Question 1

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

Question 2

Which of the following would cause investment spending to increase and aggregate demand to shift right?

Accepted Answer

A)   an increase in the money supply, but not an investment tax credit
B)   an investment tax credit, but not an increase in the money supply
C)   both an increase in the money supply and an investment tax credit
D)   None of the above are correct.E) C) and D)
F) A) and C)

Question 3

Figure 15-1
 
-Refer to Figure 15-1. If the economy starts at A and moves to D in the short run, the economy

Accepted Answer

A)   moves to A in the long run.
B)   moves to B in the long run.
C)   moves to C in the long run.
D)   stays at D in the long run.E) A) and C)
F) A) and B)

Question 4

In which case can we be sure real GDP rises in the short run?

Accepted Answer

A)   the money supply increases and taxes rise
B)   the money supply increases and taxes fall
C)   the money supply decreases and taxes rise
D)   None of the above are correct.E) A) and B)
F) C) and D)

Question 5

Most economists believe that money neutrality holds

Accepted Answer

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

Question 6

Other things the same, when the price level falls, interest rates

Accepted Answer

A)   rise, which means consumers will want to spend more on homebuilding.
B)   rise, which means consumers will want to spend less on homebuilding.
C)   fall, which means consumers will want to spend more on homebuilding.
D)   fall, which means consumers will want to spend less on homebuilding.E) All of the above
F) A) and B)

Question 7

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

Accepted Answer

A)   the slope of short-run aggregate supply.
B)   the slope of long-run aggregate supply.
C)   the slope of the aggregate-demand curve.
D)   everything that makes the aggregate-demand curve shift.E) B) and D)
F) B) and C)

Question 8

Other things the same, the aggregate quantity of output supplied will decrease if the price level

Accepted Answer

A)   is lower than expected so that firms believe the relative price of their output has increased.
B)   is lower than expected so that firms believe the relative price of their output has decreased.
C)   is higher than expected so that firms believe the relative price of their output has increased.
D)   is higher than expected so that firms believe the relative price of their output has decreased.E) C) and D)
F) None of the above

Question 9

Figure 15-1
 
-Refer to Figure 15-1. The economy would be moving to long-run equilibrium if it started at

Accepted Answer

A)   A and moved to B.
B)   C and moved to B.
C)   D and moved to C.
D)   None of the above is correct.E) All of the above
F) B) and D)

Question 10

During recessions

Accepted Answer

A)   workers are laid off.
B)   factories are idle.
C)   firms may find they are unable to sell all they produce.
D)   All of the above are correct.E) B) and C)
F) All of the above

Question 11

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) A) and D)
F) All of the above

Question 12

Aggregate demand shifts left if

Accepted Answer

A)   taxes rise and shifts left if stock prices rise.
B)   taxes rise and shifts left if stock prices fall.
C)   taxes fall and shifts left if stock prices rise.
D)   taxes fall and shifts left is stock prices fall.E) A) and D)
F) B) and D)

Question 13

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 B)
F) A) and C)

Question 14

An increase in the actual price level does not shift the short-run aggregate supply curve, but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following would both shift aggregate demand right?

Accepted Answer

A)   the price level decreases and government expenditures increase
B)   the price level decreases and the government repeals an investment tax credit
C)   government expenditures increase and the money supply increases
D)   None of the above are correct.E) B) and D)
F) A) and D)

Question 16

During World War II,

Accepted Answer

A)   government purchases of goods and services increased fivefold.
B)   the economy's production increased about 25 percent.
C)   unemployment fell to about 5%.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 17

As the price level falls

Accepted Answer

A)   people will want to buy more bonds, so the interest rate rises.
B)   people will want to buy fewer bonds, so the interest rate falls.
C)   people will want to buy more bonds, so the interest rate falls.
D)   people will want to buy fewer bonds, so the interest rate rises.E) All of the above
F) B) and D)

Question 18

Other things the same, if prices fell when firms and workers were expecting them to rise, then

Accepted Answer

A)   employment and production would rise.
B)   employment would rise and production would fall.
C)   employment would fall and production would rise.
D)   employment and production would fall.E) None of the above
F) C) and D)

Question 19

Figure 15-2.
 
-Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

Accepted Answer

A)   The expected price level falls. Bargains are struck for higher wages.
B)   The expected price level falls. Bargains are struck for lower wages.
C)   The expected price level rises. Bargains are struck for higher wages.
D)   The expected price level rises. Bargains are struck for lower wages.E) C) and D)
F) None of the above

Question 20

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 declines in investment spending.
C)   They are any period when real GDP growth is less than average.
D)   They tend to be associated with falling unemployment rates.E) All of the above
F) C) and D)

Exam 15: Aggregate Demand and Aggregate Supply

In which case can we be sure real GDP rises in the short run?

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Which of the following would both shift aggregate demand right?

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Which of the following would cause investment spending to increase and aggregate demand to shift right?

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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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During World War II,

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During recessions

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Figure 15-2. -Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?

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Other things the same, the aggregate quantity of output supplied will decrease if the price level

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Other things the same, when the price level falls, interest rates

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Other things the same, if prices fell when firms and workers were expecting them to rise, then

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Which of the following is correct concerning recessions?

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Figure 15-1 -Refer to Figure 15-1. The economy would be moving to long-run equilibrium if it started at

Correct AnswerverifiedShow Answer

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

Figure 15-1 -Refer to Figure 15-1. If the economy starts at A and moves to D in the short run, the economy

Correct AnswerverifiedShow Answer

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

Correct AnswerverifiedShow Answer

Aggregate demand shifts left if

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As the price level falls

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An increase in the actual price level does not shift the short-run aggregate supply curve, but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Correct AnswerverifiedShow Answer

Most economists believe that money neutrality holds

Correct AnswerverifiedShow Answer

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

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