Question 1

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Aggregate demand shifts to the left if the money supply increases.

Accepted Answer

A) True 
 B)False

Question 4

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases,

Accepted Answer

A)   the real value of money decreases; in turn, the real value of the dollar increases in foreign exchange markets, which decreases net exports.
B)   the real value of money decreases; in turn, interest rates increase, which decreases net exports.
C)   households increase their holdings of money; in turn, interest rates decrease, which reduces spending on investment goods.
D)   households increase their holdings of money; in turn, interest rates increase, which reduces spending on investment goods.E) A) and B)
F) A) and C)

Question 5

Other things the same, which of the following is correct?

Accepted Answer

A)   A decrease in the price level causes the dollar to appreciate. Aggregate demand shifts right.
B)   A decrease in the price level causes the dollar to depreciate. Aggregate demand shifts right.
C)   If speculators lose confidence in the American economy, the dollar appreciates. Aggregate demand shifts right.
D)   If speculators lose confidence in the American economy, the dollar depreciates. Aggregate demand shifts right.E) All of the above
F) A) and C)

Question 6

A decrease in the availability of an important major resource such as oil shifts

Accepted Answer

A)   aggregate supply right.
B)   aggregate supply left.
C)   aggregate demand right.
D)   aggregate demand left.E) B) and C)
F) All of the above

Question 7

Most macroeconomic variables that measure some type of income, spending, or production fluctuate closely together.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following both shift aggregate demand right?

Accepted Answer

A)   net exports rise for some reason other than a price change and the money supply rises.
B)   net exports rise for some reason other than a price change and the price level rises.
C)   net exports fall for some reason other than a price change and the money supply rises.
D)   net exports fall for some reason other than a price change and the price level rises.E) B) and D)
F) C) and D)

Question 9

A change in the money supply changes only nominal variables in the long run.

Accepted Answer

A) True 
 B)False

Question 10

The long-run aggregate supply curve shifts right if

Accepted Answer

A)   either immigration from abroad increases or technology improves.
B)   immigration from abroad increases, but not if technology improves.
C)   technology improves, but not if immigration from abroad increases.
D)   None of the above are correct.E) A) and B)
F) A) and D)

Question 11

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)   All of the above are correct.E) All of the above
F) B) and C)

Question 12

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) None of the above
F) All of the above

Question 13

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

Question 14

As recessions begin, production

Accepted Answer

A)   and unemployment both rise.
B)   rises and unemployment falls.
C)   falls and unemployment rises.
D)   and unemployment both fall.E) A) and B)
F) C) and D)

Question 15

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

Accepted Answer

A)   variables measured in terms of money and variables measured in terms of quantities or relative prices
B)   variables measured in terms of money but not variables measured in terms of quantities or relative prices
C)   variables measured in terms of quantities or relative prices, but not variables measured in terms of money
D)   neither variables measured in terms of money nor variables measured in terms of quantities or relative pricesE) None of the above
F) B) and C)

Question 16

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

Question 17

The aggregate-demand curve shows that a decrease in the price level

Accepted Answer

A)   decreases the dollar value of goods and services demanded in the economy.
B)   decreases the real value of goods and services demanded in the economy.
C)   increases the dollar value of goods and services demanded in the economy.
D)   increases the real value of goods and services demanded in the economy.E) A) and B)
F) A) and C)

Question 18

Keynes believed that economies experiencing high unemployment should adopt policies to

Accepted Answer

A)   reduce the money supply.
B)   reduce government expenditures.
C)   increase aggregate demand.
D)   increase aggregate supply.E) All of the above
F) C) and D)

Question 19

Other things the same, if the money supply rises by 2% and people were expecting it to rise by 5%, then some firms have

Accepted Answer

A)   higher than desired prices which increases their sales.
B)   higher than desired prices which depresses their sales.
C)   lower than desired prices which increases their sales.
D)   lower than desired prices which depresses their sales.E) A) and B)
F) None of the above

Question 20

Figure 15-2.
 
-Refer to Stock Market Boom 2015. In the long run, the change in price expectations created by the stock market boom shifts

Accepted Answer

A)   long-run aggregate supply right.
B)   long-run aggregate supply left.
C)   short-run aggregate supply right.
D)   short-run aggregate supply left.E) None of the above
F) A) and D)

Exam 15: Aggregate Demand and Aggregate Supply

In the context of the aggregate-demand curve, the interest-rate effect refers to the idea that, when the price level increases,

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shifts right if

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The aggregate-demand curve shows that a decrease in the price level

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

Other things the same, which of the following is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A decrease in the availability of an important major resource such as oil shifts

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

Most macroeconomic variables that measure some type of income, spending, or production fluctuate closely together.

Correct AnswerverifiedShow Answer

Which of the following both shift aggregate demand right?

Correct AnswerverifiedShow Answer

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As recessions begin, production

Correct AnswerverifiedShow Answer

Figure 15-2. -Refer to Stock Market Boom 2015. In the long run, the change in price expectations created by the stock market boom shifts

Correct AnswerverifiedShow Answer

A change in the money supply changes only nominal variables in the long run.

Correct AnswerverifiedShow Answer

Other things the same, if the money supply rises by 2% and people were expecting it to rise by 5%, then some firms have

Correct AnswerverifiedShow Answer

Aggregate demand shifts to the left if the money supply increases.

Correct AnswerverifiedShow 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

Keynes believed that economies experiencing high unemployment should adopt policies to

Correct AnswerverifiedShow Answer

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