Question 1

When interest rates fall

Accepted Answer

A)   firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding.
B)   firms want to borrow more for new plants and equipment and households want to borrow less for homebuilding.
C)   firms want to borrow less for new plants and equipment and households want to borrow more for homebuilding.
D)   firms want to borrow less for new plants and equipment and households want to borrow less for homebuilding.

Question 2

As recessions begin, income

Accepted Answer

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

Question 3

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 supplied

Question 4

Figure 33-7. 
-Refer to Figure 33-7. Suppose the economy starts at Y. If aggregate demand increases from AD2 to AD3, then the economy moves to

Accepted Answer

A)   V.
B)   W.
C)   X.
D)   Z.

Question 5

The aggregate demand and aggregate supply graph has

Accepted Answer

A)   quantity of output on the horizontal axis. Output can be measured by the GDP deflator.
B)   quantity of output on the horizontal axis. Output can be measured by real GDP.
C)   quantity of output on the vertical axis. Output can be measured by the GDP deflator.
D)   quantity of output on the vertical axis. Output can be measured by real GDP.

Question 6

Who is credited for the original development of the model of aggregate demand and aggregate supply?

Accepted Answer

The answer of Who is credited for the original development...

Question 7

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

Accepted Answer

A)   increase foreign bond purchases, so the dollar appreciates.
B)   increase foreign bond purchases, so the dollar depreciates.
C)   increase domestic bond purchases, so the dollar appreciates.
D)   increase domestic bond purchases, so the dollar depreciates.

Question 8

An increase in household saving causes consumption to

Accepted Answer

A)   rise and aggregate demand to increase.
B)   rise and aggregate demand to decrease.
C)   fall and aggregate demand to increase.
D)   fall and aggregate demand to decrease.

Question 9

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

Accepted Answer

A)   government purchases increase and taxes rise.
B)   government purchases increase and taxes fall.
C)   government purchases decrease and taxes rise.
D)   government purchases decrease and taxes fall.

Question 10

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 11

An economic expansion caused by a shift in aggregate demand remedies itself over time as the expected price level

Accepted Answer

A)   falls, shifting aggregate demand right.
B)   rises, shifting aggregate demand left.
C)   falls, shifting aggregate supply right.
D)   rises, shifting aggregate supply left.

Question 12

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained

Accepted Answer

A)   only by technological progress.
B)   only by money supply growth.
C)   by technological progress and money supply growth.
D)   None of the above is correct.

Question 13

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 be shifting farther.
D)   None of the above cases would produce rising prices and growing real GDP over time.

Question 14

A decrease in what variable will raise the quantity of goods and services supplied, and shift only the short run aggregate supply curve to the right?

Accepted Answer

The expect...

Question 15

Other things the same, which of the following is correct?

Accepted Answer

A)   A decrease in the price level causes the dollar to appreciate. Aggregate demand shifts right.
B)   A decrease in the price level causes the dollar to depreciate. Aggregate demand shifts right.
C)   If speculators lose confidence in the American economy, the dollar appreciates. Aggregate demand shifts right.
D)   If speculators lose confidence in the American economy, the dollar depreciates. Aggregate demand shifts right.

Question 16

Other things the same, an increase in the price level induces people to hold

Accepted Answer

A)   less money, so they lend less, and the interest rate rises.
B)   less money, so they lend more, and the interest rate falls.
C)   more money, so they lend more, and the interest rate falls.
D)   more money, so they lend less, and the interest rate rises.

Question 17

Refer to Political Instability Abroad. What would the change in the exchange rate make happen to U.S. net exports and U.S. aggregate demand?

Accepted Answer

A)   Net exports would rise which by itself would increase U.S. aggregate demand.
B)   Net exports would rise which by itself would decrease U.S. aggregate demand.
C)   Net exports would fall which by itself would increase U.S. aggregate demand.
D)   Net exports would fall which by itself would decrease U.S. aggregate demand.

Question 18

List the three alternative explanations for the upward slope of the short run aggregate supply curve.

Accepted Answer

Sticky wages, sticky...

Question 19

Name two macroeconomic variables that decline when an economy goes into recession, and name one macroeconomic variable that rises.

Accepted Answer

Real GDP and investm...

Question 20

Other things the same, the aggregate quantity of output supplied will increase 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.

Exam 33: Aggregate Demand and Aggregate Supply

An economic expansion caused by a shift in aggregate demand remedies itself over time as the expected price level

Correct AnswerverifiedShow Answer

A decrease in what variable will raise the quantity of goods and services supplied, and shift only the short run aggregate supply curve to the right?

Correct AnswerverifiedThe expect...View AnswerShow Answer

The aggregate demand and aggregate supply graph has

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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

When interest rates fall

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As recessions begin, income

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

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Who is credited for the original development of the model of aggregate demand and aggregate supply?

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

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Name two macroeconomic variables that decline when an economy goes into recession, and name one macroeconomic variable that rises.

Correct AnswerverifiedReal GDP and investm...View AnswerShow Answer

Figure 33-7. -Refer to Figure 33-7. Suppose the economy starts at Y. If aggregate demand increases from AD2 to AD3, then the economy moves to

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. This can be explained

Correct AnswerverifiedShow Answer

Refer to Political Instability Abroad. What would the change in the exchange rate make happen to U.S. net exports and U.S. aggregate demand?

Correct AnswerverifiedShow Answer

Other things the same, an increase in the price level induces people to hold

Correct AnswerverifiedShow Answer

An increase in household saving causes consumption to

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

List the three alternative explanations for the upward slope of the short run aggregate supply curve.

Correct AnswerverifiedSticky wages, sticky...View AnswerShow 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 expected price level.

Correct AnswerverifiedShow Answer

Other things the same, which of the following is correct?

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

Correct AnswerverifiedShow Answer

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The expect...
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Real GDP and investm...
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Sticky wages, sticky...
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