Question 1

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

Question 2

During recessions

Accepted Answer

A)  sales and profits fall.
B)  sales and profits rise.
C)  sales rise, profits fall.
D)  profits fall, sales rise.E) A) and B)
F) B) and C)

Question 3

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Accepted Answer

A)  because unemployment is low wages will be bid up and short-run aggregate supply will shift right.
B)  because unemployment is low wages will be bid down and short-run aggregate supply will shift right.
C)  because unemployment is high wages will be bid up and short-run aggregate supply will shift right.
D)  because unemployment is high wages will be bid down and short-run aggregate supply will shift right.E) B) and D)
F) All of the above

Question 4

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

Accepted Answer

A)  both the short run and the long run.
B)  the short run, but not the long run.
C)  the long run, but not the short run.
D)  neither the long run nor the short run.E) A) and D)
F) B) and C)

Question 5

Other things the same, a decrease in the price level motivates 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 rises.
D)  more money, so they lend less, and the interest rate falls.E) B) and C)
F) A) and D)

Question 6

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. In the long run, the change in price expectations created by pessimism shifts

Accepted Answer

A)  long-run aggregate supply right.
B)  long-run aggregate supply left.
C)  short-run aggregate supply right.
D)  short-run aggregate supply left.E) A) and C)
F) B) and C)

Question 7

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 8

Historically, as recessions have ended the unemployment rate declined

Accepted Answer

A)  gradually to near zero.
B)  rapidly to near zero.
C)  gradually to a rate of about 5%-6%.
D)  rapidly to a rate of about 5%-6%.E) B) and C)
F) None of the above

Question 9

If the price level rises above what was expected and nominal wages are fixed, then

Accepted Answer

A)  production becomes less profitable so firms will hire fewer workers.
B)  production becomes less profitable so firms will hire more workers.
C)  production becomes more profitable so firms will hire fewer workers.
D)  production become more profitable so firms will hire more workers.E) A) and B)
F) B) and D)

Question 10

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) B) and D)
F) B) and C)

Question 11

Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time.
-Refer to Optimism. In the short run what happens to the price level and real GDP?

Accepted Answer

A)  both the price level and real GDP rise.
B)  both the price level and real GDP fall.
C)  the price level rises and real GDP falls.
D)  the price level falls and real GDP rises.E) None of the above
F) B) and D)

Question 12

Other things the same, if prices fell when firms and workers were expecting them to rise, then

Accepted Answer

A)  employment and production would rise.
B)  employment would rise and production would fall.
C)  employment would fall and production would rise.
D)  employment and production would fall.E) None of the above
F) C) and D)

Question 13

Which of the following is correct?

Accepted Answer

A)  Economic fluctuations are easily predicted by competent economists.
B)  Recessions have never occurred very close together.
C)  Spending, income, and production do not fluctuate closely with real GDP.
D)  None of the above is correct.E) B) and C)
F) A) and D)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

Accepted Answer

A)  the slope of short-run aggregate supply.
B)  the slope of long-run aggregate supply.
C)  the slope of the aggregate-demand curve.
D)  everything that makes the aggregate-demand curve shift.E) A) and D)
F) A) and C)

Question 16

Economic variables are most often expressed in

Accepted Answer

A)  nominal terms, and that's what's important.
B)  nominal terms, but real variables are what's important.
C)  real terms, and that's what's important.
D)  real terms, but nominal variables are what's important.E) None of the above
F) B) and C)

Question 17

In 2001, the United States was in recession. Which of the following things would you not expect to have happened?

Accepted Answer

A)  increased layoffs and firings
B)  a higher rate of bankruptcy
C)  increased claims for unemployment insurance
D)  increased investment spendingE) B) and D)
F) None of the above

Question 18

Consider the exhibit below for the following questions.Figure 20-1 
-Refer to Figure 20-1. An increase in the money supply would move the economy from C to

Accepted Answer

A)  B in the short run and the long run.
B)  D in the short run and the long run.
C)  B in the short run and A in the long run.
D)  D in the short run and C in the long run.E) A) and B)
F) B) and D)

Question 19

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 20

The quantity of money has no real impact on things people really care about like whether or not they have a job. Most economists would agree that this statement is appropriate concerning

Accepted Answer

A)  both the short run and the long run.
B)  the short run, but not the long run.
C)  the long run, but not the short run.
D)  neither the long run nor the short run.E) All of the above
F) B) and D)

Exam 20: Aggregate Demand and Aggregate Supply

Historically, as recessions have ended the unemployment rate declined

Correct Answer
verified

During recessions

Correct Answer
verified

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 Answer
verified
Variables that fall along with real GDP ...
View Answer

Consider the exhibit below for the following questions.Figure 20-1 -Refer to Figure 20-1. An increase in the money supply would move the economy from C to

Correct Answer
verified

Other things the same, a decrease in the price level motivates people to hold

Correct Answer
verified

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Correct Answer
verified

Other things the same, if prices fell when firms and workers were expecting them to rise, then

Correct Answer
verified

In 2001, the United States was in recession. Which of the following things would you not expect to have happened?

Correct Answer
verified

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Correct Answer
verified

Which of the following is correct?

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

Correct Answer
verified

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

The quantity of money has no real impact on things people really care about like whether or not they have a job. Most economists would agree that this statement is appropriate concerning

Correct Answer
verified

As the price level falls

Correct Answer
verified

Correct Answer
verified

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

Correct Answer
verified

If the price level rises above what was expected and nominal wages are fixed, then

Correct Answer
verified

Economic variables are most often expressed in

Correct Answer
verified

Exam 20: Aggregate Demand and Aggregate Supply

Historically, as recessions have ended the unemployment rate declined

Correct AnswerverifiedShow Answer

During recessions

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

Consider the exhibit below for the following questions.Figure 20-1 -Refer to Figure 20-1. An increase in the money supply would move the economy from C to

Correct AnswerverifiedShow Answer

Other things the same, a decrease in the price level motivates people to hold

Correct AnswerverifiedShow Answer

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left. If there is no policy response, then eventually

Correct AnswerverifiedShow Answer

Other things the same, if prices fell when firms and workers were expecting them to rise, then

Correct AnswerverifiedShow Answer

In 2001, the United States was in recession. Which of the following things would you not expect to have happened?

Correct AnswerverifiedShow Answer

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The quantity of money has no real impact on things people really care about like whether or not they have a job. Most economists would agree that this statement is appropriate concerning

Correct AnswerverifiedShow Answer

As the price level falls

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

Correct AnswerverifiedShow Answer

If the price level rises above what was expected and nominal wages are fixed, then

Correct AnswerverifiedShow Answer

Economic variables are most often expressed in

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Variables that fall along with real GDP ...
View Answer

Correct Answer
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Correct Answer
verified

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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Correct Answer
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Correct Answer
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Correct Answer
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