Question 1

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. Which curve shifts and in which direction?

Accepted Answer

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

Question 2

Other things the same, as the price level falls, the real value of a dollar

Accepted Answer

A)   rises, and interest rates rise.
B)   rises, and interest rates fall.
C)   falls, and interest rates rise.
D)   falls, and interest rates fall.E) B) and D)
F) C) and D)

Question 3

Other things the same, the aggregate quantity of output supplied will decrease 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 C)
F) C) and D)

Question 4

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 D)
F) A) and C)

Question 5

Explain the effect on output and price level from an increase in the short-run aggregate-supply curve.

Accepted Answer

The price level woul...

Question 6

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)   The price level rises.
B)   Interest rates fall.
C)   The dollar depreciates for some reason other than a change in the price level.
D)   Stock prices fall for some reason other than a change in the price level.E) A) and D)
F) C) and D)

Question 7

Other things the same, an increase 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) A) and D)
F) None of the above

Question 8

In the long run, an increase in the stock of human capital

Accepted Answer

A)   and increases in the money supply both make the price level rise.
B)   and increases in the money supply both make the price level fall.
C)   makes the price level rise, while increases in the money supply make prices fall.
D)   makes the price level fall, while increases in the money supply make prices rise.E) B) and C)
F) A) and B)

Question 9

Suppose the government raises taxes. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Accepted Answer

The aggreg...

Question 10

Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, then

Accepted Answer

A)   employment and production rise.
B)   employment rises and production falls.
C)   employment falls and production rises.
D)   employment and production fall.E) B) and C)
F) A) and B)

Question 11

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

Question 12

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Accepted Answer

A)   because unemployment is low, wages will be bid up and short-run aggregate supply will shift right.
B)   because unemployment is low, wages will be bid down and short-run aggregate supply will shift right.
C)   because unemployment is high, wages will be bid up and short-run aggregate supply will shift right.
D)   because unemployment is high, wages will be bid down and short-run aggregate supply will shift right.E) A) and D)
F) B) and C)

Question 13

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.
-Refer to Pessimism. In the long run, the change in price expectations created by pessimism shifts

Accepted Answer

A)   long-run aggregate supply right.
B)   long-run aggregate supply left.
C)   short-run aggregate supply right.
D)   short-run aggregate supply left.E) C) and D)
F) All of the above

Question 14

If there are sticky wages, and the price level is greater than what was expected, then

Accepted Answer

A)   the quantity of aggregate goods and services supplied falls, which is shown by a shift of the short-run aggregate supply curve to the left.
B)   the quantity of aggregate goods and services supplied falls, as shown by a movement to the left along the short-run aggregate supply curve.
C)   the quantity of aggregate goods and services supplied rises, as shown by a shift of the short-run aggregate supply curve to the right.
D)   the quantity of aggregate goods and services supplied rises, as shown by a movement to the right along the short-run aggregate supply curve.E) B) and C)
F) All of the above

Question 15

During recessions which type of spending falls?

Accepted Answer

A)   consumption and investment
B)   investment but not consumption
C)   consumption but not investment
D)   neither consumption nor investmentE) A) and B)
F) C) and D)

Question 16

Which of the following rises during recessions?

Accepted Answer

A)   layoffs and consumer spending
B)   layoffs but not consumer spending
C)   consumer spending but not layoffs
D)   neither layoffs nor consumer spendingE) A) and C)
F) A) and D)

Question 17

What curve shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level?

Accepted Answer

The aggreg...

Question 18

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained

Accepted Answer

A)   only by technological progress.
B)   only by money supply growth.
C)   by technological progress and money supply growth.
D)   None of the above is correct.E) B) and C)
F) A) and D)

Question 19

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

Accepted Answer

A)   production is more profitable and employment rises.
B)   production is more profitable and employment falls.
C)   production is less profitable and employment rises.
D)   production is less profitable and employment falls.E) A) and B)
F) All of the above

Question 20

During the last half of 2012, the U.S. unemployment rate was just under 8 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) All of the above
F) A) and C)

Exam 15: Aggregate Demand and Aggregate Supply

In the long run, an increase in the stock of human capital

Correct Answer
verified

Other things the same, an increase in the price level makes consumers feel

Correct Answer
verified

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained

Correct Answer
verified

Explain the effect on output and price level from an increase in the short-run aggregate-supply curve.

Correct Answer
verified
The price level woul...
View 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. Which curve shifts and in which direction?

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

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Correct Answer
verified

During recessions which type of spending falls?

Correct Answer
verified

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

Correct Answer
verified

If there are sticky wages, and the price level is greater than what was expected, then

Correct Answer
verified

Other things the same, as the price level falls, the real value of a dollar

Correct Answer
verified

Which of the following rises during recessions?

Correct Answer
verified

What curve shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level?

Correct Answer
verified
The aggreg...
View Answer

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

Correct Answer
verified

Suppose the government raises taxes. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Correct Answer
verified
The aggreg...
View Answer

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

Correct Answer
verified

Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, then

Correct Answer
verified

During the last half of 2012, the U.S. unemployment rate was just under 8 percent. Historical experience suggests that this is

Correct Answer
verified

Correct Answer
verified

Which of the following shifts aggregate demand to the left?

Correct Answer
verified

Exam 15: Aggregate Demand and Aggregate Supply

In the long run, an increase in the stock of human capital

Correct AnswerverifiedShow Answer

Other things the same, an increase in the price level makes consumers feel

Correct AnswerverifiedShow Answer

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained

Correct AnswerverifiedShow Answer

Explain the effect on output and price level from an increase in the short-run aggregate-supply curve.

Correct AnswerverifiedThe price level woul...View AnswerShow 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. Which curve shifts and in which direction?

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

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Correct AnswerverifiedShow Answer

During recessions which type of spending falls?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If there are sticky wages, and the price level is greater than what was expected, then

Correct AnswerverifiedShow Answer

Other things the same, as the price level falls, the real value of a dollar

Correct AnswerverifiedShow Answer

Which of the following rises during recessions?

Correct AnswerverifiedShow Answer

What curve shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level?

Correct AnswerverifiedThe aggreg...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the government raises taxes. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Correct AnswerverifiedThe aggreg...View AnswerShow Answer

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

Correct AnswerverifiedShow Answer

Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, then

Correct AnswerverifiedShow Answer

During the last half of 2012, the U.S. unemployment rate was just under 8 percent. Historical experience suggests that this is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

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The price level woul...
View Answer

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The aggreg...
View Answer

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The aggreg...
View Answer

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