Question 1

Historically, the change in real GDP during recessions has been

Accepted Answer

A)   mostly a change in investment spending.
B)   mostly a change in consumption spending.
C)   about equally divided between consumption and investment spending.
D)   sometimes mostly a change in consumption and sometimes mostly a change in investment.E) A) and B)
F) All of the above

Question 2

Sticky nominal wages can result in

Accepted Answer

A)   lower profits for firms when the price level is lower than expected.
B)   a decrease in real wages when the price level is lower than expected.
C)   a short-run aggregate-supply curve that is vertical.
D)   a long-run aggregate-supply curve that is upward-sloping.E) A) and B)
F) B) and C)

Question 3

The aggregate-demand curve shows that a decrease in the price level

Accepted Answer

A)   decreases the dollar value of goods and services demanded in the economy.
B)   decreases the real value of goods and services demanded in the economy.
C)   increases the dollar value of goods and services demanded in the economy.
D)   increases the real value of goods and services demanded in the economy.E) A) and B)
F) None of the above

Question 4

Other things the same, as the price level rises,

Accepted Answer

A)   the dollar depreciates.
B)   the interest rate falls.
C)   people feel less wealthy.
D)   All of the above are correct.E) B) and C)
F) A) and C)

Question 5

Other things the same, as the price level falls, which of the following increases?

Accepted Answer

A)   lending and investment spending
B)   lending, but not investment spending
C)   investment spending, but not lending
D)   neither investment spending nor lendingE) All of the above
F) B) and D)

Question 6

Which of the following would cause prices and real GDP 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) None of the above
F) A) and B)

Question 7

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 8

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

Accepted Answer

A)   the supply of dollars would shift right and the exchange rate would rise.
B)   the supply of dollars would shift right and the exchange rate would fall.
C)   the supply of dollars would shift left and the exchange rate would rise.
D)   None of the above is correct.E) B) and C)
F) None of the above

Question 9

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Accepted Answer

A)   because unemployment is low, wages will be bid up and short-run aggregate supply will shift right.
B)   because unemployment is low, wages will be bid down and short-run aggregate supply will shift right.
C)   because unemployment is high, wages will be bid up and short-run aggregate supply will shift right.
D)   because unemployment is high, wages will be bid down and short-run aggregate supply will shift right.E) None of the above
F) A) and B)

Question 10

Refer to Political Instability Abroad. What would happen to the dollar?

Accepted Answer

A)   It would appreciate in foreign exchange markets making U.S goods more expensive compared to foreign goods.
B)   It would appreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods.
C)   It would depreciate in foreign exchange markets making U.S. goods more expensive compared to foreign goods.
D)   It would depreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods.E) A) and B)
F) None of the above

Question 11

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

Accepted Answer

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

Question 12

An economic expansion caused by a shift in aggregate demand causes prices to

Accepted Answer

A)   rise in the short run, and rise even more in the long run.
B)   rise in the short run, and fall back to their original level in the long run.
C)   fall in the short run, and fall even more in the long run.
D)   fall in the short run, and rise back to their original level in the long run.E) A) and C)
F) B) and D)

Question 13

Which of the following shifts short-run, but not long-run aggregate supply right?

Accepted Answer

A)   a decrease in the actual price level
B)   a decrease in the expected price level
C)   a decrease in the capital stock
D)   an increase in the money supplyE) All of the above
F) A) and C)

Question 14

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 15

Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time.
-Refer to Optimism. In the long run, the change in price expectations created by optimism shifts

Accepted Answer

A)   long-run aggregate supply right.
B)   long-run aggregate supply left.
C)   short-run aggregate supply right.
D)   short-run aggregate supply left.E) A) and B)
F) A) and C)

Question 16

Other things the same, if the long-run aggregate supply curve shifts right, prices

Accepted Answer

A)   and output both increase.
B)   and output both decrease.
C)   increase and output decreases.
D)   decrease and output increases.E) B) and C)
F) None of the above

Question 17

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

Accepted Answer

Expected price level changes w...

Question 18

If money is neutral, then changes in the quantity of money

Accepted Answer

A)   do not affect real output.
B)   affect both nominal and real output
C)   do not affect nominal output.
D)   affect neither nominal nor real output.E) A) and B)
F) A) and C)

Question 19

Changes in what four variables will shift the long run aggregate supply curve?

Accepted Answer

Labor, capital, natu...

Question 20

The long-run aggregate supply curve would shift right if the government were to

Accepted Answer

A)   reduce the minimum-wage.
B)   make unemployment benefits more generous.
C)   raise taxes on investment spending.
D)   All of the above are correct.E) B) and C)
F) B) and D)

Exam 23: Aggregate Demand and Aggregate Supply

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

Correct Answer
verified

Changes in what four variables will shift the long run aggregate supply curve?

Correct Answer
verified
Labor, capital, natu...
View Answer

Refer to Political Instability Abroad. What would happen to the dollar?

Correct Answer
verified

Sticky nominal wages can result in

Correct Answer
verified

Historically, the change in real GDP during recessions has been

Correct Answer
verified

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

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 taxes, then in the short run, real GDP will

Correct Answer
verified

The aggregate-demand curve shows that a decrease in the price level

Correct Answer
verified

Which of the following shifts short-run, but not long-run aggregate supply right?

Correct Answer
verified

Which of the following would cause prices and real GDP to rise in the short run?

Correct Answer
verified

If money is neutral, then changes in the quantity of money

Correct Answer
verified

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Correct Answer
verified

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

Correct Answer
verified
Expected price level changes w...
View Answer

Other things the same, as the price level rises,

Correct Answer
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Correct Answer
verified

The long-run aggregate supply curve would shift right if the government were to

Correct Answer
verified

Other things the same, as the price level falls, which of the following increases?

Correct Answer
verified

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

Correct Answer
verified

Other things the same, if the long-run aggregate supply curve shifts right, prices

Correct Answer
verified

An economic expansion caused by a shift in aggregate demand causes prices to

Correct Answer
verified

Exam 23: Aggregate Demand and Aggregate Supply

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

Correct AnswerverifiedShow Answer

Changes in what four variables will shift the long run aggregate supply curve?

Correct AnswerverifiedLabor, capital, natu...View AnswerShow Answer

Refer to Political Instability Abroad. What would happen to the dollar?

Correct AnswerverifiedShow Answer

Sticky nominal wages can result in

Correct AnswerverifiedShow Answer

Historically, the change in real GDP during recessions has been

Correct AnswerverifiedShow Answer

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

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 taxes, then in the short run, real GDP will

Correct AnswerverifiedShow Answer

The aggregate-demand curve shows that a decrease in the price level

Correct AnswerverifiedShow Answer

Which of the following shifts short-run, but not long-run aggregate supply right?

Correct AnswerverifiedShow Answer

Which of the following would cause prices and real GDP to rise in the short run?

Correct AnswerverifiedShow Answer

If money is neutral, then changes in the quantity of money

Correct AnswerverifiedShow Answer

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Correct AnswerverifiedShow Answer

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

Correct AnswerverifiedExpected price level changes w...View AnswerShow Answer

Other things the same, as the price level rises,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve would shift right if the government were to

Correct AnswerverifiedShow Answer

Other things the same, as the price level falls, which of the following increases?

Correct AnswerverifiedShow Answer

Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency exchange?

Correct AnswerverifiedShow Answer

Other things the same, if the long-run aggregate supply curve shifts right, prices

Correct AnswerverifiedShow Answer

An economic expansion caused by a shift in aggregate demand causes prices to

Correct AnswerverifiedShow Answer

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Correct Answer
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Labor, capital, natu...
View Answer

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Expected price level changes w...
View Answer

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