Question 1

If not all prices adjust instantly to changing economic circumstances,an unexpected fall in the price level leaves some firms with higher-than-desired prices,and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 2

Other things the same,the aggregate quantity of goods demanded decreases if

Accepted Answer

A)   real wealth falls.
B)   the interest rate rises.
C)   the dollar appreciates.
D)   All of the above are correct.E) All of the above
F) None of the above

Question 3

Which of the following shifts short-run aggregate supply left?

Accepted Answer

A)   an increase in the actual price level
B)   an increase in the expected price level
C)   an increase in the capital stock
D)   None of the above is correct.E) None of the above
F) A) and B)

Question 4

Which of the following is included in the aggregate demand for goods and services?

Accepted Answer

A)   consumption demand
B)   investment demand
C)   net exports
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 5

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Accepted Answer

A)   relative to prices wages are higher and employment rise.
B)   relative to prices wages are higher and employment falls.
C)   relative to prices wages are lower and employment rises.
D)   relative to prices wages are lower and employment falls.E) A) and C)
F) B) and C)

Question 6

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

Question 7

If the price level falls,the real value of a dollar

Accepted Answer

A)   rises,so people will want to buy more.This response helps explain the slope of the aggregate demand curve.
B)   rises,so people will want to buy more.This response shifts aggregate demand to the right.
C)   falls,so people will want to buy less.This response helps explain the slope of the aggregate demand curve.
D)   falls,so people will want to buy less.This response shifts aggregate demand to the left.E) None of the above
F) A) and C)

Question 8

The model of aggregate demand and aggregate supply

Accepted Answer

A)   is different from the model of supply and demand for a particular market,in that we cannot focus on the substitution of resources between markets to explain aggregate relationships.
B)   is different from the model of supply and demand for a particular market,in that we have to separate real and nominal variables in the aggregate model.
C)   is a straightforward extension of the model of supply and demand for a particular market,in which substitution of resources between markets is highlighted.
D)   is a straightforward extension of the model of supply and demand for a particular market,in which the interaction between real and nominal variables is highlighted.E) B) and C)
F) A) and D)

Question 9

An increase in the money supply causes output to rise in the long run.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is correct?

Accepted Answer

A)   Economic fluctuations are easily predicted by competent economists.
B)   Recessions have never occurred very close together.
C)   Spending,income,and production do not fluctuate closely with real GDP.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 11

The aggregate supply curve is upward sloping in

Accepted Answer

A)   the short and long run.
B)   neither the short nor long run.
C)   the long run,but not the short run.
D)   the short run,but not the long run.E) C) and D)
F) B) and D)

Question 12

Other things the same,an increase in the price level makes the dollars people hold worth

Accepted Answer

A)   more,so they can buy more.
B)   more,so they can buy less.
C)   less,so they can buy more.
D)   less,so they can buy less.E) None of the above
F) B) and C)

Question 13

Aggregate demand shifts left when the government

Accepted Answer

A)   decreases taxes.
B)   cuts military expenditures.
C)   creates a new investment tax credit
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 14

Below are pairs of GDP growth rates and unemployment rates.Economists would be shocked to see most of these pairs in the U.S.Which pair of GDP growth rates and unemployment rates is realistic?

Accepted Answer

A)   5 percent,1 percent
B)   3 percent,5 percent
C)   -1 percent,3 percent
D)   -2 percent,4 percentE) All of the above
F) A) and D)

Question 15

The average price level is measured by

Accepted Answer

A)   any real variable.
B)   the rate of inflation.
C)   the level of the money supply.
D)   the CPI or the GDP deflator.E) A) and B)
F) None of the above

Question 16

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

Accepted Answer

A)   production is more profitable and employment rises.
B)   production is more profitable and employment falls.
C)   production is less profitable and employment rises.
D)   production is less profitable and employment falls.E) B) and D)
F) A) and B)

Question 17

Technological progress shifts the long-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 18

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 profitableE) None of the above
F) B) and D)

Question 19

At a given price level,an increase in which of the following shifts aggregate demand to the right?

Accepted Answer

A)   consumption
B)   investment
C)   government expenditures
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 20

Consider the exhibit below for the following questions.
Figure 23-1 
-Refer to Figure 23-1.If the economy starts at C,an increase in the money supply moves the economy

Accepted Answer

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

Exam 23: Aggregate Demand and Aggregate Supply

Other things the same,the aggregate quantity of goods demanded decreases if

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The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

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Below are pairs of GDP growth rates and unemployment rates.Economists would be shocked to see most of these pairs in the U.S.Which pair of GDP growth rates and unemployment rates is realistic?

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Which of the following is included in the aggregate demand for goods and services?

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Aggregate demand shifts left when the government

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Technological progress shifts the long-run aggregate supply curve to the right.

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

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If the price level falls,the real value of a dollar

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The aggregate supply curve is upward sloping in

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If not all prices adjust instantly to changing economic circumstances,an unexpected fall in the price level leaves some firms with higher-than-desired prices,and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

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The model of aggregate demand and aggregate supply

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Other things the same,an increase in the price level makes the dollars people hold worth

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Which of the following is correct?

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At a given price level,an increase in which of the following shifts aggregate demand to the right?

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The average price level is measured by

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

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Consider the exhibit below for the following questions. Figure 23-1 -Refer to Figure 23-1.If the economy starts at C,an increase in the money supply moves the economy

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An increase in the money supply causes output to rise in the long run.

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The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

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Which of the following shifts short-run aggregate supply left?

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