Question 1

When taxes increase, consumption

Accepted Answer

A)   increases, so aggregate demand shifts right.
B)   increases, so aggregate supply shifts right.
C)   decreases, so aggregate demand shifts left.
D)   decreases, so aggregate supply shifts left.E) A) and B)
F) A) and C)

Question 2

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) B) and C)

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

Question 4

Which of the following is correct?

Accepted Answer

A)   An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left.
B)   An increase in stock prices reduces consumption spending so that aggregate demand shifts left.
C)   An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left.
D)   A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left.E) A) and C)
F) A) and B)

Question 5

Make a list of things that would shift the aggregate demand curve to the right.

Accepted Answer

Examples (and variations on examples) in...

Question 6

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

Question 7

Make a list of expenditures whose sum equals GDP.

Accepted Answer

consumption, investm...

Question 8

Figure 33-8. 
-Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P3 and Y3 , then it must be the case that

Accepted Answer

A)   short run aggregate supply has decreased.
B)   short run aggregate supply has increased.
C)   aggregate demand has increased.
D)   aggregate demand has decreased.E) A) and B)
F) A) and C)

Question 9

The wealth effect helps explain what feature in the aggregate demand and aggregate supply model?

Accepted Answer

why the ag...

Question 10

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

Question 11

During World War II, the economy's production increased about

Accepted Answer

A)   25 percent and prices rose about 5 percent.
B)   50 percent and prices rose about 10 percent.
C)   75 percent and prices rose about 15 percent.
D)   100 percent and prices rose about 20 percent.E) A) and B)
F) None of the above

Question 12

Which of the following shifts the long-run aggregate supply curve to the left?

Accepted Answer

A)   either an increase in the price of imported natural resources or a reduction in trade restrictions.
B)   neither an increase in the price of imported natural resources or a reduction in trade restrictions.
C)   an increase in the price of imported natural resources and an increase in trade restrictions.
D)   an increase in trade restrictions and a decrease in the price of imported natural resources.E) C) and D)
F) A) and C)

Question 13

Other things the same, if the price level rises, people

Accepted Answer

A)   increase foreign bond purchases, so the dollar appreciates.
B)   increase foreign bond purchases, so the dollar depreciates.
C)   increase domestic bond purchases, so the dollar appreciates.
D)   increase domestic bond purchases, so the dollar depreciates.E) C) and D)
F) All of the above

Question 14

Most economists believe that in the short run

Accepted Answer

A)   real and nominal variables are determined independently and that money cannot move real GDP away from its long-run trend.
B)   real and nominal variables are determined independently but that money can temporarily move real GDP away from its long-run trend.
C)   real and nominal variables are highly intertwined but that money cannot move real GDP away from its long- run trend.
D)   real and nominal variables are highly intertwined and that money can temporarily move real GDP away from its long-run trend.E) B) and D)
F) None of the above

Question 15

The model of aggregate demand and aggregate supply explains the relationship between

Accepted Answer

A)   the price and quantity of a particular good.
B)   unemployment and output.
C)   wages and employment.
D)   real GDP and the price level.E) None of the above
F) A) and D)

Question 16

"Money is a veil" best describes the

Accepted Answer

A)   new-Keynesian view.
B)   Keynesian view.
C)   classical view.
D)   economy in the short run but not the long run.E) All of the above
F) None of the above

Question 17

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Accepted Answer

A)   short-run fluctuations in the economy.
B)   the effects of macroeconomic policy on the prices of individual goods.
C)   the long-run effects of international trade policies.
D)   productivity and economic growth.E) A) and C)
F) All of the above

Question 18

In the aggregate demand and aggregate supply model, the point where the aggregate demand curve crosses the long run aggregate supply curve, and the expected price level equals the actual price level, is known as what?

Accepted Answer

Long run e...

Question 19

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Accepted Answer

A)   prices and output both increased immediately.
B)   prices increased immediately while output remained unchanged.
C)   it took time for prices to rise; in the meantime output was lower.
D)   it took time for prices to rise; in the meantime output was higher.E) C) and D)
F) A) and B)

Question 20

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 B)
F) A) and C)

Exam 33: Aggregate Demand and Aggregate Supply

Make a list of expenditures whose sum equals GDP.

Correct Answerverifiedconsumption, investm...View AnswerShow Answer

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Correct AnswerverifiedShow Answer

In the aggregate demand and aggregate supply model, the point where the aggregate demand curve crosses the long run aggregate supply curve, and the expected price level equals the actual price level, is known as what?

Correct AnswerverifiedLong run e...View AnswerShow Answer

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

The model of aggregate demand and aggregate supply explains the relationship between

Correct AnswerverifiedShow Answer

Which of the following shifts the long-run aggregate supply curve to the left?

Correct AnswerverifiedShow Answer

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P3 and Y3 , then it must be the case that

Correct AnswerverifiedShow Answer

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

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

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

Correct AnswerverifiedShow Answer

Make a list of things that would shift the aggregate demand curve to the right.

Correct AnswerverifiedExamples (and variations on examples) in...View AnswerShow Answer

"Money is a veil" best describes the

Correct AnswerverifiedShow Answer

When taxes increase, consumption

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

During World War II, the economy's production increased about

Correct AnswerverifiedShow Answer

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Correct AnswerverifiedShow Answer

The wealth effect helps explain what feature in the aggregate demand and aggregate supply model?

Correct Answerverifiedwhy the ag...View AnswerShow Answer

Most economists believe that in the short run

Correct AnswerverifiedShow Answer

Other things the same, if the price level rises, people

Correct AnswerverifiedShow Answer

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consumption, investm...
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Long run e...
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Examples (and variations on examples) in...
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why the ag...
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