Question 1

The aggregate demand and aggregate supply graph has

Accepted Answer

A)   the price level on the horizontal axis. The price level can be measured by the GDP deflator.
B)   the price level on the horizontal axis. The price level can be measured by real GDP.
C)   the price level on the vertical axis. The price level can be measured by the GDP deflator.
D)   the price level on the vertical axis. The price level can be measured by GDP.

Question 2

Which of the following would increase output in the short run?

Accepted Answer

A)   an increase in stock prices makes people feel wealthier
B)   government spending increases
C)   firms chose to purchase more investment goods
D)   All of the above are correct.

Question 3

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   a decrease in the money supply
B)   increases in the profitability of capital due perhaps to technological progress.
C)   the repeal of an investment tax credit
D)   a decrease in the price level

Question 4

Over the last fifty years both real GDP and prices have trended upward in most countries. Continuing real GDP growth and inflation can be explained by

Accepted Answer

A)   continuing technological progress alone.
B)   continuing increases in the money supply alone.
C)   continued technological progress and continuing increases in the money supply.
D)   None of the above can explain continuing real GDP growth and inflation.

Question 5

The aggregate quantity of goods and services demanded changes as the price level falls because

Accepted Answer

A)   real wealth falls, interest rates rise, and the dollar appreciates.
B)   real wealth falls, interest rates rise, and the dollar depreciates.
C)   real wealth rises, interest rates fall, and the dollar appreciates.
D)   real wealth rises, interest rates fall, and the dollar depreciates.

Question 6

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 7

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 8

Which of the following would cause stagflation?

Accepted Answer

A)   aggregate demand shifts right
B)   aggregate demand shifts left
C)   aggregate supply shifts right
D)   aggregate supply shifts left

Question 9

Stagflation exists when prices

Accepted Answer

A)   rise and unemployment falls.
B)   rise and unemployment falls.
C)   fall and unemployment rises.
D)   fall and unemployment rises.

Question 10

Other things the same, as the price level falls, a country's exchange rate

Accepted Answer

A)   and interest rates rise.
B)   and interest rates fall.
C)   falls and interest rates rise.
D)   rises and interest rates fall.

Question 11

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.

Question 12

Other things the same, a fall in an economy's overall level of prices tends to

Accepted Answer

A)   raise both the quantity demanded and supplied of goods and services.
B)   raise the quantity demanded of goods and services, but lower the quantity supplied.
C)   lower the quantity demanded of goods and services, but raise the quantity supplied.
D)   lower both the quantity demanded and the quantity supplied of goods and services.

Question 13

Suppose a country experiences a change in weather patterns that makes farming more difficult. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift?

Accepted Answer

The short-run and lo...

Question 14

Suppose that during World War II the long-run aggregate supply curve shifted right. In order for price and output to have changed in the direction they did, what would have to have happened to aggregate demand?

Accepted Answer

A)   It would have to have shifted left by less than aggregate supply shifted
B)   It would have to have to shifted left by more than aggregate supply shifted.
C)   It would have to have shifted right by less than aggregate supply shifted
D)   It would have to have to shifted right by more than aggregate supply shifted.

Question 15

The aggregate quantity of goods and services demanded changes as the price level rises because

Accepted Answer

A)   real wealth falls, interest rates rise, and the dollar appreciates.
B)   real wealth falls, interest rates rise, and the dollar depreciates.
C)   real wealth rises, interest rates fall, and the dollar appreciates.
D)   real wealth rises, interest rates fall, and the dollar depreciates.

Question 16

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Accepted Answer

A) True 
 B)False

Question 17

Suppose speculators lost confidence in foreign economies and bought more U.S. bonds. How would this affect net exports in the U.S., and which way would this cause the aggregate demand curve to shift?

Accepted Answer

Net exports would fa...

Question 18

During periods of stagflation, what happens to output and prices in the economy?

Accepted Answer

Output fal...

Question 19

The quantity of aggregate goods and services demanded rises when the

Accepted Answer

A)   price level rises, because the interest rate rises.
B)   price level rises, because the interest rate falls.
C)   price level falls, because the interest rate rises.
D)   price level falls, because the interest rate falls.

Question 20

Other things the same, continued technological progress and continued increases in the money supply would unambiguously lead to

Accepted Answer

A)   rising prices only.
B)   rising real GDP only.
C)   rising prices and rising real GDP.
D)   neither rising prices nor rising real GDP.

Exam 33: Aggregate Demand and Aggregate Supply

Suppose that during World War II the long-run aggregate supply curve shifted right. In order for price and output to have changed in the direction they did, what would have to have happened to aggregate demand?

Correct AnswerverifiedShow Answer

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Correct AnswerverifiedShow Answer

The quantity of aggregate goods and services demanded rises when the

Correct AnswerverifiedShow Answer

Which of the following would increase output in the short run?

Correct AnswerverifiedShow Answer

Other things the same, a fall in an economy's overall level of prices tends to

Correct AnswerverifiedShow Answer

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

During periods of stagflation, what happens to output and prices in the economy?

Correct AnswerverifiedOutput fal...View AnswerShow Answer

Suppose a country experiences a change in weather patterns that makes farming more difficult. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift?

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

Stagflation exists when prices

Correct AnswerverifiedShow Answer

Which of the following would cause stagflation?

Correct AnswerverifiedShow Answer

Other things the same, continued technological progress and continued increases in the money supply would unambiguously lead to

Correct AnswerverifiedShow Answer

Over the last fifty years both real GDP and prices have trended upward in most countries. Continuing real GDP growth and inflation can be explained by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, as the price level falls, a country's exchange rate

Correct AnswerverifiedShow Answer

The aggregate quantity of goods and services demanded changes as the price level rises because

Correct AnswerverifiedShow Answer

Suppose speculators lost confidence in foreign economies and bought more U.S. bonds. How would this affect net exports in the U.S., and which way would this cause the aggregate demand curve to shift?

Correct AnswerverifiedNet exports would fa...View AnswerShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

The aggregate demand and aggregate supply graph has

Correct AnswerverifiedShow Answer

The aggregate quantity of goods and services demanded changes as the price level falls because

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Output fal...
View Answer

Correct Answer
verified
The short-run and lo...
View 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
Net exports would fa...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified