Question 1

If the price level rises above what was expected and nominal wages are fixed, then

Accepted Answer

A)   production becomes less profitable so firms will hire fewer workers.
B)   production becomes less profitable so firms will hire more workers.
C)   production becomes more profitable so firms will hire fewer workers.
D)   production becomes more profitable so firms will hire more workers.E) A) and C)
F) C) and D)

Question 2

If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net exports

Accepted Answer

A)   increase which shifts aggregate demand right.
B)   increase which shifts aggregate demand left.
C)   decrease which shifts aggregate demand right.
D)   decrease which shifts aggregate demand left.E) A) and D)
F) A) and C)

Question 3

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Accepted Answer

A)   in the price level and output.
B)   in the price level, but not output.
C)   in output, but not the price level.
D)   in neither the price level nor output.E) All of the above
F) C) and D)

Question 4

Other things the same, a decrease in the price level causes real wealth to

Accepted Answer

A)   fall, interest rates to fall, and the dollar to appreciate.
B)   fall, interest rates to rise, and the dollar to depreciate.
C)   rise, interest rates to rise, and the dollar to appreciate.
D)   rise, interest rates to fall, and the dollar to depreciate.E) A) and B)
F) A) and C)

Question 5

We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

Accepted Answer

A) True 
 B)False

Question 6

Figure 33-14. 
-Refer to Figure 33-14. Identify which long run aggregate-supply curves) would be consistent with long-run equilibrium.

Accepted Answer

The answer of Figure 33-14. 
-Refer to Figure 33-14. Identify...

Question 7

Which of the following lists includes only changes that shift aggregate demand to the right?

Accepted Answer

A)   repeal of an investment tax credit, an increase in the money supply
B)   repeal of an investment tax credit, a decrease in the money supply
C)   passing of an investment tax credit, an increase in the money supply
D)   passing of an investment tax credit, a decrease in the money supplyE) C) and D)
F) All of the above

Question 8

An increase in the money supply

Accepted Answer

A)   and an investment tax credit both cause aggregate demand to shift right.
B)   and an investment tax credit both cause aggregate demand to shift left.
C)   causes aggregate demand to shift right, while an investment tax credit causes aggregate demand to shift left.
D)   causes aggregate demand to shift left, while an investment tax credit causes aggregate demand to shift right.E) B) and D)
F) B) and C)

Question 9

Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time.
-Refer to Financial Crisis. If nominal wages are sticky, which of the following helps explains the change in output?

Accepted Answer

A)   real wages fall, so firms choose to produce less
B)   real wages fall, so firms choose to produce more
C)   real wages rise, so firms choose to produce less
D)   real wages rise, so firms choose to produce moreE) A) and B)
F) All of the above

Question 10

At a given price level, an increase in which of the following shifts aggregate demand to the right?

Accepted Answer

A)   consumption
B)   investment
C)   government expenditures
D)   All of the above are correct.E) B) and C)
F) B) and D)

Question 11

Other things the same, when the price level rises, interest rates

Accepted Answer

A)   rise, which means consumers will want to spend more on homebuilding.
B)   rise, which means consumers will want to spend less on homebuilding.
C)   fall, which means consumers will want to spend more on homebuilding.
D)   fall, which means consumers will want to spend less on homebuilding.E) B) and D)
F) C) and D)

Question 12

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

Accepted Answer

A)   both sticky price theory and sticky wage theory
B)   sticky price theory but not sticky wage theory
C)   sticky wage theory but not sticky price theory
D)   neither sticky wage theory nor sticky price theoryE) A) and B)
F) None of the above

Question 13

Other things the same, technological progress raises the price level.

Accepted Answer

A) True 
 B)False

Question 14

A decrease in the money supply causes the interest rate to rise so that investment falls.

Accepted Answer

A) True 
 B)False

Question 15

A decrease in U.S. interest rates leads to

Accepted Answer

A)   a depreciation of the dollar that leads to greater net exports.
B)   a depreciation of the dollar that leads to smaller net exports.
C)   an appreciation of the dollar that leads to greater net exports.
D)   an appreciation of the dollar that leads to smaller net exports.E) B) and C)
F) None of the above

Question 16

Which part of real GDP fluctuates most over the course of the business cycle?

Accepted Answer

A)   consumption expenditures
B)   government expenditures
C)   investment expenditures
D)   net exportsE) B) and C)
F) A) and C)

Question 17

Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time.
-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) All of the above
F) A) and D)

Question 18

Other things the same, an increase in the price level causes the interest rate to

Accepted Answer

A)   increase, the dollar to depreciate, and net exports to increase.
B)   increase, the dollar to appreciate, and net exports to decrease.
C)   decrease, the dollar to depreciate, and net exports to increase.
D)   decrease, the dollar to appreciate, and net exports to decrease.E) None of the above
F) All of the above

Question 19

When interest rates fall

Accepted Answer

A)   firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding.
B)   firms want to borrow more for new plants and equipment and households want to borrow less for homebuilding.
C)   firms want to borrow less for new plants and equipment and households want to borrow more for homebuilding.
D)   firms want to borrow less for new plants and equipment and households want to borrow less for homebuilding.E) None of the above
F) All of the above

Question 20

Suppose a country experiences an increase in its capital stock. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Accepted Answer

The short-run and lo...

Exam 23: Aggregate Demand and Aggregate Supply

Correct Answer
verified

Correct Answer
verified

Which of the following lists includes only changes that shift aggregate demand to the right?

Correct Answer
verified

Other things the same, technological progress raises the price level.

Correct Answer
verified

Other things the same, a decrease in the price level causes real wealth to

Correct Answer
verified

A decrease in the money supply causes the interest rate to rise so that investment falls.

Correct Answer
verified

Figure 33-14. -Refer to Figure 33-14. Identify which long run aggregate-supply curves) would be consistent with long-run equilibrium.

Correct Answer
verified

A decrease in U.S. interest rates leads to

Correct Answer
verified

If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net exports

Correct Answer
verified

Other things the same, when the price level rises, interest rates

Correct Answer
verified

At a given price level, an increase in which of the following shifts aggregate demand to the right?

Correct Answer
verified

Other things the same, an increase in the price level causes the interest rate to

Correct Answer
verified

Which part of real GDP fluctuates most over the course of the business cycle?

Correct Answer
verified

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Correct Answer
verified

When interest rates fall

Correct Answer
verified

We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

Correct Answer
verified

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

Correct Answer
verified

If the price level rises above what was expected and nominal wages are fixed, then

Correct Answer
verified

Suppose a country experiences an increase in its capital stock. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Correct Answer
verified
The short-run and lo...
View Answer

An increase in the money supply

Correct Answer
verified

Exam 23: Aggregate Demand and Aggregate Supply

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following lists includes only changes that shift aggregate demand to the right?

Correct AnswerverifiedShow Answer

Other things the same, technological progress raises the price level.

Correct AnswerverifiedShow Answer

Other things the same, a decrease in the price level causes real wealth to

Correct AnswerverifiedShow Answer

A decrease in the money supply causes the interest rate to rise so that investment falls.

Correct AnswerverifiedShow Answer

Figure 33-14. -Refer to Figure 33-14. Identify which long run aggregate-supply curves) would be consistent with long-run equilibrium.

Correct AnswerverifiedShow Answer

A decrease in U.S. interest rates leads to

Correct AnswerverifiedShow Answer

If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net exports

Correct AnswerverifiedShow Answer

Other things the same, when the price level rises, interest rates

Correct AnswerverifiedShow Answer

At a given price level, an increase in which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

Other things the same, an increase in the price level causes the interest rate to

Correct AnswerverifiedShow Answer

Which part of real GDP fluctuates most over the course of the business cycle?

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Correct AnswerverifiedShow Answer

When interest rates fall

Correct AnswerverifiedShow Answer

We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

Correct AnswerverifiedShow Answer

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

Correct AnswerverifiedShow Answer

If the price level rises above what was expected and nominal wages are fixed, then

Correct AnswerverifiedShow Answer

Suppose a country experiences an increase in its capital stock. Which curves) in the aggregate demand and aggregate supply model would be affected, and which way would it they) shift?

Correct AnswerverifiedThe short-run and lo...View AnswerShow Answer

An increase in the money supply

Correct AnswerverifiedShow 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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The short-run and lo...
View Answer

Correct Answer
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