Question 1

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

Question 2

Suppose the economy is in long-run equilibrium. If there is a sharp decline in government purchases 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 C)
F) A) and D)

Question 3

An unexpected increase in the price level that temporarily lowers real wages and induces more employment and output in an economy, occurs in

Accepted Answer

A)   nominal-supply theory.
B)   stagflation.
C)   misperceptions theory.
D)   sticky-wage theory.E) B) and D)
F) None of the above

Question 4

The aggregate supply curve is

Accepted Answer

A)   vertical in the long run and slopes upward in the short run.
B)   upward sloping in the long run and vertical in the short run.
C)   vertical in the short run and in the long run.
D)   upward sloping in the short run and in the long run.E) B) and C)
F) A) and C)

Question 5

Figure 33-5. 
-Refer to Figure 33-5. The shift of the short-run aggregate-supply curve from SRAS1 to SRAS2

Accepted Answer

A)   could be caused by an outbreak of war in the Middle East.
B)   could be caused by a decrease in the expected price level.
C)   causes the economy to experience an increase in the unemployment rate.
D)   causes the economy to experience stagflation.E) B) and C)
F) A) and C)

Question 6

A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run: 1. increase immigration from abroad 2. make trade more open between the US and other countries.

Accepted Answer

A)   1 and 2 both shift long-run aggregate supply right.
B)   1 and 2 both shift long-run aggregate supply left.
C)   1 shifts long-run aggregate supply right, 2 shifts long-run aggregate supply left.
D)   1 shifts long-run aggregate supply left, 2 shifts long-run aggregate supply right.E) None of the above
F) All of the above

Question 7

Refer to Political Instability Abroad. What would the change in the exchange rate make happen to U.S. net exports and U.S. aggregate demand?

Accepted Answer

A)   Net exports would rise which by itself would increase U.S. aggregate demand.
B)   Net exports would rise which by itself would decrease U.S. aggregate demand.
C)   Net exports would fall which by itself would increase U.S. aggregate demand.
D)   Net exports would fall which by itself would decrease U.S. aggregate demand.E) A) and B)
F) A) and D)

Question 8

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 Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

Accepted Answer

A)   The expected price level falls. Bargains are struck for higher wages.
B)   The expected price level falls. Bargains are struck for lower wages.
C)   The expected price level rises. Bargains are struck for higher wages.
D)   The expected price level rises. Bargains are struck for lower wages.E) A) and B)
F) B) and D)

Question 9

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to

Accepted Answer

A)   decrease consumption, which shifts aggregate supply left.
B)   decrease consumption, which shifts aggregate demand left.
C)   increase consumption, which shifts aggregate supply right.
D)   increase consumption, which shifts aggregate demand right.E) C) and D)
F) None of the above

Question 10

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Accepted Answer

A)   the price level to rise and real GDP to fall.
B)   the price level to fall and real GDP to rise.
C)   the price level and real GDP both to stay the same.
D)   All of the above are possible.E) All of the above
F) A) and C)

Question 11

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

Question 12

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

Accepted Answer

A)   both the short run and the long run.
B)   the short run, but not the long run.
C)   the long run, but not the short run.
D)   neither the long run nor the short run.E) None of the above
F) A) and B)

Question 13

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

Question 14

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Accepted Answer

A) True 
 B)False

Question 15

During World War II,

Accepted Answer

A)   government purchases of goods and services increased fivefold.
B)   the economy's production increased about 25 percent.
C)   unemployment fell to about 5%.
D)   All of the above are correct.E) All of the above
F) B) and D)

Question 16

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 money supply.
D)   an increase in taxes.E) C) and D)
F) None of the above

Question 17

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 18

Real GDP

Accepted Answer

A)   moves in the opposite direction as unemployment.
B)   increases as production falls.
C)   falls when households save a smaller fraction of their income.
D)   All of the above are correct.E) All of the above
F) C) and D)

Question 19

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

Accepted Answer

A)   consumer wealth rises
B)   borrowing rises
C)   each dollar is worth more domestic goods
D)   the dollar appreciates relative to other currenciesE) A) and B)
F) B) and D)

Question 20

The classical dichotomy and monetary neutrality are represented graphically by

Accepted Answer

A)   an upward-sloping long-run aggregate-supply curve.
B)   a vertical long-run aggregate-supply curve.
C)   an upward-sloping short-run aggregate-curve.
D)   a downward-sloping aggregate-demand curve.E) A) and D)
F) A) and C)

Exam 23: Aggregate Demand and Aggregate Supply

Refer to Political Instability Abroad. What would the change in the exchange rate make happen to U.S. net exports and U.S. aggregate demand?

Correct Answer
verified

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Correct Answer
verified

Real GDP

Correct Answer
verified

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Correct Answer
verified

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

Correct Answer
verified

A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run: 1. increase immigration from abroad 2. make trade more open between the US and other countries.

Correct Answer
verified

The classical dichotomy and monetary neutrality are represented graphically by

Correct Answer
verified

During World War II,

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

Tax cuts shift aggregate demand

Correct Answer
verified

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

Correct Answer
verified

Figure 33-5. -Refer to Figure 33-5. The shift of the short-run aggregate-supply curve from SRAS1 to SRAS2

Correct Answer
verified

An unexpected increase in the price level that temporarily lowers real wages and induces more employment and output in an economy, occurs in

Correct Answer
verified

Correct Answer
verified

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

Correct Answer
verified

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to

Correct Answer
verified

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 Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The aggregate supply curve is

Correct Answer
verified

Exam 23: Aggregate Demand and Aggregate Supply

Refer to Political Instability Abroad. What would the change in the exchange rate make happen to U.S. net exports and U.S. aggregate demand?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Correct AnswerverifiedShow Answer

Real GDP

Correct AnswerverifiedShow Answer

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Correct AnswerverifiedShow Answer

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

Correct AnswerverifiedShow Answer

A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run: 1. increase immigration from abroad 2. make trade more open between the US and other countries.

Correct AnswerverifiedShow Answer

The classical dichotomy and monetary neutrality are represented graphically by

Correct AnswerverifiedShow Answer

During World War II,

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

Tax cuts shift aggregate demand

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 33-5. -Refer to Figure 33-5. The shift of the short-run aggregate-supply curve from SRAS1 to SRAS2

Correct AnswerverifiedShow Answer

An unexpected increase in the price level that temporarily lowers real wages and induces more employment and output in an economy, occurs in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

Correct AnswerverifiedShow Answer

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to

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

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

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 aggregate supply curve is

Correct AnswerverifiedShow Answer

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The price level woul...
View Answer

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