Question 1

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

Accepted Answer

See graph.

Over time, technological ad...

Question 2

Other things the same, as the price level falls,

Accepted Answer

A)   the money supply falls.
B)   interest rates rise.
C)   a dollar buys more domestic goods.
D)   the aggregate-demand curve shifts right.E) All of the above
F) B) and C)

Question 3

Which of the following is correct?

Accepted Answer

A)   Economic fluctuations are easily predicted by competent economists.
B)   Recessions have never occurred very close together.
C)   Spending, income, and production do not fluctuate closely with real GDP.
D)   None of the above is correct.E) A) and D)
F) A) and C)

Question 4

Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, 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) A) and C)
F) C) and D)

Question 5

Other things the same, as the price level decreases it induces greater spending on

Accepted Answer

A)   both net exports and investment.
B)   net exports but not investment.
C)   investment but not net exports.
D)   neither net exports nor investment.E) A) and C)
F) All of the above

Question 6

Figure 15-1
 
-Refer to Figure 15-1. In the short run, a favorable shift in aggregate supply would move the economy from

Accepted Answer

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

Question 7

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   both an investment tax credit and a decrease in income tax rates
B)   an investment tax credit but not a decrease in income tax rates
C)   a decrease in income tax rates but not an investment tax credit
D)   neither an investment tax credit nor a decrease in income tax ratesE) A) and B)
F) C) and D)

Question 8

Of the following theories, which is consistent with a vertical long-run aggregate supply curve?

Accepted Answer

A)   the sticky-wage theory
B)   misperceptions theory
C)   both the sticky-wage and misperceptions theories.
D)   neither the sticky-wage nor the misperceptions theory.E) B) and D)
F) A) and B)

Question 9

Other things the same, if the U.S. price level rises, then

Accepted Answer

A)   the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises.
B)   the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls.
C)   the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises.
D)   the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.E) C) and D)
F) None of the above

Question 10

Which of the following did the Fed do during the recession of 2008-2009?

Accepted Answer

A)   lowered the federal funds rate and sold securities and loans
B)   lowered the federal funds rate and purchased securities and loans
C)   raised the federal funds rate and sold securities and loans
D)   raised the federal funds rate and purchased securities and loansE) C) and D)
F) B) and C)

Question 11

If aggregate demand shifts left, then in the short run

Accepted Answer

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

Question 12

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

Accepted Answer

A) True 
 B)False

Question 13

The aggregate supply curve is upward sloping in

Accepted Answer

A)   the short and long run.
B)   neither the short nor long run.
C)   the long run, but not the short run.
D)   the short run, but not the long run.E) None of the above
F) A) and B)

Question 14

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

Question 15

In the short-run an increase in the costs of production makes

Accepted Answer

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

Question 16

Other things the same, an increase in the price level induces people to hold

Accepted Answer

A)   less money, so they lend less, and the interest rate rises.
B)   less money, so they lend more, and the interest rate falls.
C)   more money, so they lend more, and the interest rate falls.
D)   more money, so they lend less, and the interest rate rises.E) All of the above
F) None of the above

Question 17

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained

Accepted Answer

A)   only by technological progress.
B)   only by money supply growth.
C)   by technological progress and money supply growth.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 18

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

Accepted Answer

A)   both the money supply increase and the investment tax credit
B)   the money supply increase but not the investment tax credit
C)   the investment tax credit but not the money supply increase
D)   neither the investment tax credit nor the money supply increaseE) A) and B)
F) A) and C)

Question 19

Most economists believe that classical macroeconomic theory is a good description of the economy

Accepted Answer

A)   in neither the short nor long run.
B)   in the short run and in the long run.
C)   in the short run, but not in the long run.
D)   in the long run, but not in the short run.E) A) and D)
F) None of the above

Question 20

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

Exam 15: Aggregate Demand and Aggregate Supply

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

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 ad...View AnswerShow Answer

Which of the following did the Fed do during the recession of 2008-2009?

Correct AnswerverifiedShow Answer

Other things the same, as the price level decreases it induces greater spending on

Correct AnswerverifiedShow Answer

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

Correct AnswerverifiedShow Answer

Of the following theories, which is consistent with a vertical long-run aggregate supply curve?

Correct AnswerverifiedShow Answer

Figure 15-1 -Refer to Figure 15-1. In the short run, a favorable shift in aggregate supply would move the economy from

Correct AnswerverifiedShow Answer

The aggregate supply curve is upward sloping in

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

In the short-run an increase in the costs of production makes

Correct AnswerverifiedShow Answer

Other things the same, an increase in the price level induces people to hold

Correct AnswerverifiedShow Answer

Most economists believe that classical macroeconomic theory is a good description of the economy

Correct AnswerverifiedShow Answer

Which of the following is correct?

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Other things the same, if the U.S. price level rises, then

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Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, then

Correct AnswerverifiedShow Answer

Other things the same, as the price level falls,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

Correct AnswerverifiedShow Answer

If aggregate demand shifts left, then in the short run

Correct AnswerverifiedShow Answer

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained

Correct AnswerverifiedShow Answer

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See graph.
Over time, technological ad...
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