Question 1

When the price level falls

Accepted Answer

A)  people want to hold less money.
B)  the interest rate falls.
C)  investment spending rises.
D)  All of the above are correct.E) B) and D)
F) B) and C)

Question 2

Explain how an increase in the price level changes interest rates. How does this change in interest rates lead to changes in investment and net exports?

Accepted Answer

When the price level increases, the purc...

Question 3

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Accepted Answer

A) True 
 B)False

Question 4

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 or the CPI.E) All of the above
F) None of the above

Question 5

Which of the following affected aggregate demand during the recession of 2008-2009?

Accepted Answer

A)  a decline in residential construction and a decrease in lending
B)  a decline in residential construction but not a decrease in lending
C)  a decrease in lending but not a decline in residential construction
D)  neither a decrease in residential construction nor a decrease in lendingE) A) and C)
F) A) and B)

Question 6

Which of the following shifts short-run, but not long-run aggregate supply right?

Accepted Answer

A)  a decrease in the actual price level
B)  a decrease in the expected price level
C)  a decrease in the capital stock
D)  an increase in the money supplyE) B) and C)
F) None of the above

Question 7

When the price level rises unexpectedly, some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

Accepted Answer

A) True 
 B)False

Question 8

In the long run, an economy's production of goods and services depends on its supply of​

Accepted Answer

A)  ​labor, natural resources, capital, and available technology.
B)  ​labor, natural resources, and capital only.
C)  ​labor, and natural resources only.
D)  ​labor only.E) All of the above
F) A) and C)

Question 9

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

Question 10

During a recession the economy experiences

Accepted Answer

A)  rising employment and income.
B)  rising employment and falling income.
C)  rising income and falling employment.
D)  falling employment and income.E) B) and C)
F) B) and D)

Question 11

During recessions which type of spending falls?

Accepted Answer

A)  consumption and investment
B)  investment but not consumption
C)  consumption but not investment
D)  neither consumption nor investmentE) A) and B)
F) A) and C)

Question 12

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 13

In the long run, an increase in the stock of human capital

Accepted Answer

A)  and increases in the money supply both make the price level rise.
B)  and increases in the money supply both make the price level fall.
C)  makes the price level rise, while increases in the money supply make prices fall.
D)  makes the price level fall, while increases in the money supply make prices rise.E) None of the above
F) All of the above

Question 14

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

Accepted Answer

A)  both sticky price theory and sticky wage theory
B)  sticky price theory but not sticky wage theory
C)  sticky wage theory but not sticky price theory
D)  neither sticky wage theory nor sticky price theoryE) None of the above
F) A) and D)

Question 15

A decrease in U.S. interest rates leads to

Accepted Answer

A)  a depreciation of the dollar that leads to greater net exports.
B)  a depreciation of the dollar that leads to smaller net exports.
C)  an appreciation of the dollar that leads to greater net exports.
D)  an appreciation of the dollar that leads to smaller net exports.E) B) and D)
F) B) and C)

Question 16

In which case can we be sure that real GDP and the price level rise in the short run?

Accepted Answer

A)  foreign economies expand and taxes increase.
B)  foreign economies expand and taxes decrease.
C)  foreign economies contract and taxes decrease.
D)  foreign economies contract and taxes increase.E) B) and D)
F) B) and C)

Question 17

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

Question 18

Figure 33-7. 2 to AD3, then the economy moves to A) V. B) W. C) X. D) Z." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 33-7. Suppose the economy starts at Y. If aggregate demand increases from AD2 to AD3, then the economy moves to

Accepted Answer

A)  V.
B)  W.
C)  X.
D)  Z.E) B) and D)
F) A) and C)

Question 19

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants increases the number of workers it employs. What could explain this?

Accepted Answer

A)  both sticky price theory and sticky wage theory
B)  sticky price theory but not sticky wage theory
C)  sticky wage theory but not sticky price theory
D)  neither sticky wage theory nor sticky price theoryE) A) and B)
F) None of the above

Question 20

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

Accepted Answer

A)  rises, so people will want to buy more.
B)  rises, so people will want to buy less.
C)  falls, so people will want to buy more.
D)  falls, so people will want to buy less.E) A) and D)
F) A) and C)

Exam 33: Aggregate Demand and Aggregate Supply

Figure 33-7. -Refer to Figure 33-7. Suppose the economy starts at Y. If aggregate demand increases from AD2 to AD3, then the economy moves to

Correct AnswerverifiedShow Answer

Explain how an increase in the price level changes interest rates. How does this change in interest rates lead to changes in investment and net exports?

Correct AnswerverifiedWhen the price level increases, the purc...View AnswerShow Answer

During a recession the economy experiences

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Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Correct AnswerverifiedShow Answer

A decrease in U.S. interest rates leads to

Correct AnswerverifiedShow Answer

In the long run, an increase in the stock of human capital

Correct AnswerverifiedShow Answer

In the long run, an economy's production of goods and services depends on its supply of​

Correct AnswerverifiedShow Answer

In which case can we be sure that real GDP and the price level rise in the short run?

Correct AnswerverifiedShow Answer

Changes in the price of oil

Correct AnswerverifiedShow Answer

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants increases the number of workers it employs. What could explain this?

Correct AnswerverifiedShow Answer

Which of the following affected aggregate demand during the recession of 2008-2009?

Correct AnswerverifiedShow Answer

During recessions which type of spending falls?

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Keynes believed that economies experiencing high unemployment should adopt policies to

Correct AnswerverifiedShow Answer

When the price level rises unexpectedly, some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

Correct AnswerverifiedShow Answer

The average price level is measured by

Correct AnswerverifiedShow Answer

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

Correct AnswerverifiedShow Answer

When the price level falls

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

Correct AnswerverifiedShow Answer

Which of the following shifts short-run, but not long-run aggregate supply right?

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Figure 33-7. -Refer to Figure 33-7. Suppose the economy starts at Y. If aggregate demand increases from AD₂ to AD₃, then the economy moves to

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When the price level increases, the purc...
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In the long run, an economy's production of goods and services depends on its supply of

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