Question 1

As the price level rises,

Accepted Answer

A)   the exchange rate falls, so net exports fall.
B)   the exchange rate falls, so net exports rise.
C)   the exchange rate rises, so net exports fall.
D)   the exchange rate rises, so net exports rise.E) None of the above
F) B) and C)

Question 2

Explain how an increase in the price level changes interest rates. How does this change in interest rates lead to changes in investment and net exports?

Accepted Answer

When the price level increases, the purc...

Question 3

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

Accepted Answer

A) True 
 B)False

Question 4

Most economists believe that classical theory describes the world in the short run but not in the long run.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

Accepted Answer

Variables that fall along with real GDP ...

Question 7

When taxes increase, consumption

Accepted Answer

A)   increases, so aggregate demand shifts right.
B)   increases, so aggregate supply shifts right.
C)   decreases, so aggregate demand shifts left.
D)   decreases, so aggregate supply shifts left.E) C) and D)
F) None of the above

Question 8

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 D)
F) A) and D)

Question 9

Other things the same, a decrease in the price level makes the dollars people hold worth

Accepted Answer

A)   more, so they can buy more.
B)   more, so they can buy less.
C)   less, so they can buy more.
D)   less, so they can buy less.E) None of the above
F) B) and D)

Question 10

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

Accepted Answer

A)   U.S. residents want to buy more foreign bonds. The real exchange rate rises.
B)   U.S. residents want to buy more foreign bonds. The real exchange rate falls.
C)   U.S. residents want to buy fewer foreign bonds. The real exchange rate rises.
D)   U.S. residents want to buy fewer foreign bonds. The real exchange rate falls.E) B) and D)
F) All of the above

Question 11

Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, they can offset the initial shift by shifting

Accepted Answer

A)   aggregate supply right.
B)   aggregate supply left.
C)   aggregate demand right.
D)   aggregate demand left.E) All of the above
F) None of the above

Question 12

In the long run, an increase in the stock of human capital

Accepted Answer

A)   and increases in the money supply both make the price level rise.
B)   and increases in the money supply both make the price level fall.
C)   makes the price level rise, while increases in the money supply make prices fall.
D)   makes the price level fall, while increases in the money supply make prices rise.E) B) and D)
F) B) and C)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

When looking at a graph of aggregate demand, which of the following is correct?

Accepted Answer

A)   There are nominal variables on both the vertical and the horizontal axes.
B)   There are real variables on both the vertical and horizontal axes.
C)   The variable on the vertical axis is nominal; the variable on the horizontal axis is real
D)   The variable on the vertical axis is real; the variable on the horizontal axis is nominalE) B) and D)
F) None of the above

Question 15

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Accepted Answer

A)   the price level and real output.
B)   real output and employment.
C)   employment and the inflation rate.
D)   the value of money and the price level.E) A) and B)
F) B) and D)

Question 16

When the price level falls, people want to

Accepted Answer

A)   hold more money and the quantity of aggregate goods and services demanded increases.
B)   hold more money and the quantity of aggregate goods and services demanded decreases.
C)   hold less money and the quantity of aggregate goods and services demanded increases.
D)   hold less money and the quantity of aggregate goods and services demanded decreases.E) A) and D)
F) A) and C)

Question 17

Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time.
-Refer to Stock Market Boom 2015. In the long run, the change in price expectations created by the stock market boom 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) B) and C)
F) A) and D)

Question 18

Aggregate demand shifts right when the Federal Reserve

Accepted Answer

A)   raises personal income taxes.
B)   increases the money supply.
C)   institutes an investment tax credit.
D)   All of the above are correct.E) C) and D)
F) None of the above

Question 19

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

Question 20

Which of the following has been suggested as a cause of the Great Depression?

Accepted Answer

A)   a decline in the money supply
B)   a decrease in stock prices
C)   the collapse of the banking system
D)   All of the above are correct.E) A) and B)
F) None of the above

Exam 23: Aggregate Demand and Aggregate Supply

Other things the same, a decrease in the price level makes the dollars people hold worth

Correct Answer
verified

Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, they can offset the initial shift by shifting

Correct Answer
verified

When looking at a graph of aggregate demand, which of the following is correct?

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

When taxes increase, consumption

Correct Answer
verified

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

Correct Answer
verified

Which of the following has been suggested as a cause of the Great Depression?

Correct Answer
verified

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

Correct Answer
verified
Variables that fall along with real GDP ...
View Answer

Which of the following shifts aggregate demand to the right?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Aggregate demand shifts right when the Federal Reserve

Correct Answer
verified

As the price level rises,

Correct Answer
verified

Most economists believe that classical theory describes the world in the short run but not in the long run.

Correct Answer
verified

Explain how an increase in the price level changes interest rates. How does this change in interest rates lead to changes in investment and net exports?

Correct Answer
verified
When the price level increases, the purc...
View Answer

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

Correct Answer
verified

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

Correct Answer
verified

In the long run, an increase in the stock of human capital

Correct Answer
verified

When the price level falls, people want to

Correct Answer
verified

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Correct Answer
verified

Exam 23: Aggregate Demand and Aggregate Supply

Other things the same, a decrease in the price level makes the dollars people hold worth

Correct AnswerverifiedShow Answer

Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, they can offset the initial shift by shifting

Correct AnswerverifiedShow Answer

When looking at a graph of aggregate demand, which of the following is correct?

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

When taxes increase, consumption

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following has been suggested as a cause of the Great Depression?

Correct AnswerverifiedShow Answer

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

Correct AnswerverifiedVariables that fall along with real GDP ...View AnswerShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Aggregate demand shifts right when the Federal Reserve

Correct AnswerverifiedShow Answer

As the price level rises,

Correct AnswerverifiedShow Answer

Most economists believe that classical theory describes the world in the short run but not in the long run.

Correct AnswerverifiedShow Answer

Explain how an increase in the price level changes interest rates. How does this change in interest rates lead to changes in investment and net exports?

Correct AnswerverifiedWhen the price level increases, the purc...View AnswerShow Answer

The explanations for the slopes of the aggregate demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the long run, an increase in the stock of human capital

Correct AnswerverifiedShow Answer

When the price level falls, people want to

Correct AnswerverifiedShow Answer

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Variables that fall along with real GDP ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When the price level increases, the purc...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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