Question 1

A decrease in the money supply causes the interest rate to rise so that investment falls.

Accepted Answer

A) True 
 B)False

Question 2

Wages tend to be sticky

Accepted Answer

A)  because of contracts, social norms, and notions of fairness.
B)  because of contracts, but not social norms or notions of fairness.
C)  because of social norms and notions of fairness, but not contracts.
D)  None of the above are correct.E) None of the above
F) B) and D)

Question 3

During World War II, the economy's production increased about

Accepted Answer

A)  25 percent and prices rose about 5 percent.
B)  50 percent and prices rose about 10 percent.
C)  75 percent and prices rose about 15 percent.
D)  100 percent and prices rose about 20 percent.E) A) and B)
F) B) and C)

Question 4

A relatively mild period of falling incomes and rising unemployment is called a(n)

Accepted Answer

A)  depression.
B)  recession.
C)  expansion.
D)  business cycle.E) None of the above
F) All of the above

Question 5

Other things the same, continued increases in the money supply lead to

Accepted Answer

A)  continued increases in the price level and real GDP.
B)  continued increases in the price level but not continued increases in real GDP.
C)  continued increases in real GDP but not continued increases in the price level.
D)  a one-time permanent increase in both prices and real GDP.E) C) and D)
F) A) and B)

Question 6

Figure 33-7. 
-Refer to Figure 33-7. Suppose the economy starts at Y. If there is a fall in aggregate demand, then the economy moves to

Accepted Answer

A)  V in the long run.
B)  W in the long run.
C)  X in the long run.
D)  Z in the long run.E) All of the above
F) B) and D)

Question 7

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage. They may infer that the reward to working is

Accepted Answer

A)  temporarily low and so supply a smaller quantity of labor.
B)  temporarily low and so supply a larger quantity of labor.
C)  temporarily high and so supply a smaller quantity of labor.
D)  temporarily high and so supply a larger quantity of labor.E) A) and D)
F) A) and C)

Question 8

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) All of the above
F) B) and C)

Question 9

Which of the following statements concerning the aggregate demand and aggregate supply model is correct?

Accepted Answer

A)  The aggregate demand and aggregate supply model is nothing more than a large version of the model of market demand and supply.
B)  The price level and quantity of output adjust to bring aggregate demand and supply into balance.
C)  The aggregate supply curve shows the quantity of goods and services that households, firms, and the government want to buy at each price.
D)  The aggregate demand shows the quantity of goods and services that firms are willing to produce at a given price level.E) B) and C)
F) A) and D)

Question 10

According to classical macroeconomic theory, changes in the money supply affect

Accepted Answer

A)  real GDP and the price level.
B)  real GDP but not the price level.
C)  the price level, but not real GDP.
D)  neither the price level nor real GDP.E) C) and D)
F) A) and D)

Question 11

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms 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 services 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.E) C) and D)
F) A) and B)

Question 12

Which of the following fall during a recession?

Accepted Answer

A)  both retail sales and employment
B)  retail sales but not employment
C)  employment but not retail sales
D)  neither employment nor retail salesE) B) and C)
F) A) and B)

Question 13

Like real GDP, investment fluctuates, but it fluctuates much less than real GDP.

Accepted Answer

A) True 
 B)False

Question 14

Other things the same, a decrease in the price level causes the interest rate to

Accepted Answer

A)  increase, the dollar to appreciate, and net exports to increase.
B)  increase, the dollar to depreciate, and net exports to decrease.
C)  decrease, the dollar to depreciate, and net exports to increase.
D)  decrease, the dollar to appreciate, and net exports to decrease.E) B) and D)
F) None of the above

Question 15

Suppose people anticipate an increase in the expected price level. 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 aggreg...

Question 16

Who wrote the 1936 book titled The General Theory of Employment, Interest, and Money?

Accepted Answer

The answer of Who wrote the 1936 book titled The...

Question 17

​The aggregate demand is described graphically as

Accepted Answer

A)  ​sloping downward.
B)  ​a vertical line.
C)  ​a horizontal line.
D)  ​sloping upward.E) A) and D)
F) B) and C)

Question 18

Other things the same, when the government spends more, the initial effect is that

Accepted Answer

A)  aggregate demand shifts right.
B)  aggregate demand shifts left.
C)  aggregate supply shifts right.
D)  aggregate supply shifts left.E) C) and D)
F) A) and B)

Question 19

Other things the same, an increase 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) None of the above

Question 20

The aggregate supply curve is

Accepted Answer

A)  vertical in the long run and slopes upward in the short run.
B)  upward sloping in the long run and vertical in the short run.
C)  vertical in the short run and in the long run.
D)  upward sloping in the short run and in the long run.E) B) and C)
F) A) and B)

Exam 33: Aggregate Demand and Aggregate Supply

Like real GDP, investment fluctuates, but it fluctuates much less than real GDP.

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The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have

Correct AnswerverifiedShow Answer

The aggregate supply curve is

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Other things the same, an increase in the price level makes consumers feel

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Other things the same, when the government spends more, the initial effect is that

Correct AnswerverifiedShow Answer

A decrease in the money supply causes the interest rate to rise so that investment falls.

Correct AnswerverifiedShow Answer

During World War II, the economy's production increased about

Correct AnswerverifiedShow Answer

Other things the same, a decrease in the price level causes the interest rate to

Correct AnswerverifiedShow Answer

Wages tend to be sticky

Correct AnswerverifiedShow Answer

Other things the same, continued increases in the money supply lead to

Correct AnswerverifiedShow Answer

Which of the following statements concerning the aggregate demand and aggregate supply model is correct?

Correct AnswerverifiedShow Answer

​The aggregate demand is described graphically as

Correct AnswerverifiedShow Answer

A relatively mild period of falling incomes and rising unemployment is called a(n)

Correct AnswerverifiedShow Answer

According to classical macroeconomic theory, changes in the money supply affect

Correct AnswerverifiedShow Answer

Suppose people anticipate an increase in the expected price level. 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 aggreg...View AnswerShow Answer

Figure 33-7. -Refer to Figure 33-7. Suppose the economy starts at Y. If there is a fall in aggregate demand, then the economy moves to

Correct AnswerverifiedShow Answer

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage. They may infer that the reward to working is

Correct AnswerverifiedShow Answer

Which of the following fall during a recession?

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

Who wrote the 1936 book titled The General Theory of Employment, Interest, and Money?

Correct AnswerverifiedShow Answer

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The aggregate demand is described graphically as

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The short-run aggreg...
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