Question 1

Figure 15-2.
 
-Refer to Stock Market Boom 2015. In the short run what happens to the price level and real GDP?

Accepted Answer

A)   both the price level and real GDP rise.
B)   both the price level and real GDP fall.
C)   the price level rises and real GDP falls.
D)   the price level falls and real GDP rises.E) None of the above
F) All of the above

Question 2

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

Question 3

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   an increase in the money supply
B)   an increase in net exports due to something other than a change in domestic prices
C)   an investment tax credit
D)   All of the above are correct.E) A) and C)
F) None of the above

Question 4

During recessions unemployment typically rises

Accepted Answer

A)   little. As the recession ends, unemployment declines gradually.
B)   little. As the recession ends, unemployment declines rapidly.
C)   substantially. As the recession ends, unemployment declines gradually.
D)   substantially. As the recession ends, unemployment declines rapidly.E) C) and D)
F) A) and B)

Question 5

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

Accepted Answer

A)   the price level and real GDP both to rise.
B)   the price level and real GDP both to fall.
C)   the price level and real GDP both to stay the same.
D)   All of the above are possible.E) All of the above
F) C) and D)

Question 6

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Accepted Answer

A) True 
 B)False

Question 7

Figure 15-1
 
-Refer to Figure 15-1. If the economy starts at A and there is a fall in aggregate demand, the economy moves

Accepted Answer

A)   back to A in the long run.
B)   to B in the long run.
C)   to C in the long run.
D)   to D in the long run.E) A) and B)
F) C) and D)

Question 8

Which of the following shifts aggregate demand right?

Accepted Answer

A)   both a decrease in the price level and the implementation of an investment tax credit
B)   a decrease in the price level but not the implementation of an investment tax credit
C)   the implementation of an investment tax credit but not a decrease in the price level
D)   neither a decrease in the price level nor the implementation of an investment tax creditE) None of the above
F) A) and C)

Question 9

Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

Accepted Answer

A)   Reducing either the minimum wage or the time and cost to open a business would have no effect on the long-run aggregate supply curve.
B)   Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right.
C)   Reducing the minimum wage would shift long-run aggregate supply to the right. Reducing the time and cost to open a business would have no affect on the long-run aggregate supply curve.
D)   Reducing the minimum wage would have no affect on the long-run aggregate supply curve. Reducing the time and cost to open a business would shift the long-run aggregate supply curve to the right.E) C) and D)
F) A) and B)

Question 10

Figure 15-2.
 1. C)  indicates that Y1 is the natural rate of output. D)  All of the above are correct. " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 15-2. The appearance of the long-run aggregate-supply (LRAS)  curve

Accepted Answer

A)   is inconsistent with the concept of monetary neutrality.
B)   is consistent with the idea that point A represents a long-run equilibrium but not a short-run equilibrium when the relevant short-run aggregate-supply curve is AS1.
C)   indicates that Y1 is the natural rate of output.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 11

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

Question 12

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

Question 13

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

Accepted Answer

A)   an increase in the price level
B)   an increase in the minimum wage
C)   a decrease in the price of oil
D)   more people migrate abroad than immigrate from abroadE) B) and C)
F) A) and C)

Question 14

Figure 15-2.
 
-Refer to Stock Market Boom 2015. How is the new long-run equilibrium different from the original one?

Accepted Answer

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

Question 15

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 16

Most economists believe that in the long run, changes in the money supply

Accepted Answer

A)   affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory.
B)   affect nominal but not real variables. This view that money is ultimately neutral is inconsistent with classical theory.
C)   affect real but not nominal variables. This view that money is ultimately neutral is consistent with classical theory.
D)   affect real but not nominal variables. This view that money is ultimately neutral is inconsistent with classical theory.E) None of the above
F) A) and B)

Question 17

The aggregate-demand curve shows the

Accepted Answer

A)   quantity of labor and other inputs that firms want to buy at each price level.
B)   quantity of labor and other inputs that firms want to buy at each inflation rate.
C)   quantity of domestically produced goods and services that households want to buy at each price level.
D)   quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level.E) B) and C)
F) B) and D)

Question 18

The aggregate demand and aggregate supply graph has the

Accepted Answer

A)   quantity of output on the horizontal axis. Output is best measured by real GDP.
B)   quantity of output on the horizontal axis. Output is best measured by nominal GDP.
C)   quantity of output on the vertical axis. Output is best measured by real GDP.
D)   quantity of output on the vertical axis. Output is best measured by nominal GDP.E) C) and D)
F) B) and C)

Question 19

Real GDP

Accepted Answer

A)   is the current dollar value of all goods produced by the citizens of an economy within a given time.
B)   measures economic activity and income.
C)   is used primarily to measure long-run changes rather than short-run fluctuations.
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 20

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

Accepted Answer

A)   It would have to have shifted left by less than aggregate supply.
B)   It would have to have shifted left by more than aggregate supply.
C)   It would have to have shifted right by less than aggregate supply.
D)   It would have to have shifted right by more than aggregate supply.E) None of the above
F) All of the above

Exam 15: Aggregate Demand and Aggregate Supply

Some countries have high minimum wages and require a lengthy and costly process to get permission to open a business

Correct AnswerverifiedShow Answer

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

Correct AnswerverifiedShow Answer

Real GDP

Correct AnswerverifiedShow Answer

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

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

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

Figure 15-2. -Refer to Stock Market Boom 2015. How is the new long-run equilibrium different from the original one?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

An increase in the money supply shifts the long-run aggregate supply curve to the right.

Correct AnswerverifiedShow Answer

The aggregate demand and aggregate supply graph has the

Correct AnswerverifiedShow Answer

Suppose that during the Great Depression long-run aggregate supply shifted left. To be consistent with what happened to the price level and output, what would have had to happen to aggregate demand?

Correct AnswerverifiedShow Answer

Figure 15-2. -Refer to Figure 15-2. The appearance of the long-run aggregate-supply (LRAS) curve

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 right?

Correct AnswerverifiedShow Answer

Figure 15-1 -Refer to Figure 15-1. If the economy starts at A and there is a fall in aggregate demand, the economy moves

Correct AnswerverifiedShow Answer

Figure 15-2. -Refer to Stock Market Boom 2015. In the short run what happens to the price level and real GDP?

Correct AnswerverifiedShow Answer

The aggregate-demand curve shows the

Correct AnswerverifiedShow Answer

Most economists believe that in the long run, changes in the money supply

Correct AnswerverifiedShow Answer

During recessions unemployment typically rises

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified