
B)   aggregate demand left.
C)   aggregate supply right.
D)   aggregate supply left.E) A) and B)
F) A) and C)

Question 11

The long-run aggregate supply curve shifts right if

Accepted Answer

A)   immigration from abroad increases.
B)   the capital stock increases.
C)   technology advances.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 12

Which of the following would not be included in aggregate demand?

Accepted Answer

A)   additions of newly produced goods to inventory
B)   purchases of U.S. services by foreigners
C)   the purchase of newly produced capital goods
D)   government transfer payments such as Social Security paymentsE) A) and C)
F) B) and D)

Question 13

Which of the following alone can explain the change in the price level and output during World War II?

Accepted Answer

A)   aggregate demand shifted right
B)   aggregate demand shifted left
C)   aggregate supply shifted right
D)   aggregate supply shifted leftE) C) and D)
F) A) and B)

Question 14

Which of the following is included in the aggregate demand for goods and services?

Accepted Answer

A)   consumption demand
B)   investment demand
C)   net exports
D)   All of the above are correct.E) All of the above
F) A) and C)

Question 15

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Accepted Answer

A) True 
 B)False

Question 16

In the last half of 1999, the U.S. unemployment rate was about 4 percent. Historical experience suggests that this is

Accepted Answer

A)   above the natural rate, so real GDP growth was likely low.
B)   above the natural rate, so real GDP growth was likely high.
C)   below the natural rate, so real GDP growth was likely low.
D)   below the natural rate, so real GDP growth was likely high.E) A) and B)
F) All of the above

Question 17

Figure 15-2.
 
-Refer to Optimism. How is the new long-run equilibrium different from the original one?

Accepted Answer

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

Question 18

Other things the same, if the price level rises, then domestic interest rates

Accepted Answer

A)   rise, so domestic residents will want to hold more foreign bonds.
B)   rise, so domestic residents will want to hold fewer foreign bonds.
C)   fall, so domestic residents will want to hold more foreign bonds.
D)   fall, so domestic residents will want to hold fewer foreign bonds.E) A) and B)
F) A) and C)

Question 19

The downward slope of the aggregate demand curve is based on logic that as the price level rises, consumption, investment, and net exports all fall.

Accepted Answer

A) True 
 B)False

Question 20

Figure 15-2.
 
-Refer to Financial Crisis. What happens to the price level and real GDP in the short run?

Accepted Answer

A)   both the price level and real GDP rise
B)   the the price level level rises and real GDP falls
C)   the the price level level falls and real GDP rises
D)   both the price level and real GDP fallE) A) and B)
F) All of the above

Exam 15: Aggregate Demand and Aggregate Supply

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Correct AnswerverifiedShow Answer

Which of the following is included in the aggregate demand for goods and services?

Correct AnswerverifiedShow Answer

Which of the following would not be included in aggregate demand?

Correct AnswerverifiedShow Answer

When the dollar depreciates, U.S.

Correct AnswerverifiedShow Answer

Figure 15-2. -Refer to Optimism. How is the new long-run equilibrium different from the original one?

Correct AnswerverifiedShow Answer

Other things the same, if the price level rises, then domestic interest rates

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Correct AnswerverifiedShow Answer

Other things the same, an increase in the amount of capital firms wish to purchase would initially shift

Correct AnswerverifiedShow Answer

Which of the following would cause prices to rise and real GDP to fall in the short run?

Correct AnswerverifiedShow Answer

The downward slope of the aggregate demand curve is based on logic that as the price level rises, consumption, investment, and net exports all fall.

Correct AnswerverifiedShow Answer

Other things the same, a decrease in the price level makes consumers feel

Correct AnswerverifiedShow Answer

Figure 15-2. -Refer to Financial Crisis. What happens to the price level and real GDP in the short run?

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts right if

Correct AnswerverifiedShow Answer

In the last half of 1999, the U.S. unemployment rate was about 4 percent. Historical experience suggests that this is

Correct AnswerverifiedShow Answer

From 2006 to 2008 there was a dramatic fall in the price of houses. If this fall made people feel less wealthy, then it would have shifted

Correct AnswerverifiedShow Answer

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

Correct AnswerverifiedThere are occasional short-lived periods...View AnswerShow Answer

If the dollar appreciates because of speculation or government policy U.S.

Correct AnswerverifiedShow Answer

Which of the following alone can explain the change in the price level and output during World War II?

Correct AnswerverifiedShow Answer

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Correct AnswerverifiedShow Answer

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There are occasional short-lived periods...
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