Question 1

The long-run aggregate supply curve shifts right if

Accepted Answer

A)   immigration from abroad increases.
B)   the capital stock increases.
C)   technology advances.
D)   All of the above are correct.E) A) and D)
F) None of the above

Question 2

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 3

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 C)
F) None of the above

Question 4

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   both an investment tax credit and a decrease in income tax rates
B)   an investment tax credit but not a decrease in income tax rates
C)   a decrease in income tax rates but not an investment tax credit
D)   neither an investment tax credit nor a decrease in income tax ratesE) B) and D)
F) A) and D)

Question 5

Other things the same, when the price level rises more than expected, some firms will have

Accepted Answer

A)   higher than desired prices, which increases their sales.
B)   higher than desired prices, which depresses their sales.
C)   lower than desired prices, which increases their sales.
D)   lower than desired prices, which depresses their sales.E) A) and D)
F) None of the above

Question 6

Which of the following shifts the short-run aggregate supply curve to the right?

Accepted Answer

A)   a decrease in the actual price level
B)   an increase in the actual price level
C)   a decrease in the expected price level
D)   an increase in the expected price levelE) A) and B)
F) A) and C)

Question 7

From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made people feel wealthier, then it would have shifted

Accepted Answer

A)   aggregate demand right.
B)   aggregate demand left.
C)   aggregate supply right.
D)   aggregate supply left.E) None of the above
F) B) and C)

Question 8

Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

Accepted Answer

The price level decr...

Question 9

Which of the following would both shift aggregate demand right?

Accepted Answer

A)   the price level decreases and government expenditures increase.
B)   the price level decreases and the government repeals an investment tax credit.
C)   taxes decrease and government expenditures increase.
D)   None of the above are correct.E) None of the above
F) B) and D)

Question 10

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

Question 11

As the price level rises, the interest rate

Accepted Answer

A)   falls, so the supply of dollars in the market for foreign currency exchange shifts left.
B)   falls, so the supply of dollars in the market for foreign currency exchange shifts right.
C)   rises, so the supply of dollars in the market for foreign currency exchange shifts left.
D)   rises, so the supply of dollars in the market for foreign currency exchange shifts right.E) All of the above
F) A) and B)

Question 12

When taxes decrease, consumption

Accepted Answer

A)   decreases as shown by a movement to the left along a given aggregate-demand curve.
B)   decreases as shown by a shift of the aggregate demand curve to the left.
C)   increases as shown by a movement to the right along a given aggregate-demand curve.
D)   increases as shown by a shift of the aggregate demand curve to the right.E) A) and B)
F) None of the above

Question 13

A relatively mild period of falling incomes and rising unemployment is called an)

Accepted Answer

A)   depression.
B)   recession.
C)   expansion.
D)   business cycle.E) C) and D)
F) None of the above

Question 14

Which of the following is included in the aggregate demand for goods and services?

Accepted Answer

A)   consumption demand
B)   investment demand
C)   net exports
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 15

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is correct?

Accepted Answer

A)   Real GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations can be predicted with some accuracy.
B)   Real GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy.
C)   Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. These fluctuations can be predicted with some accuracy.
D)   Nominal GDP is the variable most commonly used to measure short-run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy.E) B) and D)
F) A) and C)

Question 17

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

Accepted Answer

A)   real GDP and the price level are lower in country B.
B)   real GDP, but not the price level, is lower in country B.
C)   the price level, but not real GDP is lower in country B.
D)   neither the price level or real GDP is lower in country B.E) A) and D)
F) A) and C)

Question 18

Other things the same, when the price level falls, 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) All of the above
F) A) and D)

Question 19

List the three reasons for why the aggregate-demand curve slopes downward.

Accepted Answer

The wealth effect, t...

Question 20

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

Accepted Answer

A)   short-run aggregate supply shifts right
B)   short-run aggregate supply shifts left
C)   aggregate demand shifts right
D)   aggregate demand shifts leftE) B) and D)
F) B) and C)

Exam 15: Aggregate Demand and Aggregate Supply

A relatively mild period of falling incomes and rising unemployment is called an)

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Other things the same, when the price level rises more than expected, some firms will have

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The long-run aggregate supply curve shifts right if

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As the price level rises, the interest rate

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

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Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

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Which of the following shifts aggregate demand to the right?

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Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand?

Correct AnswerverifiedThe price level decr...View AnswerShow Answer

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

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

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Which of the following is included in the aggregate demand for goods and services?

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Which of the following is correct?

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Which of the following shifts the short-run aggregate supply curve to the right?

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List the three reasons for why the aggregate-demand curve slopes downward.

Correct AnswerverifiedThe wealth effect, t...View AnswerShow Answer

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

Correct AnswerverifiedShow Answer

Which of the following would both shift aggregate demand right?

Correct AnswerverifiedShow Answer

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made people feel wealthier, then it would have shifted

Correct AnswerverifiedShow Answer

When taxes decrease, consumption

Correct AnswerverifiedShow Answer

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The price level decr...
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The wealth effect, t...
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