Question 1

Other things the same,when the price level rises,interest rates

Accepted Answer

A)   rise,which means consumers will want to spend more on homebuilding.
B)   rise,which means consumers will want to spend less on homebuilding.
C)   fall,which means consumers will want to spend more on homebuilding.
D)   fall,which means consumers will want to spend less on homebuilding.E) B) and C)
F) A) and B)

Question 2

In which case can we be sure real GDP rises in the short run?

Accepted Answer

A)   foreign economies expand and taxes rise
B)   foreign economies expand and taxes fall
C)   foreign economies contract and taxes fall
D)   None of the above are correct.E) A) and D)
F) All of the above

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

When the money supply increases

Accepted Answer

A)   interest rates fall and so aggregate demand shifts right.
B)   interest rates fall and so aggregate demand shifts left.
C)   interest rates rise and so aggregate demand shifts right.
D)   interest rates rise and so aggregate demand shifts left.E) A) and D)
F) B) and C)

Question 5

The quantity of aggregate goods and service demanded rises when the

Accepted Answer

A)   price level rises,because the interest rate rises.
B)   price level rises,because the interest rate falls.
C)   price level falls,because the interest rate rises.
D)   price level falls,because the interest rate falls.E) A) and B)
F) A) and C)

Question 6

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) None of the above
F) A) and B)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

If the price level rises above what was expected and nominal wages are fixed,then

Accepted Answer

A)   production becomes less profitable so firms will hire fewer workers.
B)   production becomes less profitable so firms will hire more workers.
C)   production becomes more profitable so firms will hire fewer workers.
D)   production become more profitable so firms will hire more workers.E) None of the above
F) B) and C)

Question 9

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

Question 10

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

Question 11

People had been expecting the price level to be 220 but it turns out to be 223.In response Green Leaf Paper Company increases the number of workers it employs.What could explain this?

Accepted Answer

A)   both sticky price theory and sticky wage theory
B)   sticky price theory but not sticky wage theory
C)   sticky wage theory but not sticky price theory
D)   neither sticky wage theory nor sticky price theoryE) A) and D)
F) B) and C)

Question 12

In 1986,OPEC countries increased their production of oil.This caused

Accepted Answer

A)   the price level to rise.
B)   aggregate supply to shift right.
C)   unemployment to rise.
D)   None of the above is correct.E) B) and D)
F) B) and C)

Question 13

Other things the same,an increase in the price level causes the interest rate to

Accepted Answer

A)   increase,the dollar to depreciate,and net exports to increase.
B)   increase,the dollar to appreciate,and net exports to decrease.
C)   decrease,the dollar to depreciate,and net exports to increase.
D)   decrease,the dollar to appreciate,and net exports to decrease.E) B) and C)
F) C) and D)

Question 14

Which of the following would increase the price level?

Accepted Answer

A)   an increase in the money supply.
B)   an increase in taxes.
C)   a decrease in the expected price level.
D)   a decrease in the natural rate of unemployment.E) B) and C)
F) B) and D)

Question 15

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)   The price level rises.
B)   The price level falls.
C)   The dollar depreciates for some reason other than a change in the price level.
D)   Stock prices fall for some reason other than a change in the price level.E) C) and D)
F) B) and D)

Question 16

In the mid-1970s the price of oil rose dramatically.This

Accepted Answer

A)   shifted aggregate supply left.
B)   caused U.S.prices to fall.
C)   was the consequence of OPEC increasing oil production.
D)   All of the above are correct.E) All of the above
F) A) and D)

Question 17

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 18

Which of the following would cause investment spending to increase and aggregate demand to shift right?

Accepted Answer

A)   an increase in the money supply,but not an investment tax credit
B)   an investment tax credit,but not an increase in the money supply
C)   both an increase in the money supply and an investment tax credit
D)   None of the above are correct.E) C) and D)
F) A) and B)

Question 19

The economic boom of the early 1940s resulted mostly from

Accepted Answer

A)   increased government expenditures.
B)   falling prices of oil and other natural resources.
C)   an increase in the growth rate of the money supply.
D)   rapid developments in transportation,electronics,and communication.E) All of the above
F) A) and D)

Question 20

Other things the same,a decrease in the price level causes real wealth to

Accepted Answer

A)   fall,interest rates to fall,and the dollar to appreciate.
B)   fall,interest rates to rise,and the dollar to depreciate.
C)   rise,interest rates to rise,and the dollar to appreciate.
D)   rise,interest rates to fall,and the dollar to depreciate.E) B) and C)
F) A) and D)

Exam 23: Aggregate Demand and Aggregate Supply

In which case can we be sure real GDP rises in the short run?

Correct AnswerverifiedShow Answer

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

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

The economic boom of the early 1940s resulted mostly from

Correct AnswerverifiedShow Answer

If the price level rises above what was expected and nominal wages are fixed,then

Correct AnswerverifiedShow Answer

The quantity of aggregate goods and service demanded rises when the

Correct AnswerverifiedShow Answer

Which of the following would cause investment spending to increase and aggregate demand to shift right?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same,when the price level rises,interest rates

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

In the mid-1970s the price of oil rose dramatically.This

Correct AnswerverifiedShow Answer

People had been expecting the price level to be 220 but it turns out to be 223.In response Green Leaf Paper Company increases the number of workers it employs.What could explain this?

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

Other things the same,a decrease in the price level causes real wealth to

Correct AnswerverifiedShow Answer

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 AnswerverifiedShow Answer

Other things the same,an increase in the price level causes the interest rate to

Correct AnswerverifiedShow Answer

In 1986,OPEC countries increased their production of oil.This caused

Correct AnswerverifiedShow Answer

When the money supply increases

Correct AnswerverifiedShow Answer

Which of the following would increase the price level?

Correct AnswerverifiedShow Answer

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