Question 1

If speculators lost confidence in foreign economies and so wanted to buy more 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 2

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) C) and D)
F) A) and B)

Question 3

What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

Accepted Answer

Variables that fall along with real GDP ...

Question 4

Consider the exhibit below for the following questions.
Figure 33-4 
-Refer to Figure 33-4. A decrease in taxes would move the economy from C to

Accepted Answer

A)   B in the short run and the long run.
B)   D in the short run and the long run.
C)   B in the short run and A in the long run.
D)   D in the short run and C in the long run.E) A) and B)
F) B) and C)

Question 5

Refer to Political Instability Abroad. What would happen to the dollar?

Accepted Answer

A)   It would appreciate in foreign exchange markets making U.S goods more expensive compared to foreign goods.
B)   It would appreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods.
C)   It would depreciate in foreign exchange markets making U.S. goods more expensive compared to foreign goods.
D)   It would depreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods.E) B) and D)
F) C) and D)

Question 6

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following did not happen during the onset of the Great Depression?

Accepted Answer

A)   The money supply fell as households took money out of bank deposits.
B)   The Fed conducted expansionary monetary policy.
C)   Stock prices fell about 90 percent.
D)   Disruption of the banking system made it difficult for some firms to obtain funds for investment.E) A) and B)
F) A) and C)

Question 8

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

Accepted Answer

A) True 
 B)False

Question 9

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Accepted Answer

A)   the price level is higher than expected making production more profitable.
B)   the price level is higher than expected making production less profitable.
C)   the price level is lower than expected making production more profitable.
D)   the price level is higher than expected making production less profitable.E) A) and B)
F) A) and D)

Question 10

Refer to Financial Crisis. How is the new long-run equilibrium different from the original one?

Accepted Answer

A)   both price and real GDP are higher.
B)   both price and real GDP are lower.
C)   the price level is the same and GDP is lower.
D)   the price level is lower and real GDP is the same.E) None of the above
F) All of the above

Question 11

The average price level is measured by

Accepted Answer

A)   the price of oil.
B)   the rate of inflation.
C)   the nominal interest rate.
D)   the GDP deflator.E) A) and C)
F) A) and B)

Question 12

The discovery of a large amount of previously-undiscovered oil in the U.S. would shift

Accepted Answer

A)   the long-run aggregate-supply curve to the right.
B)   the long-run aggregate-supply curve to the left.
C)   the aggregate-demand curve to the left.
D)   None of the above is correct.E) None of the above
F) B) and C)

Question 13

Suppose a country offers a new investment tax credit. 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 14

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 15

We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

Accepted Answer

A) True 
 B)False

Question 16

Keynes explained that recessions and depressions occur because of

Accepted Answer

A)   excess aggregate demand.
B)   inadequate aggregate demand.
C)   excess aggregate supply.
D)   inadequate aggregate supply.E) C) and D)
F) None of the above

Question 17

Although wages, incomes, and interest rates are most often discussed in nominal terms, what matters most are their real values.

Accepted Answer

A) True 
 B)False

Question 18

Figure 33-12. 
-Refer to Figure 33-12. Identify periods 1 and 2.

Accepted Answer

Period 1 is the Grea...

Question 19

Which of the following would cause prices and real GDP to rise in the short run?

Accepted Answer

A)   an increase in the expected price level
B)   an increase in the money supply
C)   a decrease in the capital stock
D)   an increase in taxes.E) A) and C)
F) B) and D)

Question 20

Figure 33-8. 
-Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P1 and Y1 , then it must be the case that

Accepted Answer

A)   short run aggregate supply has decreased.
B)   short run aggregate supply has increased.
C)   aggregate demand has increased.
D)   aggregate demand has decreased.E) A) and B)
F) A) and C)

Exam 33: Aggregate Demand and Aggregate Supply

The discovery of a large amount of previously-undiscovered oil in the U.S. would shift

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The average price level is measured by

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Refer to Financial Crisis. How is the new long-run equilibrium different from the original one?

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Figure 33-12. -Refer to Figure 33-12. Identify periods 1 and 2.

Correct AnswerverifiedPeriod 1 is the Grea...View AnswerShow Answer

Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4. A decrease in taxes would move the economy from C to

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

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Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

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Refer to Political Instability Abroad. What would happen to the dollar?

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Which of the following would cause prices and real GDP to rise in the short run?

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Although wages, incomes, and interest rates are most often discussed in nominal terms, what matters most are their real values.

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If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds

Correct AnswerverifiedShow Answer

Keynes explained that recessions and depressions occur because of

Correct AnswerverifiedShow Answer

Suppose a country offers a new investment tax credit. 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

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Correct AnswerverifiedShow Answer

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

Correct AnswerverifiedShow Answer

We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

Correct AnswerverifiedShow Answer

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

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What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected.

Correct AnswerverifiedVariables that fall along with real GDP ...View AnswerShow Answer

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P1 and Y1 , then it must be the case that

Correct AnswerverifiedShow Answer

Which of the following did not happen during the onset of the Great Depression?

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Period 1 is the Grea...
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The aggregate-demand...
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Variables that fall along with real GDP ...
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