Question 1

When the money supply increases

Accepted Answer

A)   interest rates fall and so aggregate demand shifts right.
B)   interest rates fall and so aggregate demand shifts left.
C)   interest rates rise and so aggregate demand shifts right.
D)   interest rates rise and so aggregate demand shifts left.E) A) and C)
F) A) and B)

Question 2

The aggregate demand and aggregate supply model implies monetary neutrality

Accepted Answer

A)   only in the short run.
B)   only in the long run.
C)   in both the short run and the long run.
D)   in neither the short run nor long run.E) All of the above
F) A) and B)

Question 3

Other things the same, the aggregate quantity of goods demanded decreases if

Accepted Answer

A)   real wealth falls.
B)   the interest rate rises.
C)   the dollar appreciates.
D)   All of the above are correct.E) A) and C)
F) C) and D)

Question 4

An increase in the interest rate causes investment to

Accepted Answer

A)   rise and the exchange rate to appreciate.
B)   fall and the exchange rate to depreciate.
C)   rise and the exchange rate to depreciate.
D)   fall and the exchange rate to appreciate.E) All of the above
F) A) and D)

Question 5

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. Suppose the economy reaches long-run equilibrium without the Fed responding. Now suppose the financial crisis ends and the ability of banks to lend returns to normal. In which case is the price level lower compared to its value prior to the crisis?

Accepted Answer

A)   both after the economy reaches long-run equilibrium during the crisis and in the long-run equilibrium after the crisis is over
B)   after the economy reaches long-run equilibrium during the crisis but not in the long-run equilibrium after the crisis is over
C)   in the long-run equilibrium after the crisis is over but not after the economy reaches long-run equilibrium during the crisis
D)   neither after the economy reaches long-run equilibrium during the crisis nor in the long-run equilibrium after the crisis is overE) B) and D)
F) All of the above

Question 6

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

Accepted Answer

A decrease in aggregate demand causes th...

Question 7

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)   an increase in the price level.
B)   households decide to save a larger fraction of their income.
C)   an increase in net exports.
D)   Congress passes a new investment tax credit.E) B) and D)
F) A) and B)

Question 8

Figure 33-6. 
-Refer to Figure 33-6. Which of the long-run aggregate-supply curves is consistent with a short-run economic expansion?

Accepted Answer

A)   LRAS1
B)   LRAS2
C)   LRAS3
D)   Both LRAS1 and LRAS3E) A) and D)
F) B) and C)

Question 9

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes. We would expect that the rebuilding increased aggregate demand in

Accepted Answer

A)   both the United States and Europe.
B)   the United States but not Europe.
C)   Europe, but not the United States.
D)   neither the United States, nor Europe.E) B) and C)
F) A) and D)

Question 10

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

Accepted Answer

A)   the real value of wealth
B)   the interest rate
C)   the value of currency in the market for foreign exchange
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 11

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Accepted Answer

A) True 
 B)False

Question 12

Figure 33-17. 
-Refer to Figure 33-17. Suppose the economy starts at P3 and Y2. Explain how government purchases would need to change to move the economy to P2 and Y1. What about taxes?

Accepted Answer

decrease in governme...

Question 13

When the price level increases, the real value of people's money holdings

Accepted Answer

A)   falls, so they buy more.
B)   falls, so they buy less.
C)   rises, so they buy more.
D)   rises, so they buy less.E) A) and C)
F) B) and C)

Question 14

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in short-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

Other things the same, as the price level rises, exchange rates

Accepted Answer

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

Question 17

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

Accepted Answer

A)   the slope of short-run aggregate supply.
B)   the slope of long-run aggregate supply.
C)   the slope of the aggregate-demand curve.
D)   everything that makes the aggregate-demand curve shift.E) A) and D)
F) A) and B)

Question 18

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

Accepted Answer

A)   decreases the real value of money.
B)   increases the real value of the dollar in foreign exchange markets.
C)   decreases the interest rate.
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 19

In which case can we be sure aggregate demand shifts left overall?

Accepted Answer

A)   people want to save more for retirement and the Fed increases the money supply.
B)   people want to save more for retirement and the Fed decreases the money supply.
C)   people want to save less for retirement and the Fed increases the money supply.
D)   people want to save less for retirement and the Fed decreases the money supply.E) A) and B)
F) C) and D)

Question 20

Which of the following is correct?

Accepted Answer

A)   The short-run, but not the long-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
B)   The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
C)   The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables.
D)   Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables.E) A) and B)
F) A) and C)

Exam 23: Aggregate Demand and Aggregate Supply

Figure 33-6. -Refer to Figure 33-6. Which of the long-run aggregate-supply curves is consistent with a short-run economic expansion?

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

Which of the following is correct?

Correct Answer
verified

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

Correct Answer
verified

When the money supply increases

Correct Answer
verified

In which case can we be sure aggregate demand shifts left overall?

Correct Answer
verified

The aggregate demand and aggregate supply model implies monetary neutrality

Correct Answer
verified

When the price level increases, the real value of people's money holdings

Correct Answer
verified

Which of the following shifts aggregate demand to the left?

Correct Answer
verified

An increase in the interest rate causes investment to

Correct Answer
verified

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in short-run aggregate supply.

Correct Answer
verified

Correct Answer
verified

Other things the same, the aggregate quantity of goods demanded decreases if

Correct Answer
verified

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

Correct Answer
verified

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

Correct Answer
verified
A decrease in aggregate demand causes th...
View Answer

Figure 33-17. -Refer to Figure 33-17. Suppose the economy starts at P3 and Y2. Explain how government purchases would need to change to move the economy to P2 and Y1. What about taxes?

Correct Answer
verified
decrease in governme...
View Answer

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes. We would expect that the rebuilding increased aggregate demand in

Correct Answer
verified

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

Correct Answer
verified

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Correct Answer
verified

Other things the same, as the price level rises, exchange rates

Correct Answer
verified

Exam 23: Aggregate Demand and Aggregate Supply

Figure 33-6. -Refer to Figure 33-6. Which of the long-run aggregate-supply curves is consistent with a short-run economic expansion?

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

Which of the following is correct?

Correct AnswerverifiedShow Answer

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

Correct AnswerverifiedShow Answer

When the money supply increases

Correct AnswerverifiedShow Answer

In which case can we be sure aggregate demand shifts left overall?

Correct AnswerverifiedShow Answer

The aggregate demand and aggregate supply model implies monetary neutrality

Correct AnswerverifiedShow Answer

When the price level increases, the real value of people's money holdings

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

An increase in the interest rate causes investment to

Correct AnswerverifiedShow Answer

In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in short-run aggregate supply.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things the same, the aggregate quantity of goods demanded decreases if

Correct AnswerverifiedShow Answer

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

Correct AnswerverifiedShow Answer

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

Correct AnswerverifiedA decrease in aggregate demand causes th...View AnswerShow Answer

Figure 33-17. -Refer to Figure 33-17. Suppose the economy starts at P3 and Y2. Explain how government purchases would need to change to move the economy to P2 and Y1. What about taxes?

Correct Answerverifieddecrease in governme...View AnswerShow Answer

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes. We would expect that the rebuilding increased aggregate demand in

Correct AnswerverifiedShow Answer

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

Correct AnswerverifiedShow Answer

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Correct AnswerverifiedShow Answer

Other things the same, as the price level rises, exchange rates

Correct AnswerverifiedShow Answer

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Correct Answer
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A decrease in aggregate demand causes th...
View Answer

Correct Answer
verified
decrease in governme...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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