Question 1

If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net exports

Accepted Answer

A)  increase which shifts aggregate demand right.
B)  increase which shifts aggregate demand left.
C)  decrease which shifts aggregate demand right.
D)  decrease which shifts aggregate demand left.E) A) and B)
F) B) and C)

Question 2

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Accepted Answer

A)  relative to prices wages are higher and employment rise.
B)  relative to prices wages are higher and employment falls.
C)  relative to prices wages are lower and employment rises.
D)  relative to prices wages are lower and employment falls.E) B) and C)
F) None of the above

Question 3

A change in the supply of labor, all else remaining the same, will shift the short-run aggregate-supply curve.​

Accepted Answer

A) True 
 B)False

Question 4

If aggregate demand and aggregate supply both shift right, we can be sure that the price level is higher in the short run.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Which of the following correctly expresses why the short-run aggregate-supply curve slopes upward?

Accepted Answer

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

Question 7

Refer to Pessimism. How is the new long-run equilibrium different from the original one?

Accepted Answer

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

Question 8

Other things the same, if the price level falls, people

Accepted Answer

A)  increase foreign bond purchases, so the dollar appreciates.
B)  increase foreign bond purchases, so the dollar depreciates.
C)  increase domestic bond purchases, so the dollar appreciates.
D)  increase domestic bond purchases, so the dollar depreciates.E) A) and C)
F) A) and D)

Question 9

Which of the following would raise the price level in both the short and long run?

Accepted Answer

A)  an increase in taxes
B)  an increase in government expenditures
C)  a decrease in the minimum wage
D)  an increase in the capital stockE) C) and D)
F) A) and B)

Question 10

The initial impact of the repeal of an investment tax credit is to shift

Accepted Answer

A)  aggregate demand right.
B)  aggregate demand left.
C)  aggregate supply right.
D)  aggregate supply left.E) A) and C)
F) All of the above

Question 11

The long-run aggregate supply curve shifts right if

Accepted Answer

A)  technology improves.
B)  the price level decreases.
C)  the money supply increases.
D)  All of the above are correct.E) B) and D)
F) None of the above

Question 12

Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Accepted Answer

A)  as people revise their price-level expectations upward, firms and workers strike bargains for higher nominal wages.
B)  as people revise their price-level expectations upward, firms and workers strike bargains for lower nominal wages.
C)  as people revise their price-level expectations downward, firms and workers strike bargains for higher nominal wages.
D)  as people revise their price-level expectations downward, firms and workers strike bargains for lower nominal wages.E) A) and D)
F) B) and C)

Question 13

Consider the exhibit below for the following questions.
Figure 33-4 
-Refer to Figure 33-4. If the economy starts at A, a decrease in the money supply moves the economy

Accepted Answer

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

Question 14

Which of the following typically rises during a recession?

Accepted Answer

A)  investment.
B)  unemployment.
C)  tax revenues.
D)  new home construction.E) A) and B)
F) All of the above

Question 15

Tax cuts shift aggregate demand

Accepted Answer

A)  right as do increases in government spending.
B)  right while increases in government spending shift aggregate demand left.
C)  left as do increases in government spending.
D)  left while increases in government spending shift aggregate demand right.E) B) and C)
F) All of the above

Question 16

Other things the same, if the price level falls, domestic interest rates

Accepted Answer

A)  rise, so domestic residents will want to hold more foreign bonds.
B)  rise, so domestic residents will want to hold fewer foreign bonds.
C)  fall, so domestic residents will want to hold more foreign bonds.
D)  fall, so domestic residents will want to hold fewer foreign bonds.E) All of the above
F) A) and B)

Question 17

The recessions of the 1970s are often attributed to

Accepted Answer

A)  declining inflation expectations.
B)  an increase in oil prices.
C)  declines in the price of stock.
D)  decreases in the money supply.E) A) and D)
F) B) and C)

Question 18

When the price level falls

Accepted Answer

A)  people want to hold more money.
B)  the interest rate rises.
C)  investment spending rises.
D)  All of the above are correct.E) All of the above
F) None of the above

Question 19

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

Accepted Answer

A)  employment and production rise.
B)  employment rises and production falls.
C)  employment falls and production rises.
D)  employment and production fall.E) B) and C)
F) A) and D)

Question 20

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  Congress reduces purchases of new weapons systems.
B)  The Fed buys bonds in the open market.
C)  The price level falls.
D)  Net exports fall.E) B) and C)
F) C) and D)

Exam 33: Aggregate Demand and Aggregate Supply

Other things the same, if the price level falls, people

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Tax cuts shift aggregate demand

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Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4. If the economy starts at A, a decrease in the money supply moves the economy

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The initial impact of the repeal of an investment tax credit is to shift

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Which of the following correctly expresses why the short-run aggregate-supply curve slopes upward?

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Refer to Pessimism. How is the new long-run equilibrium different from the original one?

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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

Which of the following shifts aggregate demand to the right?

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The recessions of the 1970s are often attributed to

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The long-run aggregate supply curve shifts right if

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Suppose the economy is in long-run equilibrium and the government decreases its expenditures. Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

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The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

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Other things the same, if the price level falls, domestic interest rates

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Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then

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A change in the supply of labor, all else remaining the same, will shift the short-run aggregate-supply curve.​

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When the price level falls

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Which of the following typically rises during a recession?

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If aggregate demand and aggregate supply both shift right, we can be sure that the price level is higher in the short run.

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Which of the following would raise the price level in both the short and long run?

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If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net exports

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The price level decr...
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A change in the supply of labor, all else remaining the same, will shift the short-run aggregate-supply curve.

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