Question 1

A change in the expected price level is likely to cause which of the following?

Accepted Answer

A)  a shift in the short-run aggregate supply curve and long-run aggregate supply curve
B)  a shift in the short run aggregate supply curve
C)  a shift in the aggregate demand curve
D)  a shift in the long-run aggregate supply curveE) All of the above
F) A) and B)

Question 2

What curve shows the quantity of goods and services that firms choose to produce and sell at each price level?

Accepted Answer

The aggreg...

Question 3

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 becomes more profitable so firms will hire more workers.E) B) and C)
F) A) and D)

Question 4

The mathematical equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level) , expresses

Accepted Answer

A)  how the long run equilibrium adjusts to changes in money supply.
B)  how output deviates in the short run from its long run natural rate.
C)  how the short run aggregate supply curve shifts.
D)  how adverse shifts in aggregate supply can cause stagflation.E) None of the above
F) C) and D)

Question 5

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have

Accepted Answer

A)  higher than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied.
B)  higher than desired prices, which leads to a decrease in the aggregate quantity of goods and service supplied.
C)  lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied.
D)  lower than desired prices, which leads to a decrease in the aggregate quantity of goods and services suppliedE) A) and D)
F) All of the above

Question 6

Other things the same, if the price level 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) A) and B)
F) C) and D)

Question 7

Which of the following is correct concerning recessions?

Accepted Answer

A)  They come at fairly regular and predictable intervals.
B)  They are associated with comparatively large increases in investment spending.
C)  They are any period when real GDP growth is less than average.
D)  They tend to be associated with rising unemployment rates.E) A) and B)
F) All of the above

Question 8

Suppose technology advances within a nation. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Accepted Answer

The short run and lo...

Question 9

Which of the following would help explain why the aggregate demand curve slopes downward?

Accepted Answer

A)  An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services.
B)  A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports.
C)  A higher price level increases real wealth, which stimulates spending on consumption.
D)  A lower price level reduces the interest rate, which encourages greater spending on investment goods.E) None of the above
F) B) and C)

Question 10

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

Accepted Answer

A)  variables measured in terms of money and variables measured in terms of quantities or relative prices
B)  variables measured in terms of money but not variables measured in terms of quantities or relative prices
C)  variables measured in terms of quantities or relative prices, but not variables measured in terms of money
D)  neither variables measured in terms of money nor variables measured in terms of quantities or relative pricesE) B) and C)
F) A) and B)

Question 11

Other things the same, as the price level rises, exchange rates

Accepted Answer

A)  and interest rates rise.
B)  and interest rates fall.
C)  fall and interest rates rise.
D)  rise and interest rates fall.E) C) and D)
F) A) and D)

Question 12

Other things the same, as the price level falls, which of the following increases?

Accepted Answer

A)  lending and investment spending
B)  lending, but not investment spending
C)  investment spending, but not lending
D)  neither investment spending nor lendingE) A) and C)
F) A) and B)

Question 13

Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 14

Stagflation results from continued decreases in aggregate demand.

Accepted Answer

A) True 
 B)False

Question 15

Other things the same, if the price level is lower than expected, then some firms believe that the relative price of what they produce has

Accepted Answer

A)  decreased, so they increase production.
B)  decreased, so they decrease production.
C)  increased, so they increase production.
D)  increased, so they decrease production.E) A) and C)
F) A) and D)

Question 16

Other things the same, as the price level rises, the real value of a dollar

Accepted Answer

A)  rises, and interest rates rise.
B)  rises, and interest rates fall.
C)  falls, and interest rates rise.
D)  falls, and interest rates fall.E) All of the above
F) A) and B)

Question 17

Historically, the change in real GDP during recessions has been

Accepted Answer

A)  mostly a change in investment spending.
B)  mostly a change in consumption spending.
C)  about equally divided between consumption and investment spending.
D)  sometimes mostly a change in consumption and sometimes mostly a change in investment.E) B) and D)
F) B) and C)

Question 18

During recessions

Accepted Answer

A)  sales and profits fall.
B)  sales and profits rise.
C)  sales rise, profits fall.
D)  profits fall, sales rise.E) A) and D)
F) A) and C)

Question 19

Which of the following would shift long-run aggregate supply to the right?

Accepted Answer

A)  increased immigration from abroad
B)  a decrease in the price of an imported natural resource
C)  opening the economy to international trade
D)  All of the above are correct.E) A) and D)
F) All of the above

Question 20

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

Exam 33: Aggregate Demand and Aggregate Supply

The mathematical equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level) , expresses

Correct AnswerverifiedShow Answer

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

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Other things the same, if the price level is lower than expected, then some firms believe that the relative price of what they produce has

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Increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending which shifts the aggregate-demand curve to the left.

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During recessions

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Historically, the change in real GDP during recessions has been

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Which of the following is correct concerning recessions?

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Suppose technology advances within a nation. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Correct AnswerverifiedThe short run and lo...View AnswerShow Answer

Which of the following would shift long-run aggregate supply to the right?

Correct AnswerverifiedShow Answer

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

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Stagflation results from continued decreases in aggregate demand.

Correct AnswerverifiedShow Answer

A change in the expected price level is likely to cause which of the following?

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Other things the same, if the price level rises by 2% and people were expecting it to rise by 5%, then some firms have

Correct AnswerverifiedShow Answer

What curve shows the quantity of goods and services that firms choose to produce and sell at each price level?

Correct AnswerverifiedThe aggreg...View AnswerShow Answer

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

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Other things the same, as the price level falls, which of the following increases?

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Which of the following would help explain why the aggregate demand curve slopes downward?

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Other things the same, as the price level rises, exchange rates

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Other things the same, as the price level rises, the real value of a dollar

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The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have

Correct AnswerverifiedShow Answer

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The short run and lo...
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The aggreg...
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