Question 1

If output is above its natural rate, then according to sticky-wage theory

Accepted Answer

A)   workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce less at any given price level.
B)   workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce more at any given price level.
C)   will strike bargains for higher wages. In response to the higher wages firms will produce less at any given price level.
D)   workers and firms will strike bargains for higher wages. In response to the higher wages firms will produce more at any given price level.E) B) and C)
F) C) and D)

Question 2

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

Accepted Answer

A) True 
 B)False

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

Assuming that a is positive, theories of short-run aggregate supply are expressed mathematically as

Accepted Answer

A)   quantity of output supplied = natural rate of output + aactual price level - expected price level) .
B)   quantity of output supplied = natural rate of output + aexpected price level - actual price level) .
C)   quantity of output supplied = aactual price level -expected price level)  - natural rate of output.
D)   quantity of output supplied = aexpected price level - actual price level)  - natural rate of output.E) A) and D)
F) A) and B)

Question 5

"Money is a veil" best describes the

Accepted Answer

A)   new-Keynesian view.
B)   Keynesian view.
C)   classical view.
D)   economy in the short run but not the long run.E) All of the above
F) B) and D)

Question 6

Which of the following will both make people buy more?

Accepted Answer

A)   wealth and interest rates rise.
B)   wealth rises and interest rates fall.
C)   wealth falls and interest rates rise.
D)   wealth falls and interest rates fall.E) A) and C)
F) B) and C)

Question 7

Other things the same, if the price level rises, then domestic interest rates

Accepted Answer

A)   rise, so domestic residents will want to hold more foreign bonds.
B)   rise, so domestic residents will want to hold fewer foreign bonds.
C)   fall, so domestic residents will want to hold more foreign bonds.
D)   fall, so domestic residents will want to hold fewer foreign bonds.E) B) and C)
F) C) and D)

Question 8

Make a list of things that would shift the long-run aggregate supply curve to the right.

Accepted Answer

Examples in the text or variations) incl...

Question 9

During periods of stagflation, what happens to output and prices in the economy?

Accepted Answer

Output fal...

Question 10

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

Question 11

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

Accepted Answer

A)   increase foreign bond purchases, so the dollar appreciates.
B)   increase foreign bond purchases, so the dollar depreciates.
C)   increase domestic bond purchases, so the dollar appreciates.
D)   increase domestic bond purchases, so the dollar depreciates.E) A) and B)
F) A) and C)

Question 12

Suppose that during World War II the long-run aggregate supply curve shifted right. In order for price and output to have changed in the direction they did, what would have to have happened to aggregate demand?

Accepted Answer

A)   It would have to have shifted left by less than aggregate supply shifted
B)   It would have to have to shifted left by more than aggregate supply shifted.
C)   It would have to have shifted right by less than aggregate supply shifted
D)   It would have to have to shifted right by more than aggregate supply shifted.E) A) and B)
F) None of the above

Question 13

In the mid-1970s the price of oil rose dramatically. This

Accepted Answer

A)   shifted aggregate supply left, the price level rose, and real GDP fell.
B)   caused U.S. prices to fall, and real GDP rose.
C)   caused an increase in U.S. prices and real GDP.
D)   caused a decrease in U.S. prices and real GDP.E) B) and C)
F) A) and B)

Question 14

Over the last fifty years both real GDP and prices have trended upward in most countries. Continuing real GDP growth and inflation can be explained by

Accepted Answer

A)   continuing technological progress alone.
B)   continuing increases in the money supply alone.
C)   continued technological progress and continuing increases in the money supply.
D)   None of the above can explain continuing real GDP growth and inflation.E) B) and D)
F) All of the above

Question 15

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Accepted Answer

A)   the relationship between output and unemployment is erratic and difficult to characterize.
B)   when one macroeconomic variable that measures income or spending is falling, other macroeconomic variables that measure income or spending are likely to be rising.
C)   recessions do not occur at regular intervals.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 16

During World War II, the economy's production increased about

Accepted Answer

A)   25 percent and prices rose about 5 percent.
B)   50 percent and prices rose about 10 percent.
C)   75 percent and prices rose about 15 percent.
D)   100 percent and prices rose about 20 percent.E) None of the above
F) A) and B)

Question 17

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 D)
F) A) and C)

Question 18

The quantity of aggregate goods and services demanded rises when the

Accepted Answer

A)   price level rises, because the interest rate rises.
B)   price level rises, because the interest rate falls.
C)   price level falls, because the interest rate rises.
D)   price level falls, because the interest rate falls.E) A) and B)
F) A) and C)

Question 19

Which of the following would increase output in the short run?

Accepted Answer

A)   an increase in stock prices makes people feel wealthier
B)   government spending increases
C)   firms chose to purchase more investment goods
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 20

Other things the same, if the price level falls, domestic interest rates

Accepted Answer

A)   rise, so domestic residents will want to hold more foreign bonds.
B)   rise, so domestic residents will want to hold fewer foreign bonds.
C)   fall, so domestic residents will want to hold more foreign bonds.
D)   fall, so domestic residents will want to hold fewer foreign bonds.E) A) and B)
F) A) and C)

Exam 15: Aggregate Demand and Aggregate Supply

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

Correct AnswerverifiedShow Answer

Which of the following would increase output in the short run?

Correct AnswerverifiedShow Answer

Other things the same, if the price level rises, then domestic interest rates

Correct AnswerverifiedShow Answer

Assuming that a is positive, theories of short-run aggregate supply are expressed mathematically as

Correct AnswerverifiedShow Answer

"Money is a veil" best describes the

Correct AnswerverifiedShow Answer

When we say that economic fluctuations are "irregular and unpredictable," we mean that

Correct AnswerverifiedShow Answer

Other things the same, if the price level falls, domestic interest rates

Correct AnswerverifiedShow Answer

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

Which of the following will both make people buy more?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Over the last fifty years both real GDP and prices have trended upward in most countries. Continuing real GDP growth and inflation can be explained by

Correct AnswerverifiedShow Answer

Make a list of things that would shift the long-run aggregate supply curve to the right.

Correct AnswerverifiedExamples in the text or variations) incl...View AnswerShow Answer

During World War II, the economy's production increased about

Correct AnswerverifiedShow Answer

Suppose that during World War II the long-run aggregate supply curve shifted right. In order for price and output to have changed in the direction they did, what would have to have happened to aggregate demand?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If output is above its natural rate, then according to sticky-wage theory

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the mid-1970s the price of oil rose dramatically. This

Correct AnswerverifiedShow Answer

The quantity of aggregate goods and services demanded rises when the

Correct AnswerverifiedShow Answer

During periods of stagflation, what happens to output and prices in the economy?

Correct AnswerverifiedOutput fal...View AnswerShow Answer

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Variables that fall along with real GDP ...
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Examples in the text or variations) incl...
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Output fal...
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