Question 1

Other things the same, continued increases in the money supply lead to

Accepted Answer

A)   continued increases in the price level and real GDP.
B)   continued increases in the price level but not continued increases in real GDP.
C)   continued increases in real GDP but not continued increases in the price level.
D)   a one-time permanent increase in both prices and real GDP.E) A) and D)
F) C) and D)

Question 2

The long-run aggregate supply curve shifts left if

Accepted Answer

A)   the capital stock increases.
B)   there is a natural disaster.
C)   the government removes some environmental regulations that limit production methods.
D)   None of the above is correct.E) A) and C)
F) A) and D)

Question 3

Which of the following would cause stagflation?

Accepted Answer

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

Question 4

When production costs rise,

Accepted Answer

A)   the short-run aggregate supply curve shifts to the right.
B)   the short-run aggregate supply curve shifts to the left.
C)   the aggregate demand curve shifts to the right.
D)   the aggregate demand curve shifts to the left.E) A) and B)
F) All of the above

Question 5

During recessions employment typically

Accepted Answer

A)   falls substantially. As the recession ends, employment rises rapidly.
B)   rises substantially. As the recession ends, employment declines gradually.
C)   falls substantially. As the recession ends, employment rises gradually.
D)   rises substantially. As the recession ends, employment declines rapidly.E) A) and B)
F) A) and C)

Question 6

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   a decrease in the money supply
B)   increases in the profitability of capital due perhaps to technological progress.
C)   the repeal of an investment tax credit
D)   a decrease in the price levelE) All of the above
F) B) and C)

Question 7

The position of the long-run aggregate supply curve

Accepted Answer

A)   is determined by resource usage and technology.
B)   is at the point where the unemployment rate is zero.
C)   shifts to the right when the money supply increases.
D)   is at the point where the economy would cease to grow.E) A) and D)
F) B) and C)

Question 8

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

Accepted Answer

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

Question 9

Suppose the expected price level increases. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Accepted Answer

The short run aggreg...

Question 10

Investment is a

Accepted Answer

A)   small part of real GDP, so it accounts for a small share of the fluctuation in real GDP.
B)   small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP.
C)   large part of real GDP, so it accounts for a large share of the fluctuation in real GDP.
D)   large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.E) C) and D)
F) All of the above

Question 11

According to the classical model, an increase in the money supply causes

Accepted Answer

A)   output to increase in the long run.
B)   the unemployment rate to fall in the long run.
C)   prices to rise in the long run.
D)   interest rates to fall in the long run.E) B) and C)
F) B) and D)

Question 12

An increase in the money supply causes the interest rate to fall, investment spending to rise, and aggregate demand to shift right.

Accepted Answer

A) True 
 B)False

Question 13

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Accepted Answer

A) True 
 B)False

Question 14

According to classical macroeconomic theory, changes in the money supply affect

Accepted Answer

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

Question 15

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) None of the above

Question 16

Which of the following accounts for about two-thirds of the decline in output during a recession?

Accepted Answer

A)   the decline in government purchases.
B)   the decline in total consumption spending.
C)   the decline in investment spending.
D)   the decline in net exports.E) A) and D)
F) B) and C)

Question 17

Using the aggregate demand and aggregate supply model, a decrease of what curve is by itself consistent with the changes in prices and output that occurred during the onset of the Great Depression?

Accepted Answer

The answer of Using the aggregate demand and aggregate supply...

Question 18

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

Accepted Answer

A) True 
 B)False

Question 19

Other things the same, an increase in the price level makes the dollars people hold worth

Accepted Answer

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

Question 20

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) C) and D)

Exam 15: Aggregate Demand and Aggregate Supply

The position of the long-run aggregate supply curve

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When production costs rise,

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

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Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

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

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Using the aggregate demand and aggregate supply model, a decrease of what curve is by itself consistent with the changes in prices and output that occurred during the onset of the Great Depression?

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According to classical macroeconomic theory, changes in the money supply affect

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Which of the following accounts for about two-thirds of the decline in output during a recession?

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Which of the following would cause stagflation?

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An increase in the money supply causes the interest rate to fall, investment spending to rise, and aggregate demand to shift right.

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Other things the same, continued increases in the money supply lead to

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Suppose the expected price level increases. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Correct AnswerverifiedThe short run aggreg...View AnswerShow Answer

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

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Which of the following shifts aggregate demand to the right?

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During recessions employment typically

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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

The long-run aggregate supply curve shifts left if

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Investment is a

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According to the classical model, an increase in the money supply causes

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Other things the same, an increase in the price level makes the dollars people hold worth

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The short run aggreg...
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