Question 1

If policy makers choose to try to move the economy out of a recession, they should use their policy tools to decrease aggregate demand.

Accepted Answer

A) True 
 B)False

Question 2

The natural rate of output is the amount of real GDP produced when

Accepted Answer

A)  the economy is at the natural rate of unemployment.
B)  the economy is at the natural rate of investment.
C)  the economy is at the natural rate of aggregate demand.
D)  there is no unemployment.E) A) and D)
F) A) and B)

Question 3

Suppose the price level falls, but suppliers only notice that the price of their particular product has fallen.Thinking there has been a fall in the relative price of their product, they cut back on production.This is a demonstration of the

Accepted Answer

A)  misperceptions theory of the short run aggregate supply curve.
B)  classical dichotomy theory of the short run aggregate supply curve.
C)  sticky price theory of the short run aggregate supply curve.
D)  sticky wage theory of the short run aggregate supply curve.E) A) and B)
F) B) and C)

Question 4

Most economists believe that classical macroeconomic theory is a good description of the economy

Accepted Answer

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

Question 5

Explain the short run and long run effects on output and prices of a recession overseas causing foreigners to buy fewer SA goods.Create a chart to demonstrate the effects.

Accepted Answer

When a recession overseas causes foreign...

Question 6

Which of the following will cause stagflation?

Accepted Answer

A)  An increase in the money supply (which shifts the economy's aggregate demand curve to the right) .
B)  An increase in oil prices (which shifts the economy's aggregate supply curve to the left) .
C)  A decrease in the money supply (which shifts the economy's aggregate demand curve to the right) .
D)  Technical progress (which shifts the economy's aggregate supply curve to the right) .E) None of the above
F) All of the above

Question 7

When studying the short run, the assumption of money neutrality is

Accepted Answer

A)  not appropriate.
B)  increasingly important.
C)  still relevant, but the classical dichotomy no longer holds.
D)  Both b and c are correct.E) A) and B)
F) A) and C)

Question 8

Which of the following explains why production rises in most years?

Accepted Answer

A)  Increases in the labour force.
B)  Increases in the capital stock.
C)  Advances in technological knowledge.
D)  All of the above are correct.E) B) and C)
F) B) and D)

Question 9

Explain how an increase in the price level changes interest rates.How does this change in interest rates lead to changes in investment and net exports?

Accepted Answer

When the price level increases, the purc...

Question 10

A rise in price expectations that causes wages to rise causes the short run aggregate supply curve to shift to the left.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a determinant of long run aggregate supply?

Accepted Answer

A)  The level of skills in the workforce.
B)  The price level.
C)  Technology.
D)  The quantity of capital.E) None of the above
F) All of the above

Question 12

Use sticky wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Accepted Answer

When people expect the price l...

Question 13

Which of the following statements is true regarding the long run aggregate supply curve? The long run aggregate supply curve

Accepted Answer

A)  is vertical, because an equal change in all prices and wages leaves output unaffected.
B)  is positively sloped, because price expectations and wages tend to be fixed in the long run.
C)  shifts right when the government raises the minimum wage.
D)  shifts left when the natural rate of unemployment falls.E) None of the above
F) A) and D)

Question 14

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

Accepted Answer

Examples (and variations on examples) in...

Question 15

Explain the short run and long run effects on output and prices of technological improvements.Create a chart to demonstrate the effects.

Accepted Answer

When a technological improvement raises ...

Question 16

Economists refer to fluctuations in output as the "business cycle" because movements in output are regular and predictable.

Accepted Answer

A) True 
 B)False

Question 17

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) A) and D)
F) A) and C)

Question 18

List and discuss three key facts about economic fluctuations.

Accepted Answer

Three key facts about economic fluctuati...

Question 19

Figure 1
 
-Refer to the Figure above.Suppose the economy is operating in a recession such as point B.If policymakers wished to move output to its long run natural rate, they should attempt to shift

Accepted Answer

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

Question 20

Figure 1
 
-Refer to the Figure above.Suppose the economy is operating in a recession such as point B.If policymakers allow the economy to adjust to the long run natural rate on its own, people will

Accepted Answer

A)  reduce their price expectations and the short run aggregate supply will shift to the right.
B)  raise their price expectations and aggregate demand will shift to the left.
C)  raise their price expectations and the short run aggregate supply will shift to the left.
D)  reduce their price expectations and aggregate demand will shift to the right.E) A) and B)
F) A) and C)

Exam 15: Aggregate Demand and Aggregate Supply

Explain how an increase in the price level changes interest rates.How does this change in interest rates lead to changes in investment and net exports?

Correct AnswerverifiedWhen the price level increases, the purc...View AnswerShow Answer

Use sticky wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

Correct AnswerverifiedWhen people expect the price l...View AnswerShow Answer

Suppose the price level falls, but suppliers only notice that the price of their particular product has fallen.Thinking there has been a fall in the relative price of their product, they cut back on production.This is a demonstration of the

Correct AnswerverifiedShow Answer

Economists refer to fluctuations in output as the "business cycle" because movements in output are regular and predictable.

Correct AnswerverifiedShow Answer

The natural rate of output is the amount of real GDP produced when

Correct AnswerverifiedShow Answer

Explain the short run and long run effects on output and prices of a recession overseas causing foreigners to buy fewer SA goods.Create a chart to demonstrate the effects.

Correct AnswerverifiedWhen a recession overseas causes foreign...View AnswerShow Answer

Which of the following will cause stagflation?

Correct AnswerverifiedShow Answer

A rise in price expectations that causes wages to rise causes the short run aggregate supply curve to shift to the left.

Correct AnswerverifiedShow 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

Which of the following explains why production rises in most years?

Correct AnswerverifiedShow Answer

If policy makers choose to try to move the economy out of a recession, they should use their policy tools to decrease aggregate demand.

Correct AnswerverifiedShow Answer

Which of the following statements is true regarding the long run aggregate supply curve? The long run aggregate supply curve

Correct AnswerverifiedShow Answer

Figure 1 -Refer to the Figure above.Suppose the economy is operating in a recession such as point B.If policymakers allow the economy to adjust to the long run natural rate on its own, people will

Correct AnswerverifiedShow Answer

Figure 1 -Refer to the Figure above.Suppose the economy is operating in a recession such as point B.If policymakers wished to move output to its long run natural rate, they should attempt to shift

Correct AnswerverifiedShow Answer

Which of the following is not a determinant of long run aggregate supply?

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Most economists believe that classical macroeconomic theory is a good description of the economy

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

Correct AnswerverifiedShow Answer

List and discuss three key facts about economic fluctuations.

Correct AnswerverifiedThree key facts about economic fluctuati...View AnswerShow Answer

Explain the short run and long run effects on output and prices of technological improvements.Create a chart to demonstrate the effects.

Correct AnswerverifiedWhen a technological improvement raises ...View AnswerShow Answer

When studying the short run, the assumption of money neutrality is

Correct AnswerverifiedShow Answer

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When the price level increases, the purc...
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When people expect the price l...
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Correct Answer
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When a recession overseas causes foreign...
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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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Correct Answer
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Three key facts about economic fluctuati...
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When a technological improvement raises ...
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Correct Answer
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