Question 1

The quantity of aggregate goods and service 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.

Question 2

Which of the following has been suggested as a cause of the Great Depression?

Accepted Answer

A)   a decline in the money supply
B)   a decrease in stock prices
C)   the collapse of the banking system
D)   All of the above are correct.

Question 3

Refer to Political Instability Abroad.What would happen to the dollar?

Accepted Answer

A)   It would appreciate in foreign exchange markets making U.S goods more expensive compared to foreign goods.
B)   It would appreciate in foreign exchange markets making U.S.goods less expensive compared to foreign goods.
C)   It would depreciate in foreign exchange markets making U.S.goods more expensive compared to foreign goods.
D)   It would depreciate in foreign exchange markets making U.S.goods less expensive compared to foreign goods.

Question 4

The aggregate-demand curve shows the quantity of domestic goods and services that households,firms,the government,and customers abroad want to buy at each price level.

Accepted Answer

A) True 
 B)False

Question 5

Other things the same,when the price level rises,interest rates

Accepted Answer

A)   rise,so firms increase investment.
B)   rise,so firms decrease investment.
C)   fall,so firms increase investment.
D)   fall,so firms decrease investment.

Question 6

If the government provides an investment tax credit and increases income taxes,

Accepted Answer

A)   real GDP rises,and the price level could rise,fall,or stay the same.
B)   real GDP falls,and the price level could rise,fall,or stay the same.
C)   the price level rises and real GDP could rise,fall or stay the same
D)   None of the above are necessarily correct.

Question 7

Who wrote the 1936 book titled The General Theory of Employment,Interest,and Money?

Accepted Answer

The answer of Who wrote the 1936 book titled The...

Question 8

The curve that shows the quantity of goods and services that firms produce and sell

Accepted Answer

A)   as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-demand curve.
B)   as it relates to the quantity of goods and services that buyers want to buy is called the aggregate-supply curve.
C)   as it relates to the overall price level is called the aggregate-demand curve.
D)   as it relates to the overall price level is called the aggregate-supply curve.

Question 9

If banks and speculators in the U.S.decided to exchange U.S.dollars for the foreign currencies of other countries,but foreigners do not desire to increase their holdings of U.S.dollars,then U.S.net exports would

Accepted Answer

A)   rise and aggregate demand would shift left.
B)   rise and aggregate demand would shift right.
C)   fall and aggregate demand would shift left.
D)   fall and aggregate demand would shift right.

Question 10

When the price level falls,people want to

Accepted Answer

A)   hold more money and the quantity of aggregate goods and services demanded increases.
B)   hold more money and the quantity of aggregate goods and services demanded decreases.
C)   hold less money and the quantity of aggregate goods and services demanded increases.
D)   hold less money and the quantity of aggregate goods and services demanded decreases.

Question 11

In the context of the aggregate-demand curve,the interest-rate effect refers to the idea that,when the price level increases,

Accepted Answer

A)   the real value of money decreases;in turn,the real value of the dollar increases in foreign exchange markets,which decreases net exports.
B)   the real value of money decreases;in turn,interest rates increase,which decreases net exports.
C)   households increase their holdings of money;in turn,interest rates decrease,which reduces spending on investment goods.
D)   households increase their holdings of money;in turn,interest rates increase,which reduces spending on investment goods.

Question 12

Below are pairs of GDP growth rates and unemployment rates.Economists would be shocked to see most of these pairs in the U.S.Which pair of GDP growth rates and unemployment rates is realistic?

Accepted Answer

A)   6 percent,0 percent
B)   3 percent,10 percent
C)   -1 percent,6 percent
D)   -3 percent,2 percent

Question 13

Other things the same,if the money supply rises by 2% and people were expecting it to rise by 5%,then some firms have

Accepted Answer

A)   higher than desired prices which increases their sales.
B)   higher than desired prices which depresses their sales.
C)   lower than desired prices which increases their sales.
D)   lower than desired prices which depresses their sales.

Question 14

Refer to Political Instability Abroad.What would the change in the interest rate created by foreigners wanting to buy more U.S.assets do to investment spending in the U.S.?

Accepted Answer

A)   make it rise which by itself would increase U.S.aggregate demand.
B)   make it rise which by itself would decrease U.S.aggregate demand.
C)   make it fall which by itself would increase U.S.aggregate demand.
D)   make it fall which by itself would decrease U.S.aggregate demand.

Question 15

The aggregate quantity of goods and services demanded changes as the price level falls because

Accepted Answer

A)   real wealth falls,interest rates rise,and the dollar appreciates.
B)   real wealth falls,interest rates rise,and the dollar depreciates.
C)   real wealth rises,interest rates fall,and the dollar appreciates.
D)   real wealth rises,interest rates fall,and the dollar depreciates.

Question 16

Other things the same,as the price level falls,the real value of a dollar

Accepted Answer

A)   rises,and interest rates rise.
B)   rises,and interest rates fall.
C)   falls,and interest rates rise.
D)   falls,and interest rates fall.

Question 17

When interest rates fall

Accepted Answer

A)   firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding.
B)   firms want to borrow more for new plants and equipment and households want to borrow less for homebuilding.
C)   firms want to borrow less for new plants and equipment and households want to borrow more for homebuilding.
D)   firms want to borrow less for new plants and equipment and households want to borrow less for homebuilding.

Question 18

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

Accepted Answer

A)   production is more profitable and employment rises.
B)   production is more profitable and employment falls.
C)   production is less profitable and employment rises.
D)   production is less profitable and employment falls.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)   the price level
B)   the supply of labor
C)   available natural resources
D)   available technology

Exam 33: Aggregate Demand and Aggregate Supply

Refer to Political Instability Abroad.What would happen to the dollar?

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

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If the government provides an investment tax credit and increases income taxes,

Correct AnswerverifiedShow Answer

Other things the same,when the price level rises,interest rates

Correct AnswerverifiedShow Answer

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

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

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When interest rates fall

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The curve that shows the quantity of goods and services that firms produce and sell

Correct AnswerverifiedShow Answer

Who wrote the 1936 book titled The General Theory of Employment,Interest,and Money?

Correct AnswerverifiedShow Answer

The aggregate quantity of goods and services demanded changes as the price level falls because

Correct AnswerverifiedShow Answer

Which of the following has been suggested as a cause of the Great Depression?

Correct AnswerverifiedShow Answer

When the price level falls,people want to

Correct AnswerverifiedShow Answer

The aggregate-demand curve shows the quantity of domestic goods and services that households,firms,the government,and customers abroad want to buy at each price level.

Correct AnswerverifiedShow Answer

Refer to Political Instability Abroad.What would the change in the interest rate created by foreigners wanting to buy more U.S.assets do to investment spending in the U.S.?

Correct AnswerverifiedShow Answer

If banks and speculators in the U.S.decided to exchange U.S.dollars for the foreign currencies of other countries,but foreigners do not desire to increase their holdings of U.S.dollars,then U.S.net exports would

Correct AnswerverifiedShow Answer

In the context of the aggregate-demand curve,the interest-rate effect refers to the idea that,when the price level increases,

Correct AnswerverifiedShow Answer

Below are pairs of GDP growth rates and unemployment rates.Economists would be shocked to see most of these pairs in the U.S.Which pair of GDP growth rates and unemployment rates is realistic?

Correct AnswerverifiedShow Answer

Other things the same,as the price level falls,the real value of a dollar

Correct AnswerverifiedShow Answer

Other things the same,if the money supply rises by 2% and people were expecting it to rise by 5%,then some firms have

Correct AnswerverifiedShow Answer

The quantity of aggregate goods and service demanded rises when the

Correct AnswerverifiedShow Answer

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