Question 1

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

Accepted Answer

A)   long run, because evidence indicates that money is not neutral in the long run.
B)   long run, because real and nominal variables are essentially determined separately in the long run.
C)   short run, because money is neutral in the short run.
D)   short run, because real and nominal variables are not highly intertwined in the short run.

Question 2

Figure 33-13. 
-Refer to Figure 33-13. Identify the price and output levels consistent with long-run equilibrium.

Accepted Answer

The answer of Figure 33-13. 
-Refer to Figure 33-13. Identify...

Question 3

If the price level falls, the real value of a dollar

Accepted Answer

A)   rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve.
B)   rises, so people will want to buy more. This response shifts aggregate demand to the right.
C)   falls, so people will want to buy less. This response helps explain the slope of the aggregate demand curve.
D)   falls, so people will want to buy less. This response shifts aggregate demand to the left.

Question 4

In the long-run, an increase in aggregate demand increases the price level, but not real GDP.

Accepted Answer

A) True 
 B)False

Question 5

The long-run aggregate supply curve shifts right if

Accepted Answer

A)   the price level rises.
B)   the price level falls.
C)   the capital stock increases.
D)   the capital stock decreases.

Question 6

Accepted Answer

Which of the following correctly expresses why the short-run aggregate-supply curve slopes upward?

Question 7

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

Accepted Answer

A)   consumer wealth rises
B)   borrowing rises
C)   each dollar is worth more domestic goods
D)   the dollar appreciates relative to other currencies

Question 8

During a recession the economy experiences

Accepted Answer

A)   rising employment and income.
B)   rising employment and falling income.
C)   rising income and falling employment.
D)   falling employment and income.

Question 9

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.

Question 10

When the price level falls

Accepted Answer

A)   households want to lend less.
B)   the interest rate rises.
C)   firms want to spend less on investment goods.
D)   None of the above are correct.

Question 11

According to classical macroeconomic theory, changes in the money supply affect

Accepted Answer

A)   nominal variables and real variables.
B)   nominal variables, but not real variables.
C)   real variables, but not nominal variables.
D)   neither nominal nor real variables.

Question 12

The curve that shows the quantity of goods and services that firms produce and sell

Accepted Answer

A)   as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-demand curve.
B)   as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-supply curve.
C)   as it relates to the overall price level is called the aggregate-demand curve.
D)   as it relates to the overall price level is called the aggregate-supply curve.

Question 13

Which part of real GDP fluctuates most over the course of the business cycle?

Accepted Answer

A)   consumption expenditures
B)   government expenditures
C)   investment expenditures
D)   net exports

Question 14

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the supply of labor, a major new discovery of oil, and new environmental regulations that raise the cost of electricity production. In the short run

Accepted Answer

A)   the price level will rise and real GDP will fall.
B)   the price level will fall and real GDP will rise.
C)   the price level and real GDP will both stay the same.
D)   All of the above are possible.

Question 15

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 16

During recessions declines in investment account for about

Accepted Answer

A)   1/6 of the decline in real GDP.
B)   1/7 of the decline in real GDP.
C)   1/3 of the decline in real GDP.
D)   2/3 of the decline in real GDP.

Question 17

If a central bank is independent,

Accepted Answer

A)   it has the ability to alter taxes.
B)   it allocates savings to firms.
C)   it restricts trade to increase domestic employment.
D)   it operations are not controlled by the political process.

Question 18

The saying "Money is a veil." means that

Accepted Answer

A)   while nominal variables are the first thing we may observe about an economy, what's important are the real variables and the forces that determine them.
B)   money is the principal medium of exchange in most economies.
C)   the primary determinant of short-run economic fluctuations is not real variables, but rather changes in the money supply.
D)   in the long run money is of no importance to the determination of either real or nominal variables.

Question 19

When the price level falls

Accepted Answer

A)   people want to hold more money.
B)   the interest rate rises.
C)   investment spending rises.
D)   All of the above are correct.

Question 20

In the aggregate demand and aggregate supply model, sticky wages, sticky prices, and misperceptions about relative prices

Accepted Answer

A)   have temporary effects.
B)   explain why the short run aggregate supply curve might shift.
C)   explain why the aggregate demand curve is downward sloping.
D)   explain monetary neutrality.

Exam 33: Aggregate Demand and Aggregate Supply

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

Correct Answer
verified

When the price level falls

Correct Answer
verified

If the price level falls, the real value of a dollar

Correct Answer
verified

Which part of real GDP fluctuates most over the course of the business cycle?

Correct Answer
verified

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the supply of labor, a major new discovery of oil, and new environmental regulations that raise the cost of electricity production. In the short run

Correct Answer
verified

Correct Answer
verified

The curve that shows the quantity of goods and services that firms produce and sell

Correct Answer
verified

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply is vertical.

Correct Answer
verified

Figure 33-13. -Refer to Figure 33-13. Identify the price and output levels consistent with long-run equilibrium.

Correct Answer
verified

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

Correct Answer
verified

In the aggregate demand and aggregate supply model, sticky wages, sticky prices, and misperceptions about relative prices

Correct Answer
verified

The long-run aggregate supply curve shifts right if

Correct Answer
verified

The saying "Money is a veil." means that

Correct Answer
verified

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

Correct Answer
verified

When the price level falls

Correct Answer
verified

In the long-run, an increase in aggregate demand increases the price level, but not real GDP.

Correct Answer
verified

If a central bank is independent,

Correct Answer
verified

According to classical macroeconomic theory, changes in the money supply affect

Correct Answer
verified

During a recession the economy experiences

Correct Answer
verified

During recessions declines in investment account for about

Correct Answer
verified

Exam 33: Aggregate Demand and Aggregate Supply

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

Correct AnswerverifiedShow Answer

When the price level falls

Correct AnswerverifiedShow Answer

If the price level falls, the real value of a dollar

Correct AnswerverifiedShow Answer

Which part of real GDP fluctuates most over the course of the business cycle?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the supply of labor, a major new discovery of oil, and new environmental regulations that raise the cost of electricity production. In the short run

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The curve that shows the quantity of goods and services that firms produce and sell

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

Figure 33-13. -Refer to Figure 33-13. Identify the price and output levels consistent with long-run equilibrium.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the aggregate demand and aggregate supply model, sticky wages, sticky prices, and misperceptions about relative prices

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts right if

Correct AnswerverifiedShow Answer

The saying "Money is a veil." means that

Correct AnswerverifiedShow Answer

Which of the following does not help explain the direction the quantity of aggregate goods demanded changes when the price level decreases?

Correct AnswerverifiedShow Answer

When the price level falls

Correct AnswerverifiedShow Answer

In the long-run, an increase in aggregate demand increases the price level, but not real GDP.

Correct AnswerverifiedShow Answer

If a central bank is independent,

Correct AnswerverifiedShow Answer

According to classical macroeconomic theory, changes in the money supply affect

Correct AnswerverifiedShow Answer

During a recession the economy experiences

Correct AnswerverifiedShow Answer

During recessions declines in investment account for about

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified