Question 1

A change in the money supply changes only nominal variables in the long run.

Accepted Answer

A) True 
 B)False

Question 2

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to happen?

Accepted Answer

A)   In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be unaffected.
B)   In the short run, real GDP will fall, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be unaffected.
C)   In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be lower.
D)   In the short run, real GDP will fall, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be lower.E) B) and D)
F) B) and C)

Question 3

Most economists believe that classical theory explains the world in the short run, but not the long run.

Accepted Answer

A) True 
 B)False

Question 4

Economists mostly agree that the Great Depression was the result of a very large adverse supply shock.

Accepted Answer

A) True 
 B)False

Question 5

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

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 growthE) All of the above
F) None of the above

Question 6

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

Accepted Answer

An AD-induced recession lowers prices an...

Question 7

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 aggregate supply.

Accepted Answer

A) True 
 B)False

Question 8

What does a rise in the economy's overall level of prices tend to do?

Accepted Answer

A)   It tends to raise both the quantity demanded and supplied of goods and services.
B)   It tends to raise the quantity demanded of goods and services but lower the quantity supplied.
C)   It tends to lower the quantity demanded of goods and services but raise the quantity supplied.
D)   It tends to lower both the quantity demanded and the quantity supplied of goods and services.E) B) and C)
F) A) and B)

Question 9

Scenario 14-1
The economy is in long-run equilibrium. Suddenly, due to improved international relations, a boom experienced by a major trading partner, and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time.
-Refer to the Scenario 14-1. How does the new long-run equilibrium differ from the original one?

Accepted Answer

A)   Both the price level and real GDP are higher.
B)   Both the price level and real GDP are lower.
C)   The price level is the same and real GDP is higher.
D)   The price level is higher and real GDP is the same.E) B) and D)
F) C) and D)

Question 10

According to the aggregate demand and aggregate supply model, in the long run what is the impact of an increase in the money supply?

Accepted Answer

A)   It lowers both the price level and real GDP.
B)   It increases GDP, but it does not change the price level.
C)   It increases the price level, but it does not change real GDP.
D)   It increases both the price level and real GDP.E) None of the above
F) A) and D)

Question 11

The explanations for the downward slope of the aggregate demand curve say that as the price level rises, consumption, investment, and net exports all fall.

Accepted Answer

A) True 
 B)False

Question 12

When all prices rise together, there is no change in the overall quantity of goods and services supplied.

Accepted Answer

A) True 
 B)False

Question 13

A decrease in the price level makes consumers feel more wealthy. How is this situation represented?

Accepted Answer

A)   Aggregate demand shifts right.
B)   Aggregate demand shifts left.
C)   There is a movement to the right along a given aggregate-demand curve.
D)   There is a movement to the left along a given aggregate-demand curve.E) A) and B)
F) None of the above

Question 14

Which of the following measures the overall price level?

Accepted Answer

A)   the price of some particular commodity or service
B)   the rate of inflation
C)   the consumer price index
D)   the nominal GDPE) A) and D)
F) B) and C)

Question 15

In which situation does investment spending decrease?

Accepted Answer

A)   when the price level rises, causing interest rates to rise
B)   when the price level rises, causing interest rates to fall
C)   when the price level falls, causing interest rates to rise
D)   when the price level falls, causing interest rates to fallE) A) and B)
F) B) and C)

Question 16

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   an increase in the money supply
B)   a decrease in net exports at every exchange rate
C)   a decrease in prices
D)   an increase in importsE) B) and D)
F) All of the above

Question 17

What has been suggested as a cause of the Great Depression?

Accepted Answer

A)   a decline in output
B)   a decrease in prices
C)   strong bank regulations
D)   a decrease in the money supplyE) C) and D)
F) B) and C)

Question 18

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)   a decrease in exports
B)   a decrease in taxes
C)   a decrease in imports
D)   a decrease in interest ratesE) B) and C)
F) All of the above

Question 19

What impact do changes in the price of oil have on producers who use oil inputs today as compared to producers who used oil inputs during the OPEC price shock in 1973?

Accepted Answer

A)   greater impact
B)   smaller impact
C)   no impact
D)   similar impactE) None of the above
F) A) and B)

Question 20

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, there is a sharp decline in the stock market. What would we expect to happen in the short run?

Accepted Answer

A)   Real GDP will rise, and the price level might rise, fall, or stay the same.
B)   Real GDP will fall, and the price level might rise, fall, or stay the same.
C)   The price level will rise, and real GDP might rise, fall, or stay the same.
D)   The price level will fall, and real GDP might rise, fall, or stay the same.E) A) and B)
F) B) and C)

Exam 14: Aggregate Demand and Aggregate Supply

Which of the following shifts aggregate demand to the right?

Correct Answer
verified

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to happen?

Correct Answer
verified

Economists mostly agree that the Great Depression was the result of a very large adverse supply shock.

Correct Answer
verified

What does a rise in the economy's overall level of prices tend to do?

Correct Answer
verified

A change in the money supply changes only nominal variables in the long run.

Correct Answer
verified

The explanations for the downward slope of the aggregate demand curve say that as the price level rises, consumption, investment, and net exports all fall.

Correct Answer
verified

According to the aggregate demand and aggregate supply model, in the long run what is the impact of an increase in the money supply?

Correct Answer
verified

Which of the following shifts aggregate demand to the left?

Correct Answer
verified

What has been suggested as a cause of the Great Depression?

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 aggregate supply.

Correct Answer
verified

In which situation does investment spending decrease?

Correct Answer
verified

Most economists believe that classical theory explains the world in the short run, but not the long run.

Correct Answer
verified

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

Correct Answer
verified
An AD-induced recession lowers prices an...
View Answer

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

Correct Answer
verified

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, there is a sharp decline in the stock market. What would we expect to happen in the short run?

Correct Answer
verified

When all prices rise together, there is no change in the overall quantity of goods and services supplied.

Correct Answer
verified

A decrease in the price level makes consumers feel more wealthy. How is this situation represented?

Correct Answer
verified

Which of the following measures the overall price level?

Correct Answer
verified

Correct Answer
verified

What impact do changes in the price of oil have on producers who use oil inputs today as compared to producers who used oil inputs during the OPEC price shock in 1973?

Correct Answer
verified

Exam 14: Aggregate Demand and Aggregate Supply

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to happen?

Correct AnswerverifiedShow Answer

Economists mostly agree that the Great Depression was the result of a very large adverse supply shock.

Correct AnswerverifiedShow Answer

What does a rise in the economy's overall level of prices tend to do?

Correct AnswerverifiedShow Answer

A change in the money supply changes only nominal variables in the long run.

Correct AnswerverifiedShow Answer

The explanations for the downward slope of the aggregate demand curve say that as the price level rises, consumption, investment, and net exports all fall.

Correct AnswerverifiedShow Answer

According to the aggregate demand and aggregate supply model, in the long run what is the impact of an increase in the money supply?

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

What has been suggested as a cause of the Great Depression?

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 aggregate supply.

Correct AnswerverifiedShow Answer

In which situation does investment spending decrease?

Correct AnswerverifiedShow Answer

Most economists believe that classical theory explains the world in the short run, but not the long run.

Correct AnswerverifiedShow Answer

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession. How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

Correct AnswerverifiedAn AD-induced recession lowers prices an...View AnswerShow Answer

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, there is a sharp decline in the stock market. What would we expect to happen in the short run?

Correct AnswerverifiedShow Answer

When all prices rise together, there is no change in the overall quantity of goods and services supplied.

Correct AnswerverifiedShow Answer

A decrease in the price level makes consumers feel more wealthy. How is this situation represented?

Correct AnswerverifiedShow Answer

Which of the following measures the overall price level?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What impact do changes in the price of oil have on producers who use oil inputs today as compared to producers who used oil inputs during the OPEC price shock in 1973?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
An AD-induced recession lowers prices an...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified