Question 1

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 exportsE) B) and C)
F) None of the above

Question 2

All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the price level that was expected.

Accepted Answer

A) True 
 B)False

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

Aggregate demand would shift right if either

Accepted Answer

A)  the price level decreased, or government expenditures increased.
B)  the price level decreased, or the government instituted an investment tax credit.
C)  government expenditures or the money supply increased.
D)  All of the above are correct.E) All of the above
F) A) and D)

Question 5

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

Question 6

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)  an increase in the price level
B)  a decrease in the money supply
C)  an increase in net exports
D)  Congress passes a new investment tax creditE) A) and B)
F) A) and C)

Question 7

According to the misperceptions theory of the short-run aggregate supply curve,if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent,then the firm would believe that the relative price of what they produce had

Accepted Answer

A)  increased, so they would increase production.
B)  increased, so they would decrease production.
C)  decreased, so they would increase production.
D)  decreased, so they would decrease production.E) None of the above
F) C) and D)

Question 8

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 D)
F) A) and C)

Question 9

An increase in the interest rate causes investment to

Accepted Answer

A)  rise and the exchange rate to appreciate.
B)  fall and the exchange rate to depreciate.
C)  rise and the exchange rate to depreciate.
D)  fall and the exchange rate to appreciate.E) A) and B)
F) A) and C)

Question 10

During World War II government expenditures increased almost five-fold and output almost doubled.

Accepted Answer

A) True 
 B)False

Question 11

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.To explain this

Accepted Answer

A)  it is only necessary that long-run aggregate supply shifts right over time.
B)  it is only necessary that aggregate demand shifts right over time.
C)  both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must shift farther.
D)  None of the above cases would produce rising prices and growing real GDP over time.E) A) and D)
F) A) and C)

Question 12

If there are sticky wages,and the price level is greater than what was expected,then

Accepted Answer

A)  the quantity of aggregate goods and services supplied falls, which is shown by a shift of the short-run aggregate supply curve to the left.
B)  the quantity of aggregate goods and services supplied falls, as shown by a movement to the left along the short-run aggregate supply curve.
C)  the quantity of aggregate goods and services supplied rises, as shown by a shift of the short-run aggregate supply curve to the right.
D)  the quantity of aggregate goods and services supplied rises, as shown by a movement to the right along the short-run aggregate supply curve.E) A) and B)
F) None of the above

Question 13

Which of the following shifts short-run aggregate supply left?

Accepted Answer

A)  an increase in the actual price level
B)  an increase in the expected price level
C)  an increase in the capital stock
D)  None of the above is correct.E) B) and D)
F) B) and C)

Question 14

Aggregate demand shifts left when the government

Accepted Answer

A)  decreases taxes.
B)  cuts military expenditures.
C)  creates a new investment tax credit
D)  None of the above is correct.E) A) and D)
F) A) and C)

Question 15

The economic boom of the early 1940s resulted mostly from

Accepted Answer

A)  increased government expenditures.
B)  falling prices of oil and other natural resources.
C)  an increase in the growth rate of the money supply.
D)  rapid developments in transportation, electronics, and communication.E) B) and C)
F) All of the above

Question 16

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

Question 17

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 purch...

Question 18

Below are pairs of GDP growth rates and unemployment rates.Economists would be shocked to see most of these pairs.Which pair of GDP growth rates and unemployment rates is realistic?

Accepted Answer

A)  5 percent, 1 percent
B)  3 percent, 5 percent
C)  -1 percent, 3 percent
D)  -2 percent, 4 percentE) C) and D)
F) None of the above

Question 19

The aggregate demand curve

Accepted Answer

A)  has a slope that is explained in the same way as the slope of the demand curve for a particular product.
B)  is vertical in the long run.
C)  shows an inverse relation between the price level and the quantity of all goods and services demanded.
D)  All of the above are correct.E) A) and B)
F) None of the above

Question 20

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

Exam 33: Aggregate Demand and Aggregate Supply

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

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

Aggregate demand would shift right if either

Correct AnswerverifiedShow Answer

An increase in the interest rate causes investment to

Correct AnswerverifiedShow Answer

The economic boom of the early 1940s resulted mostly from

Correct AnswerverifiedShow Answer

Which of the following shifts short-run aggregate supply left?

Correct AnswerverifiedShow Answer

If there are sticky wages,and the price level is greater than what was expected,then

Correct AnswerverifiedShow Answer

Below are pairs of GDP growth rates and unemployment rates.Economists would be shocked to see most of these pairs.Which pair of GDP growth rates and unemployment rates is realistic?

Correct AnswerverifiedShow Answer

All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of output supplied increases when the actual price level exceeds the price level that was expected.

Correct AnswerverifiedShow Answer

Since the end of World War II,the U.S.has almost always had rising prices and an upward trend in real GDP.To explain this

Correct AnswerverifiedShow Answer

Aggregate demand shifts left when the government

Correct AnswerverifiedShow Answer

The aggregate demand curve

Correct AnswerverifiedShow Answer

During World War II government expenditures increased almost five-fold and output almost doubled.

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

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

Correct AnswerverifiedShow Answer

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

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 purch...View AnswerShow Answer

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

Correct AnswerverifiedShow 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

According to the misperceptions theory of the short-run aggregate supply curve,if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent,then the firm would believe that the relative price of what they produce had

Correct AnswerverifiedShow Answer

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When the price level increases,the purch...
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