Question 1

Other things the same,a fall in an economy's overall level of prices tends to

Accepted Answer

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

Question 2

Aggregate demand shifts to the left if the money supply increases.

Accepted Answer

A) True 
 B)False

Question 3

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage.They may infer that the reward to working is

Accepted Answer

A)  temporarily low and so supply a smaller quantity of labor.
B)  temporarily low and so supply a larger quantity of labor.
C)  temporarily high and so supply a smaller quantity of labor.
D)  temporarily high and so supply a larger quantity of labor.E) B) and C)
F) A) and C) A

Question 4

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

Accepted Answer

A)  the decline in consumption expenditures on consumer durables alone
B)  the decline in total consumption spending alone
C)  the decline in investment spending alone
D)  the combined decline in consumption and investment spendingE) All of the above
F) B) and D)

Question 5

The long-run effect of an increase in government spending is to raise

Accepted Answer

A)  both real output and the price level.
B)  real output and lower the price level.
C)  real output and leave the price level unchanged.
D)  the price level and leave real output unchanged.E) A) and B)
F) A) and C)

Question 6

According to classical macroeconomic theory,changes in the money supply change nominal but not real variables.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following explains why production rises in most years?

Accepted Answer

A)  increases in the labor force
B)  increases in the capital stock
C)  advances in technological knowledge
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 8

In the context of aggregate demand and aggregate supply,the wealth effect refers to the idea that,when the price level decreases,the real wealth of households

Accepted Answer

A)  increases and as a result consumption spending increases.This effect contributes to the downward slope of the aggregate-demand curve.
B)  decreases and as a result consumption spending increases.This effect contributes to the upward slope of the aggregate-supply curve.
C)  increases and as a result households increase their money holdings; in turn,interest rates increase and investment spending decreases.This effect contributes to the downward slope of the aggregate-demand curve.
D)  decreases and as a result households increase their money holdings; in turn,interest rates increase and investment spending decreases.This effect contributes to the upward slope of the aggregate-supply curve.E) None of the above
F) A) and B)

Question 9

As the price level falls

Accepted Answer

A)  people are more willing to lend,so interest rates rise.
B)  people are more willing to lend,so interest rates fall.
C)  people are less willing to lend,so interest rates fall.
D)  people are less willing to lend,so interest rates rise.E) None of the above
F) B) and D)

Question 10

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

Accepted Answer

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

Question 11

If aggregate demand shifts right,then eventually price level expectations rise.This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Accepted Answer

A) True 
 B)False  False

Question 12

Stagflation exists when prices

Accepted Answer

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

Question 13

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Accepted Answer

There are occasional short-lived periods...

Question 14

Other things the same,if the price level rises,then 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) B) and C)
F) B) and D)

Question 15

Other things the same,if the money supply rises by 2% and people were expecting it to rise by 5%,then some firms have

Accepted Answer

A)  higher than desired prices which increases their sales.
B)  higher than desired prices which depresses their sales.
C)  lower than desired prices which increases their sales.
D)  lower than desired prices which depresses their sales.E) A) and C)
F) A) and D)

Question 16

The effect of a change in the value of the currency in the foreign exchange market due to a change in the price level helps explain the slope of aggregate demand,but does not shift it.The effects of a change in the value of the currency in the foreign exchange market due to speculation is shown by shifting the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 17

The classical model is appropriate for analysis of the economy in the

Accepted Answer

A)  long run,since evidence indicates that money is not neutral in the long run.
B)  long run,since real and nominal variables are essentially determined separately in the long run.
C)  short run,provided money is not neutral.
D)  short run,provided real and nominal variables are highly intertwined.E) All of the above
F) B) and D)

Question 18

The model of aggregate demand and aggregate supply

Accepted Answer

A)  is different from the model of supply and demand for a particular market,in that we cannot focus on the substitution of resources between markets to explain aggregate relationships.
B)  is different from the model of supply and demand for a particular market,in that we have to separate real and nominal variables in the aggregate model.
C)  is a straightforward extension of the model of supply and demand for a particular market,in which substitution of resources between markets is highlighted.
D)  is a straightforward extension of the model of supply and demand for a particular market,in which the interaction between real and nominal variables is highlighted.E) A) and D)
F) None of the above

Question 19

Technological progress shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 20

Illustrate the classical analysis of growth and inflation with aggregate demand and long-run aggregate supply curves.

Accepted Answer

See graph. <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Over time,technological adva...

Exam 34: Aggregate Demand and Aggregate Supply

Other things the same,a fall in an economy's overall level of prices tends to

Correct Answer
verified

Aggregate demand shifts to the left if the money supply increases.

Correct Answer
verified

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage.They may infer that the reward to working is

Correct Answer
verified
A

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

Correct Answer
verified

The long-run effect of an increase in government spending is to raise

Correct Answer
verified

According to classical macroeconomic theory,changes in the money supply change nominal but not real variables.

Correct Answer
verified

Which of the following explains why production rises in most years?

Correct Answer
verified

In the context of aggregate demand and aggregate supply,the wealth effect refers to the idea that,when the price level decreases,the real wealth of households

Correct Answer
verified

As the price level falls

Correct Answer
verified

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

Correct Answer
verified
B

If aggregate demand shifts right,then eventually price level expectations rise.This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Correct Answer
verified
False

Stagflation exists when prices

Correct Answer
verified

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Correct Answer
verified
There are occasional short-lived periods...
View Answer

Other things the same,if the price level rises,then domestic interest rates

Correct Answer
verified

Other things the same,if the money supply rises by 2% and people were expecting it to rise by 5%,then some firms have

Correct Answer
verified

Correct Answer
verified

The classical model is appropriate for analysis of the economy in the

Correct Answer
verified

The model of aggregate demand and aggregate supply

Correct Answer
verified

Technological progress shifts the long-run aggregate supply curve to the right.

Correct Answer
verified

Illustrate the classical analysis of growth and inflation with aggregate demand and long-run aggregate supply curves.

Correct Answer
verified
See graph. Over time,technological adva...
View Answer

Exam 34: Aggregate Demand and Aggregate Supply

Other things the same,a fall in an economy's overall level of prices tends to

Correct AnswerverifiedShow Answer

Aggregate demand shifts to the left if the money supply increases.

Correct AnswerverifiedShow Answer

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage.They may infer that the reward to working is

Correct AnswerverifiedA

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

Correct AnswerverifiedShow Answer

The long-run effect of an increase in government spending is to raise

Correct AnswerverifiedShow Answer

According to classical macroeconomic theory,changes in the money supply change nominal but not real variables.

Correct AnswerverifiedShow Answer

Which of the following explains why production rises in most years?

Correct AnswerverifiedShow Answer

In the context of aggregate demand and aggregate supply,the wealth effect refers to the idea that,when the price level decreases,the real wealth of households

Correct AnswerverifiedShow Answer

As the price level falls

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

If aggregate demand shifts right,then eventually price level expectations rise.This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Correct AnswerverifiedFalse

Stagflation exists when prices

Correct AnswerverifiedShow Answer

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Correct AnswerverifiedThere are occasional short-lived periods...View AnswerShow Answer

Other things the same,if the price level rises,then domestic interest rates

Correct AnswerverifiedShow Answer

Other things the same,if the money supply rises by 2% and people were expecting it to rise by 5%,then some firms have

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The classical model is appropriate for analysis of the economy in the

Correct AnswerverifiedShow Answer

The model of aggregate demand and aggregate supply

Correct AnswerverifiedShow Answer

Technological progress shifts the long-run aggregate supply curve to the right.

Correct AnswerverifiedShow Answer

Illustrate the classical analysis of growth and inflation with aggregate demand and long-run aggregate supply curves.

Correct AnswerverifiedSee graph. Over time,technological adva...View AnswerShow Answer

Correct Answer
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A

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B

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False

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There are occasional short-lived periods...
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Correct Answer
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Correct Answer
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See graph. Over time,technological adva...
View Answer