Question 1

The aggregate demand and aggregate supply graph has

Accepted Answer

A)   quantity of output on the horizontal axis.Output can be measured by the GDP deflator.
B)   quantity of output on the horizontal axis.Output can be measured by real GDP.
C)   quantity of output on the vertical axis.Output can be measured by the GDP deflator.
D)   quantity of output on the vertical axis.Output can be measured by real GDP.

Question 2

The aggregate demand and aggregate supply model implies monetary neutrality

Accepted Answer

A)   only in the short run.
B)   only in the long run.
C)   in both the short run and the long run.
D)   in neither the short run nor long run.

Question 3

Suppose the economy is in long-run equilibrium.If there is a tax cut at the same time that major new sources of oil are discovered in the country,then 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.

Question 4

Classical economist David Hume observed that as the money supply expanded after gold discoveries

Accepted Answer

A)   prices and output both increased immediately.
B)   prices increased immediately while output remained unchanged.
C)   it took time for prices to rise; in the meantime output was lower.
D)   it took time for prices to rise; in the meantime output was higher.

Question 5

The aggregate demand curve shifts right if either

Accepted Answer

A)   speculators gain confidence in U.S.assets or foreign countries enter into recession.
B)   speculators gain confidence in U.S.assets or recessions in foreign countries end.
C)   speculators lose confidence in U.S.assets or foreign countries enter into recession.
D)   speculators lose confidence in U.S.assets or recessions in foreign countries end.

Question 6

The Stock Market Boom of 2015
Imagine that in 2015 the economy is in long-run equilibrium.Then stock prices rise more than expected and stay high for some time.
-Refer to Stock Market Boom 2015.Which curve shifts and in which direction?

Accepted Answer

A)   aggregate demand shifts right
B)   aggregate demand shifts left
C)   aggregate supply shifts right
D)   aggregate supply shifts left.

Question 7

Other things the same,if workers and firms expected inflation to be 2%,but it is only 1% 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.

Question 8

Sticky nominal wages can result in

Accepted Answer

A)   lower profits for firms when the price level is lower than expected.
B)   a decrease in real wages when the price level is lower than expected.
C)   a short-run aggregate-supply curve that is vertical.
D)   a long-run aggregate-supply curve that is upward-sloping.

Question 9

The recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following shifts the long-run aggregate supply curve to the left?

Accepted Answer

A)   either an increase in the price of imported natural resources or opening up international trade
B)   neither an increase in the price of imported natural resources or opening up international trade
C)   an increase in the price of imported natural resources,but not opening up international trade
D)   opening up international trade,but not an increase in the price of imported natural resources

Question 11

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 increase

Question 12

Which of the following is correct?

Accepted Answer

A)   An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left.
B)   An increase in stock prices reduces consumption spending so that aggregate demand shifts left.
C)   An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left.
D)   A recession in other countries reduces U.S.net exports so that U.S.aggregate demand shifts left.

Question 13

Figure 23-2. 1 to AS2 A)  could be caused by an outbreak of war in the Middle East. B)  could be caused by a decrease in the expected price level. C)  causes the economy to experience an increase in the unemployment rate. D)  causes the economy to experience stagflation." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 23-2.The shift of the short-run aggregate-supply curve from AS1 to AS2

Accepted Answer

A)   could be caused by an outbreak of war in the Middle East.
B)   could be caused by a decrease in the expected price level.
C)   causes the economy to experience an increase in the unemployment rate.
D)   causes the economy to experience stagflation.

Question 14

As the price level rises

Accepted Answer

A)   people will want to hold more money,so the interest rate rises.
B)   people will want to hold more money,so the interest rate falls.
C)   people will want to hold less money,so the interest rate falls.
D)   people will want to hold less money,so the interest rate rises.

Question 15

The aggregate demand and aggregate supply graph has

Accepted Answer

A)   the price level on the horizontal axis.The price level can be measured by the GDP deflator.
B)   the price level on the horizontal axis.The price level can be measured by real GDP.
C)   the price level on the vertical axis.The price level can be measured by the GDP deflator.
D)   the price level on the vertical axis.The price level can be measured by GDP.

Question 16

Other things the same,a decrease in the price level makes consumers feel

Accepted Answer

A)   less wealthy,so the quantity of goods and services demanded falls.
B)   less wealthy,so the quantity of goods and services demanded rises.
C)   more wealthy,so the quantity of goods and services demanded rises.
D)   more wealthy,so the quantity of goods and services demanded falls.

Question 17

A decrease in the expected price level shifts short-run aggregate supply to the

Accepted Answer

A)   right,and an increase in the actual price level shifts short-run aggregate supply to the right.
B)   right,and an increase in the actual price level does not shift short-run aggregate supply.
C)   left,and an increase in the actual price level shifts short-run aggregate supply to the left.
D)   left,and an increase in the actual price level does not shift short-run aggregate supply.

Question 18

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.

Question 19

As the price level rises,the exchange rate

Accepted Answer

A)   falls,so exports rise and imports fall.
B)   falls,so exports fall and imports rise.
C)   rises,so exports rise and imports fall.
D)   rises,so exports fall and imports rise.

Question 20

Other things the same,continued technological progress and continued increases in the money supply would unambiguously lead to

Accepted Answer

A)   rising prices only.
B)   rising real GDP only.
C)   rising prices and rising real GDP.
D)   neither rising prices nor rising real GDP.

Exam 23: Aggregate Demand and Aggregate Supply

Other things the same,continued technological progress and continued increases in the money supply would unambiguously lead to

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Suppose the economy is in long-run equilibrium.If there is a tax cut at the same time that major new sources of oil are discovered in the country,then in the short-run

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Other things the same,as the price level falls,

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Which of the following shifts the long-run aggregate supply curve to the left?

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Other things the same,a decrease in the price level makes consumers feel

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The aggregate demand curve shifts right if either

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As the price level rises,the exchange rate

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As the price level rises

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Which of the following is correct?

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The aggregate demand and aggregate supply graph has

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The aggregate demand and aggregate supply graph has

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The Stock Market Boom of 2015 Imagine that in 2015 the economy is in long-run equilibrium.Then stock prices rise more than expected and stay high for some time. -Refer to Stock Market Boom 2015.Which curve shifts and in which direction?

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The recession of 2008-2009 was in many ways the worst macroeconomic event in more than half a century.

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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

Classical economist David Hume observed that as the money supply expanded after gold discoveries

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Figure 23-2. -Refer to Figure 23-2.The shift of the short-run aggregate-supply curve from AS1 to AS2

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Other things the same,if workers and firms expected inflation to be 2%,but it is only 1% then

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Sticky nominal wages can result in

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A decrease in the expected price level shifts short-run aggregate supply to the

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The aggregate demand and aggregate supply model implies monetary neutrality

Correct AnswerverifiedShow Answer

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Figure 23-2. -Refer to Figure 23-2.The shift of the short-run aggregate-supply curve from AS₁ to AS₂

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