Question 1

Which of the following is correct?

Accepted Answer

A)  The short-run, but not the long-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
B)  The long-run, but not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
C)  The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables.
D)  Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables.E) A) and B)
F) A) and C)

Question 2

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

Accepted Answer

A)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises.
B)  the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls.
C)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises.
D)  the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.E) A) and B)
F) B) and D)

Question 3

Which of the following rises during recessions?

Accepted Answer

A)  layoffs and consumer spending
B)  layoffs but not consumer spending
C)  consumer spending but not layoffs
D)  neither layoffs nor consumer spendingE) A) and D)
F) A) and C)

Question 4

Other things the same, if the price level rises, people

Accepted Answer

A)  increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases.
B)  increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.
C)  decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases.
D)  decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.E) None of the above
F) C) and D)

Question 5

The aggregate supply curve is upward sloping in

Accepted Answer

A)  the short and long run.
B)  neither the short nor long run.
C)  the long run, but not the short run.
D)  the short run, but not the long run.E) A) and B)
F) B) and C)

Question 6

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following affected aggregate demand during the recession of 2008-2009?

Accepted Answer

A)  a decline in residential construction and a decrease in lending
B)  a decline in residential construction but not a decrease in lending
C)  a decrease in lending but not a decline in residential construction
D)  neither a decrease in residential construction nor a decrease in lendingE) None of the above
F) A) and C)

Question 8

An increase in the price level and a reduction in output would result from

Accepted Answer

A)  an increase in the money supply.
B)  an increase in government expenditures.
C)  a fall in stock prices.
D)  bad weather in farm states.E) All of the above
F) B) and D)

Question 9

A decrease in the expected price level shifts

Accepted Answer

A)  only the long-run aggregate supply curve right.
B)  only the short-run aggregate supply curve right.
C)  both the short-run and the long-run aggregate supply curve right.
D)  Neither the short-run nor the long-run aggregate supply curve right.E) A) and B)
F) C) and D)

Question 10

Consider the exhibit below for the following questions.Figure 20-1 
-Refer to Figure 20-1. If the economy is at A and there is a fall in aggregate demand, in the short run the economy

Accepted Answer

A)  stays at A.
B)  moves to B.
C)  moves to C.
D)  moves to D.E) A) and D)
F) C) and D)

Question 11

According to classical macroeconomic theory, changes in the money supply change real GDP but not the price level.

Accepted Answer

A) True 
 B)False

Question 12

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

Accepted Answer

A) True 
 B)False

Question 13

In the first few years of the Great Depression, unemployment rose to about

Accepted Answer

A)  10 percent, and prices rose about 14 percent.
B)  15 percent, and prices rose about 22 percent.
C)  20 percent, and prices fell about 14 percent.
D)  25 percent, and prices fell about 22 percent.E) All of the above
F) B) and C)

Question 14

Which of the following shifts the short-run aggregate supply curve to the right?

Accepted Answer

A)  an increase in the money supply
B)  an increase in the price level
C)  a decrease in the expected price level
D)  All of the above are correct.E) A) and D)
F) A) and C)

Question 15

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.E) B) and C)
F) A) and D)

Question 16

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 expected price level.

Accepted Answer

A) True 
 B)False

Question 17

In the short-run an increase in the costs of production makes

Accepted Answer

A)  output and prices rise.
B)  output rise and prices fall.
C)  output fall and prices rise.
D)  output and prices fall.E) A) and B)
F) C) and D)

Question 18

When the money supply decreases

Accepted Answer

A)  interest rates fall and so aggregate demand shifts right.
B)  interest rates fall and so aggregate demand shifts left.
C)  interest rates rise and so aggregate demand shifts right.
D)  interest rates rise and so aggregate demand shifts left.E) All of the above
F) B) and D)

Question 19

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

Accepted Answer

A)  long run, since evidence indicates that money is not neutral in the long run.
B)  long run, since real and nominal variables are essentially determined separately in the long run.
C)  short run, provided money is not neutral.
D)  short run, provided real and nominal variables are highly intertwined.E) All of the above
F) A) and D)

Question 20

Which of the following accounts for about two-thirds of the decline in output during a recession?

Accepted Answer

A)  the decline in consumption expenditures on consumer durables alone
B)  the decline in total consumption spending alone
C)  the decline in investment spending alone
D)  the combined decline in consumption and investment spendingE) A) and D)
F) A) and C)

Exam 20: Aggregate Demand and Aggregate Supply

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

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

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In the first few years of the Great Depression, unemployment rose to about

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When the money supply decreases

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Consider the exhibit below for the following questions.Figure 20-1 -Refer to Figure 20-1. If the economy is at A and there is a fall in aggregate demand, in the short run the economy

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The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

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Which of the following is correct?

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The aggregate supply curve is upward sloping in

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In the short-run an increase in the costs of production makes

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A decrease in the expected price level shifts

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Other things the same, if the price level rises, people

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According to classical macroeconomic theory, changes in the money supply change real GDP but not the price level.

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Which of the following accounts for about two-thirds of the decline in output during a recession?

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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 expected price level.

Correct AnswerverifiedShow Answer

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

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Which of the following shifts the short-run aggregate supply curve to the right?

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An increase in the price level and a reduction in output would result from

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Which of the following affected aggregate demand during the recession of 2008-2009?

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Which of the following rises during recessions?

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

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