Question 1

Suppose that foreigners had reduced confidence in U.S. financial institutions and believed that privately issued U.S. bonds were more likely to be defaulted on. U.S. net exports would

Accepted Answer

A)  rise which by itself would increase aggregate demand.
B)  rise which by itself would decrease aggregate demand.
C)  fall which by itself would increase aggregate demand.
D)  fall which by itself would decrease aggregate demand.E) A) and C)
F) B) and D)

Question 2

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% while firms were expecting it to rise by 2%, then some firms with high menu costs 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 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) All of the above
F) C) and D)

Question 3

Most economists believe that classical theory describes the world in the short run but not in the long run.

Accepted Answer

A) True 
 B)False

Question 4

Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to

Accepted Answer

A)  rise.This rise in price expectations shifts the short-run aggregate supply curve to the right.
B)  rise.This rise in price expectations shifts the short-run aggregate supply curve to the left.
C)  fall.This fall in price expectations shifts the short-run aggregate supply curve to the right.
D)  fall.This fall in price expectations shifts the short-run aggregate supply curve to the left.E) A) and C)
F) B) and C)

Question 5

Suppose a recession overseas reduces a country's exports. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift?

Accepted Answer

The aggregate-demand...

Question 6

The initial impact of an increase in an investment tax credit is to shift aggregate

Accepted Answer

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

Question 7

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 8

Misperceptions theory helps explain what feature of the aggregate demand and aggregate supply model?

Accepted Answer

why the short run ag...

Question 9

Using the aggregate demand and aggregate supply model, a decrease of what curve is by itself consistent with the changes in prices and output that occurred during the onset of the Great Depression?

Accepted Answer

The answer of Using the aggregate demand and aggregate supply...

Question 10

Write the mathematical expression that summarizes the three alternative explanations for the upward slope of the short run aggregate supply curve.

Accepted Answer

Quantity of output s...

Question 11

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Accepted Answer

A) True 
 B)False

Question 12

When the price level rises unexpectedly, some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

Accepted Answer

A) True 
 B)False

Question 13

Figure 33-2  ​
-Refer to Figure 33-2. If the economy starts at S, a decrease in the money supply moves the economy

Accepted Answer

A)  to T in the long run.
B)  to U in the long run.
C)  back to S in the long run.
D)  to V in the long run.E) A) and B)
F) A) and C)

Question 14

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 15

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

Accepted Answer

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

Question 16

Figure 33-5 2 to AD3, then in the short run the economy moves to A) Point V. B) Point X. C) Point W. D) Point Z." class="answers-bank-image d-inline" rel="preload" > ​
-Refer to Figure 33-5. Suppose the economy starts at Point Y. If aggregate demand increases from AD2 to AD3, then in the short run the economy moves to

Accepted Answer

A)  Point V.
B)  Point X.
C)  Point W.
D)  Point Z.E) A) and B)
F) B) and D)

Question 17

Other things the same, as the price level decreases it induces greater spending on

Accepted Answer

A)  both net exports and investment.
B)  net exports but not investment.
C)  investment but not net exports.
D)  neither net exports nor investment.E) A) and D)
F) All of the above

Question 18

Explain the effect on output and price level from an increase in the short-run aggregate-supply curve.

Accepted Answer

The price level woul...

Question 19

Make a list of things that would shift the long-run aggregate supply curve to the right.

Accepted Answer

Examples in the text (or variations) inc...

Question 20

The aggregate demand and aggregate supply model helps us to understand both short-run economic fluctuations and how the economy moves from the short to the long run.

Accepted Answer

A) True 
 B)False

Exam 33: Aggregate Demand and Aggregate Supply

Explain the effect on output and price level from an increase in the short-run aggregate-supply curve.

Correct AnswerverifiedThe price level woul...View AnswerShow Answer

Using the aggregate demand and aggregate supply model, a decrease of what curve is by itself consistent with the changes in prices and output that occurred during the onset of the Great Depression?

Correct AnswerverifiedShow Answer

The initial impact of an increase in an investment tax credit is to shift aggregate

Correct AnswerverifiedShow Answer

Write the mathematical expression that summarizes the three alternative explanations for the upward slope of the short run aggregate supply curve.

Correct AnswerverifiedQuantity of output s...View AnswerShow Answer

The aggregate demand and aggregate supply model helps us to understand both short-run economic fluctuations and how the economy moves from the short to the long run.

Correct AnswerverifiedShow Answer

Misperceptions theory helps explain what feature of the aggregate demand and aggregate supply model?

Correct Answerverifiedwhy the short run ag...View AnswerShow Answer

Suppose a recession overseas reduces a country's exports. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift?

Correct AnswerverifiedThe aggregate-demand...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

Figure 33-2 ​ -Refer to Figure 33-2. If the economy starts at S, a decrease in the money supply moves the economy

Correct AnswerverifiedShow Answer

Other things the same, as the price level decreases it induces greater spending on

Correct AnswerverifiedShow Answer

Figure 33-5 ​ -Refer to Figure 33-5. Suppose the economy starts at Point Y. If aggregate demand increases from AD2 to AD3, then in the short run the economy moves to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Most economists believe that classical theory describes the world in the short run but not in the long run.

Correct AnswerverifiedShow Answer

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Correct AnswerverifiedShow Answer

Suppose that foreigners had reduced confidence in U.S. financial institutions and believed that privately issued U.S. bonds were more likely to be defaulted on. U.S. net exports would

Correct AnswerverifiedShow Answer

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% while firms were expecting it to rise by 2%, then some firms with high menu costs will have

Correct AnswerverifiedShow Answer

When the price level rises unexpectedly, some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to

Correct AnswerverifiedShow Answer

Make a list of things that would shift the long-run aggregate supply curve to the right.

Correct AnswerverifiedExamples in the text (or variations) inc...View AnswerShow Answer

Correct Answer
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The price level woul...
View Answer

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Quantity of output s...
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why the short run ag...
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The aggregate-demand...
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The short-run and lo...
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Figure 33-2 -Refer to Figure 33-2. If the economy starts at S, a decrease in the money supply moves the economy

Correct Answer
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Correct Answer
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Figure 33-5 -Refer to Figure 33-5. Suppose the economy starts at Point Y. If aggregate demand increases from AD₂ to AD₃, then in the short run the economy moves to

Correct Answer
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Examples in the text (or variations) inc...
View Answer