Question 1

Other things the same, as the price level falls,

Accepted Answer

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

Question 2

Figure 33-17. 
-Refer to Figure 33-17. Suppose the economy starts at P3 and Y2. Explain how government purchases would need to change to move the economy to P2 and Y1. What about taxes?

Accepted Answer

decrease in governme...

Question 3

Aggregate demand shifts left if

Accepted Answer

A)   government purchases increase and shifts left if stock prices rise.
B)   government purchases increase and shifts left if stock prices fall.
C)   government purchases decrease and shifts left if stock prices rise.
D)   government purchases decrease and shifts left is stock prices fall.E) C) and D)
F) B) and C)

Question 4

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) None of the above
F) All of the above

Question 5

Like real GDP, investment fluctuates, but it fluctuates much less than real GDP.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)   and output both increase.
B)   and output both decrease.
C)   increase and output decreases.
D)   decrease and output increases.E) C) and D)
F) B) and C)

Question 7

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Accepted Answer

A)   the relationship between output and unemployment is erratic and difficult to characterize.
B)   when one macroeconomic variable that measures income or spending is falling, other macroeconomic variables that measure income or spending are likely to be rising.
C)   recessions do not occur at regular intervals.
D)   All of the above are correct.E) All of the above
F) A) and D)

Question 8

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) C) and D)
F) B) and D)

Question 9

Refer to Pessimism. In the long run, the change in price expectations created by pessimism 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) All of the above
F) C) and D)

Question 10

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, taxes fall. In the short-run

Accepted Answer

A)   real GDP will rise, and the price level might rise, fall, or stay the same.
B)   real GDP will fall, and the price level might rise, fall, or stay the same.
C)   the price level will rise, and real GDP might rise, fall, or stay the same.
D)   the price level will fall, and real GDP might rise, fall, or stay the same.E) C) and D)
F) B) and C)

Question 11

Other things the same, an unexpected fall in the price level results in some firms having

Accepted Answer

A)   lower than desired prices, which increases their sales.
B)   lower than desired prices, which depresses their sales.
C)   higher than desired prices, which increases their sales.
D)   higher than desired prices, which depresses their sales.E) A) and B)
F) None of the above

Question 12

An increase in the expected price level shifts the short-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Accepted Answer

A)   long-run aggregate supply shifts right
B)   long-run aggregate supply shifts left
C)   aggregate demand shifts right
D)   aggregate demand shifts leftE) A) and B)
F) A) and C)

Question 14

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

From 1995 to 1999 there was a dramatic rise in stock prices. If this rise made people feel wealthier, then it would have shifted

Accepted Answer

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

Question 17

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 B)
F) B) and D)

Question 18

Suppose the economy is in long-run equilibrium. If there is a sharp decline in government purchases combined with a significant increase in immigration of skilled workers, then in the short run,

Accepted Answer

A)   real GDP will rise and the price level might rise, fall, or stay the same. In the long-run, real GDP will rise and the price level might rise, fall, or stay the same.
B)   the price level will fall, and real GDP might rise, fall, or stay the same. In the long-run, real GDP and the price level will be unaffected.
C)   the price level will rise, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.
D)   the price level will fall, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.E) None of the above
F) All of the above

Question 19

Other things the same, what happens to the price level and the quantity of output when the short run aggregate supply curve shifts to the right?

Accepted Answer

The price ...

Question 20

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

Exam 33: Aggregate Demand and Aggregate Supply

Suppose the economy is in long-run equilibrium. If there is a sharp decline in government purchases combined with a significant increase in immigration of skilled workers, then in the short run,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, an unexpected fall in the price level results in some firms having

Correct AnswerverifiedShow Answer

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Correct AnswerverifiedShow Answer

Like real GDP, investment fluctuates, but it fluctuates much less than real GDP.

Correct AnswerverifiedShow Answer

Other things the same, as the price level falls,

Correct AnswerverifiedShow Answer

Figure 33-17. -Refer to Figure 33-17. Suppose the economy starts at P3 and Y2. Explain how government purchases would need to change to move the economy to P2 and Y1. What about taxes?

Correct Answerverifieddecrease in governme...View AnswerShow Answer

Which of the following, other things the same, would make the price level decrease and real GDP increase?

Correct AnswerverifiedShow Answer

From 1995 to 1999 there was a dramatic rise in stock prices. If this rise made people feel wealthier, then it would have shifted

Correct AnswerverifiedShow Answer

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, what happens to the price level and the quantity of output when the short run aggregate supply curve shifts to the right?

Correct AnswerverifiedThe price ...View AnswerShow 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

Aggregate demand shifts left if

Correct AnswerverifiedShow Answer

Refer to Pessimism. In the long run, the change in price expectations created by pessimism shifts

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in the expected price level shifts the short-run aggregate supply curve to the right.

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, taxes fall. In the short-run

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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decrease in governme...
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The price ...
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