Question 1

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) None of the above
F) A) and B)

Question 2

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not a determinant of the long-run level of real GDP?

Accepted Answer

A)  the price level
B)  the supply of labor
C)  available natural resources
D)  available technologyE) B) and C)
F) None of the above

Question 4

The downward slope of the aggregate demand curve is based on logic that as the price level rises, consumption, investment, and net exports all fall.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is correct?

Accepted Answer

A)  An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left.
B)  An increase in stock prices reduces consumption spending so that aggregate demand shifts left.
C)  An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left.
D)  A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left.E) A) and D)
F) A) and C)

Question 6

If aggregate demand shifts right, then eventually price level expectations rise. This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Accepted Answer

A) True 
 B)False

Question 7

The long-run aggregate supply curve

Accepted Answer

A)  is vertical.
B)  is a graphical representation of the classical dichotomy.
C)  indicates monetary neutrality in the long run.
D)  All of the above are correct.E) B) and D)
F) C) and D)

Question 8

If the actual price level is 165, but people had been expecting it to be 160, then

Accepted Answer

A)  the quantity of output supplied rises, but only in the short run.
B)  the quantity of output supplied rises in the short run and the long run.
C)  the quantity of output supplied falls, but only in the short run.
D)  the quantity of output supplied falls in the short run and the long run.E) A) and B)
F) B) and D)

Question 9

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.E) All of the above
F) B) and D)

Question 10

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.E) A) and C)
F) B) and D)

Question 11

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.E) B) and C)
F) A) and C) C

Question 12

Which of the following did the Fed do during the recession of 2008-2009?

Accepted Answer

A)  lowered the federal funds rate and sold securities and loans
B)  lowered the federal funds rate and purchased securities and loans
C)  raised the federal funds rate and sold securities and loans
D)  raised the federal funds rate and purchased securities and loansE) All of the above
F) A) and B)

Question 13

Changes in the price of oil

Accepted Answer

A)  can only lead to recessions.
B)  have not contributed much to output fluctuations in the United States.
C)  change the economy principally by changing aggregate demand.
D)  created both inflation and recession in the United States in the 1970s.E) All of the above
F) C) and D)

Question 14

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

Accepted Answer

A)  the dollar would appreciate which would cause aggregate demand to shift right.
B)  the dollar would appreciate which would cause aggregate demand to shift left.
C)  the dollar would depreciate which would cause aggregate demand to shift right.
D)  the dollar would depreciate which would cause aggregate demand to shift left.E) A) and B)
F) A) and C)

Question 15

Figure 20-2. 
-Refer to Figure 20-2. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience

Accepted Answer

A)  a falling price level and a falling level of output.
B)  a falling price level and a rising level of output.
C)  a rising price level and a falling level of output.
D)  a rising price level and a rising level of output.E) A) and D)
F) A) and B) C

Question 16

Which of the following shifts long-run aggregate supply right?

Accepted Answer

A)  an increase in either the physical or human capital stock
B)  an increase in the human but not the physical capital stock
C)  an increase in the physical capital stock, but no the human capital stock
D)  neither an increase in the physical capital stock or the human capital stockE) None of the above
F) A) and C)

Question 17

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major new restrictions on logging enacted. In the short run

Accepted Answer

A)  real GDP will rise and the price level might rise, fall, or stay the same.
B)  real GDP will fall and the price level might rise, fall, or stay the same.
C)  the price level will rise, and real GDP might rise, fall, or stay the same.
D)  the price level will fall, and real GDP might rise, fall, or stay the same.E) B) and C)
F) All of the above

Question 18

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)  an increase in the price level
B)  a decrease in the money supply
C)  an increase in net exports
D)  Congress passes a new investment tax creditE) A) and D)
F) C) and D)

Question 19

If countries that imported goods and services from the United States went into recession, we would expect that U.S. net exports would

Accepted Answer

A)  rise, making aggregate demand shift right.
B)  rise, making aggregate demand shift left.
C)  fall, making aggregate demand shift right.
D)  fall, making aggregate demand shift left.E) A) and B)
F) B) and C)

Question 20

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Accepted Answer

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

Exam 20: Aggregate Demand and Aggregate Supply

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

Correct AnswerverifiedShow Answer

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

Correct AnswerverifiedShow Answer

Which of the following is not a determinant of the long-run level of real GDP?

Correct AnswerverifiedShow Answer

The downward slope of the aggregate demand curve is based on logic that as the price level rises, consumption, investment, and net exports all fall.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

If aggregate demand shifts right, then eventually price level expectations rise. This increase in price level expectations causes the aggregate demand curve to shift to the left back to its original position.

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve

Correct AnswerverifiedShow Answer

If the actual price level is 165, but people had been expecting it to be 160, then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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 AnswerverifiedC

Which of the following did the Fed do during the recession of 2008-2009?

Correct AnswerverifiedShow Answer

Changes in the price of oil

Correct AnswerverifiedShow Answer

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

Correct AnswerverifiedShow Answer

Figure 20-2. -Refer to Figure 20-2. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience

Correct AnswerverifiedC

Which of the following shifts long-run aggregate supply right?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes raised. At the same time, Senator B succeeds in getting major new restrictions on logging enacted. In the short run

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

If countries that imported goods and services from the United States went into recession, we would expect that U.S. net exports would

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Correct AnswerverifiedB

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C

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C

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B