Question 1

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

Accepted Answer

A) True 
 B)False

Question 2

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.
-Refer to Pessimism. Which curve shifts and in which direction?

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) None of the above

Question 3

We depart from the assumptions of classical economics when we focus on the relationship between

Accepted Answer

A)   the quantity of output and the price level.
B)   the quantity of output and the unemployment rate.
C)   the price level and the inflation rate.
D)   inflation and the nominal interest rate.E) C) and D)
F) A) and D)

Question 4

When the price level falls

Accepted Answer

A)   households want to lend less.
B)   the interest rate rises.
C)   firms want to spend less on investment goods.
D)   None of the above are correct.E) All of the above
F) B) and C)

Question 5

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Accepted Answer

A) True 
 B)False

Question 6

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Accepted Answer

A) True 
 B)False

Question 7

When the price level falls

Accepted Answer

A)   households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise.
B)   households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise.
C)   households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall.
D)   None of the above are correct.E) C) and D)
F) All of the above

Question 8

During recessions declines in investment account for about

Accepted Answer

A)   1/6 of the decline in real GDP.
B)   1/7 of the decline in real GDP.
C)   1/3 of the decline in real GDP.
D)   2/3 of the decline in real GDP.E) B) and C)
F) A) and C)

Question 9

Figure 33-8. 
-Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P1 and Y1 , then it must be the case that

Accepted Answer

A)   short run aggregate supply has decreased.
B)   short run aggregate supply has increased.
C)   aggregate demand has increased.
D)   aggregate demand has decreased.E) A) and D)
F) A) and C)

Question 10

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

Question 11

Aggregate demand shifts right if

Accepted Answer

A)   government purchases increase and shifts left if stock prices rise.
B)   government purchases increase and shifts left if stock prices fall.
C)   government purchases decrease and shifts left if stock prices rise.
D)   government purchases decrease and shifts left is stock prices fall.E) A) and D)
F) C) and D)

Question 12

When the money supply increases

Accepted Answer

A)   interest rates fall and so aggregate demand shifts right.
B)   interest rates fall and so aggregate demand shifts left.
C)   interest rates rise and so aggregate demand shifts right.
D)   interest rates rise and so aggregate demand shifts left.E) A) and C)
F) A) and D)

Question 13

Which of the following would help explain why the aggregate demand curve slopes downward?

Accepted Answer

A)   An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services.
B)   A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports.
C)   A higher price level increases real wealth, which stimulates spending on consumption.
D)   A lower price level reduces the interest rate, which encourages greater spending on investment goods.E) A) and D)
F) B) and C)

Question 14

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

Accepted Answer

A)   decreases the real value of money.
B)   increases the real value of the dollar in foreign exchange markets.
C)   decreases the interest rate.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 15

Using the aggregate demand and aggregate supply model, an increase in what curve is by itself consistent with the changes in prices and output that occurred during World War II?

Accepted Answer

The answer of Using the aggregate demand and aggregate supply...

Question 16

People will buy more if the price level

Accepted Answer

A)   rises because rising prices increase the real value of a dollar.
B)   rises because rising prices decrease the real value of a dollar.
C)   falls because falling prices increase the real value of a dollar.
D)   falls because falling prices decrease the real value of a dollar.E) A) and B)
F) A) and C)

Question 17

Changes in the price level affect which components of aggregate demand?

Accepted Answer

A)   only consumption and investment
B)   only consumption and net exports
C)   only investment
D)   consumption, investment, and net exportsE) A) and B)
F) A) and C)

Question 18

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

Question 19

The aggregate demand and aggregate supply graph has

Accepted Answer

A)   quantity of output on the horizontal axis. Output can be measured by the GDP deflator.
B)   quantity of output on the horizontal axis. Output can be measured by real GDP.
C)   quantity of output on the vertical axis. Output can be measured by the GDP deflator.
D)   quantity of output on the vertical axis. Output can be measured by real GDP.E) A) and B)
F) A) and C)

Question 20

The classical model is the appropriate model for analysis of the economy in the

Accepted Answer

A)   long run, because evidence indicates that money is not neutral in the long run.
B)   long run, because real and nominal variables are essentially determined separately in the long run.
C)   short run, because money is neutral in the short run.
D)   short run, because real and nominal variables are not highly intertwined in the short run.E) A) and B)
F) B) and D)

Exam 15: Aggregate Demand and Aggregate Supply

The classical model is the appropriate model for analysis of the economy in the

Correct Answer
verified

When the price level falls

Correct Answer
verified

We depart from the assumptions of classical economics when we focus on the relationship between

Correct Answer
verified

Correct Answer
verified

Which of the following would help explain why the aggregate demand curve slopes downward?

Correct Answer
verified

People will buy more if the price level

Correct Answer
verified

When the money supply increases

Correct Answer
verified

When the price level falls

Correct Answer
verified

Using the aggregate demand and aggregate supply model, an increase in what curve is by itself consistent with the changes in prices and output that occurred during World War II?

Correct Answer
verified

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Correct Answer
verified

Changes in the price level affect which components of aggregate demand?

Correct Answer
verified

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

Correct Answer
verified

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Correct Answer
verified

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

Correct Answer
verified

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

Correct Answer
verified

When the price level falls

Correct Answer
verified

Aggregate demand shifts right if

Correct Answer
verified

The aggregate demand and aggregate supply graph has

Correct Answer
verified

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P1 and Y1 , then it must be the case that

Correct Answer
verified

During recessions declines in investment account for about

Correct Answer
verified

Exam 15: Aggregate Demand and Aggregate Supply

The classical model is the appropriate model for analysis of the economy in the

Correct AnswerverifiedShow Answer

When the price level falls

Correct AnswerverifiedShow Answer

We depart from the assumptions of classical economics when we focus on the relationship between

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following would help explain why the aggregate demand curve slopes downward?

Correct AnswerverifiedShow Answer

People will buy more if the price level

Correct AnswerverifiedShow Answer

When the money supply increases

Correct AnswerverifiedShow Answer

When the price level falls

Correct AnswerverifiedShow Answer

Using the aggregate demand and aggregate supply model, an increase in what curve is by itself consistent with the changes in prices and output that occurred during World War II?

Correct AnswerverifiedShow Answer

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Correct AnswerverifiedShow Answer

Changes in the price level affect which components of aggregate demand?

Correct AnswerverifiedShow Answer

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

Correct AnswerverifiedShow Answer

The primary purpose of the aggregate demand and aggregate supply model is to demonstrate the classical dichotomy.

Correct AnswerverifiedShow Answer

The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the price level falls

Correct AnswerverifiedShow Answer

Aggregate demand shifts right if

Correct AnswerverifiedShow Answer

The aggregate demand and aggregate supply graph has

Correct AnswerverifiedShow Answer

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. If changes occur that move the economy to a new short run equilibrium of P1 and Y1 , then it must be the case that

Correct AnswerverifiedShow Answer

During recessions declines in investment account for about

Correct AnswerverifiedShow Answer

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