Question 1

Make a list of things that would shift the aggregate demand curve to the right.

Accepted Answer

Examples (and variations on examples) in...

Question 2

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 3

Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to

Accepted Answer

A)  rise. This rise in price expectations shifts the short-run aggregate supply curve to the right.
B)  rise. This rise in price expectations shifts the short-run aggregate supply curve to the left.
C)  fall. This fall in price expectations shifts the short-run aggregate supply curve to the right.
D)  fall. This fall in price expectations shifts the short-run aggregate supply curve to the left.E) All of the above
F) B) and C)

Question 4

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 5

Other things the same, the aggregate quantity of goods demanded in the U.S. increases if

Accepted Answer

A)  real wealth rises.
B)  the interest rate rises.
C)  the dollar appreciates.
D)  All of the above are correct.E) A) and D)
F) None of the above

Question 6

When production costs rise,

Accepted Answer

A)  the short-run aggregate supply curve shifts to the right.
B)  the short-run aggregate supply curve shifts to the left.
C)  the aggregate demand curve shifts to the right.
D)  the aggregate demand curve shifts to the left.E) All of the above
F) C) and D)

Question 7

If countries that imported goods and services from the United States went into recession, we would expect that U.S. net exports would

Accepted Answer

A)  rise, making aggregate demand shift right.
B)  rise, making aggregate demand shift left.
C)  fall, making aggregate demand shift right.
D)  fall, making aggregate demand shift left.E) C) and D)
F) A) and C)

Question 8

Which of the following is not a determinant of the long-run level of real GDP?

Accepted Answer

A)  the price level.
B)  the amount of capital used by firms.
C)  available stock of human capital.
D)  available technologyE) C) and D)
F) All of the above

Question 9

Other things the same, an increase in the price level induces people to hold

Accepted Answer

A)  less money, so they lend less, and the interest rate rises.
B)  less money, so they lend more, and the interest rate falls.
C)  more money, so they lend more, and the interest rate falls.
D)  more money, so they lend less, and the interest rate rises.E) All of the above
F) A) and D)

Question 10

Imagine the U.S. economy is in long-run equilibrium. Then suppose the value of the U.S. dollar decreases. At the same time, people in the U.S. revise their expectations so that the expected price level rises. We would expect that 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 D)
F) B) and C)

Question 11

From 1995 to 1999 there was a dramatic rise in stock prices. If this rise made people feel wealthier, then it would have shifted

Accepted Answer

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

Question 12

The sticky-price theory helps explain what feature of the aggregate demand and aggregate supply model?

Accepted Answer

why the short run ag...

Question 13

Suppose a country experiences an increase in its capital stock. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift?

Accepted Answer

The short-run and lo...

Question 14

Suppose a boom in stock market prices helps make people feel wealthier. Using the model of aggregate demand and aggregate supply, identify the curves that are affected, and which way these curves would shift.

Accepted Answer

The aggregate demand...

Question 15

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

Question 16

Explain how a recession differs from a depression.

Accepted Answer

Recessions are relatively mild...

Question 17

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

Accepted Answer

A)  both the money supply increase and the investment tax credit
B)  the money supply increase but not the investment tax credit
C)  the investment tax credit but not the money supply increase
D)  neither the investment tax credit nor the money supply increaseE) A) and D)
F) C) and D)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

A decrease in what variable will raise the quantity of goods and services supplied, and shift only the short run aggregate supply curve to the right?

Accepted Answer

The expect...

Question 20

As the price level falls

Accepted Answer

A)  people will want to buy more bonds, so the interest rate rises.
B)  people will want to buy fewer bonds, so the interest rate falls.
C)  people will want to buy more bonds, so the interest rate falls.
D)  people will want to buy fewer bonds, so the interest rate rises.E) B) and D)
F) B) and C)

Exam 33: Aggregate Demand and Aggregate Supply

A decrease in what variable will raise the quantity of goods and services supplied, and shift only the short run aggregate supply curve to the right?

Correct AnswerverifiedThe expect...View AnswerShow Answer

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

Correct AnswerverifiedShow Answer

Explain how a recession differs from a depression.

Correct AnswerverifiedRecessions are relatively mild...View AnswerShow Answer

Imagine the U.S. economy is in long-run equilibrium. Then suppose the value of the U.S. dollar decreases. At the same time, people in the U.S. revise their expectations so that the expected price level rises. We would expect that in the short-run

Correct AnswerverifiedShow Answer

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to

Correct AnswerverifiedShow Answer

Suppose a country experiences an increase in its capital stock. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift?

Correct AnswerverifiedThe short-run and lo...View AnswerShow Answer

The sticky-price theory helps explain what feature of the aggregate demand and aggregate supply model?

Correct Answerverifiedwhy the short run ag...View AnswerShow Answer

Make a list of things that would shift the aggregate demand curve to the right.

Correct AnswerverifiedExamples (and variations on examples) in...View AnswerShow Answer

Other things the same, the aggregate quantity of goods demanded in the U.S. increases if

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When production costs rise,

Correct AnswerverifiedShow Answer

From 1995 to 1999 there was a dramatic rise in stock prices. If this rise made people feel wealthier, then it would have shifted

Correct AnswerverifiedShow Answer

Suppose a boom in stock market prices helps make people feel wealthier. Using the model of aggregate demand and aggregate supply, identify the curves that are affected, and which way these curves would shift.

Correct AnswerverifiedThe aggregate demand...View AnswerShow Answer

Other things the same, an increase in the price level induces people to hold

Correct AnswerverifiedShow Answer

If countries that imported goods and services from the United States went into recession, we would expect that U.S. net exports would

Correct AnswerverifiedShow Answer

When the Fed buys bonds

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not a determinant of the long-run level of real GDP?

Correct AnswerverifiedShow Answer

As the price level falls

Correct AnswerverifiedShow Answer

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The expect...
View Answer

Correct Answer
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Correct Answer
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Recessions are relatively mild...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The short-run and lo...
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Correct Answer
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why the short run ag...
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Correct Answer
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Examples (and variations on examples) in...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The aggregate demand...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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