Question 1

Which of the following is correct concerning recessions?

Accepted Answer

A)   They come at fairly regular and predictable intervals.
B)   They are associated with comparatively large increases in investment spending.
C)   They are any period when real GDP growth is less than average.
D)   They tend to be associated with rising unemployment rates.E) A) and B)
F) A) and C)

Question 2

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

Question 3

Suppose the economy is in long-run equilibrium. If there is an increase in government purchases at the same time there is a large increase in the price of oil, then 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 4

When the price level falls

Accepted Answer

A)   The interest rate falls because people will want to hold more money and so sell bonds.
B)   Firms will want to spend more on new business buildings and business equipment and households will want to spend more building new homes.
C)   Both A and B are correct.
D)   None of the above are correct.E) A) and B)
F) All of the above

Question 5

Other things the same, as the price level falls, which of the following increases?

Accepted Answer

A)   lending and investment spending
B)   lending, but not investment spending
C)   investment spending, but not lending
D)   neither investment spending nor lendingE) A) and C)
F) None of the above

Question 6

When the Fed buys bonds

Accepted Answer

A)   the supply of money increases and so aggregate demand shifts right.
B)   the supply of money decreases and so aggregate demand shifts left.
C)   the supply of money decreases and so aggregate demand shifts right.
D)   the supply of money increases and so aggregate demand shifts left.E) A) and B)
F) All of the above

Question 7

Which of the following rises when the U.S. price level falls?

Accepted Answer

A)   interest rates
B)   the value of the dollar in the market for foreign-currency exchange
C)   real wealth
D)   All of the above are correct.E) C) and D)
F) A) and B)

Question 8

Other things the same, when the government spends more, the initial effect is that

Accepted Answer

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

Question 9

Which of the following effects provide incentives for consumers to spend less when the price level rises?

Accepted Answer

A)   the wealth effect and the interest-rate effect
B)   the wealth effect but not the interest-rate effect
C)   the interest-rate effect but not the wealth effect
D)   neither the wealth-effect nor the interest rate effectE) B) and C)
F) A) and D)

Question 10

Figure 33-7. 
-Refer to Figure 33-7. Suppose the economy starts at Y. If there is a fall in aggregate demand, then the economy moves to

Accepted Answer

A)   V in the long run.
B)   W in the long run.
C)   X in the long run.
D)   Z in the long run.E) B) and D)
F) B) and C)

Question 11

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

Accepted Answer

A)   aggregate demand right.
B)   aggregate demand left.
C)   aggregate supply right.
D)   aggregate supply left.E) None of the above
F) All of the above

Question 12

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

Question 13

Suppose that the economy is at long-run equilibrium. If there is a sharp rise in the stock market combined with a significant increase in the minimum wage, then 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) A) and B)
F) A) and C)

Question 14

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   Congress reduces purchases of new weapons systems.
B)   The Fed buys bonds in the open market.
C)   The price level falls.
D)   Net exports fall.E) B) and C)
F) None of the above

Question 15

The long-run effect of an increase in household consumption is to raise

Accepted Answer

A)   both real output and the price level.
B)   real output and lower the price level.
C)   real output and leave the price level unchanged.
D)   the price level and leave real output unchanged.E) A) and D)
F) A) and C)

Question 16

In 2009 Congress passed legislation providing states with funds to build roads and bridges. It also instituted tax cuts. Which of these shifts aggregate demand right?

Accepted Answer

A)   only the increased funding for states
B)   only the tax cuts
C)   both the increased funding for states and the tax cuts
D)   neither the increased funding for states nor the tax cutsE) B) and C)
F) A) and B)

Question 17

Other things the same, if the price level rises, people

Accepted Answer

A)   increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases.
B)   increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.
C)   decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases.
D)   decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.E) None of the above
F) A) and B)

Question 18

As the price level rises,

Accepted Answer

A)   the exchange rate falls, so net exports fall.
B)   the exchange rate falls, so net exports rise.
C)   the exchange rate rises, so net exports fall.
D)   the exchange rate rises, so net exports rise.E) B) and C)
F) A) and C)

Question 19

A decrease in the price level

Accepted Answer

A)   increases the quantity of goods and services supplied in the short run.
B)   decreases the quantity of goods and services supplied in the long run.
C)   decreases the quantity of goods and services demanded.
D)   increases the quantity of goods and services demanded.E) C) and D)
F) None of the above

Question 20

A decrease in the expected price level shifts short-run aggregate supply to the

Accepted Answer

A)   right, and an increase in the actual price level shifts short-run aggregate supply to the right.
B)   right, and an increase in the actual price level does not shift short-run aggregate supply.
C)   left, and an increase in the actual price level shifts short-run aggregate supply to the left.
D)   left, and an increase in the actual price level does not shift short-run aggregate supply.E) A) and B)
F) None of the above

Exam 33: Aggregate Demand and Aggregate Supply

When the price level falls

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The long-run effect of an increase in household consumption is to raise

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As the price level rises,

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Suppose that the economy is at long-run equilibrium. If there is a sharp rise in the stock market combined with a significant increase in the minimum wage, then in the short run

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Which of the following shifts aggregate demand to the right?

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When the Fed buys bonds

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

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Figure 33-7. -Refer to Figure 33-7. Suppose the economy starts at Y. If there is a fall in aggregate demand, then the economy moves to

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Suppose the economy is in long-run equilibrium. If there is an increase in government purchases at the same time there is a large increase in the price of oil, then in the short-run

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Which of the following rises when the U.S. price level falls?

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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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A decrease in the price level

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In 2009 Congress passed legislation providing states with funds to build roads and bridges. It also instituted tax cuts. Which of these shifts aggregate demand right?

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Other things the same, as the price level falls, which of the following increases?

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

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Other things the same, if the price level rises, people

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Which of the following effects provide incentives for consumers to spend less when the price level rises?

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A decrease in the expected price level shifts short-run aggregate supply to the

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Which of the following is correct concerning recessions?

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Other things the same, when the government spends more, the initial effect is that

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