Macroeconomics ch 15
petercatIf the price level falls, the real value of a dollar
Answer
| a. | falls, so people will want to buy less. This response helps explain the slope of the aggregate demand curve. |
| b. | rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve. |
| c. | falls, so people will want to buy less. This response shifts aggregate demand to the left. |
| d. | rises, so people will want to buy more. This response shifts aggregate demand to the right.
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The short-run effects of an increase in the expected price level include
Answer
| a. | a lower level of output and a higher price level. |
| b. | a higher level of output and a higher price level. |
| c. | a higher level of output and a lower price level. |
| d. | a lower level of output and a lower price level.
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Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then
Answer
| a. | employment and production rise. |
| b. | employment and production fall. |
| c. | employment falls and production rises. |
| d. | employment rises and production falls.
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Other things the same, an increase in the expected price level shifts
Answer
| a. | aggregate-demand right. |
| b. | short-run aggregate supply right. |
| c. | aggregated-demand left. |
| d. | short-run aggregate supply left.
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The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change
Answer
| a. | in the price level and output. |
| b. | in output, but not the price level. |
| c. | in the price level, but not output. |
| d. | in neither the price level nor output.
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As recessions begin, production
Answer
| a. | and unemployment both fall. |
| b. | rises and unemployment falls. |
| c. | and unemployment both rise. |
| d. | falls and unemployment rises.
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Other things the same, as the price level rises, the real value of a dollar
Answer
| a. | rises, and interest rates fall. |
| b. | falls, and interest rates fall. |
| c. | falls, and interest rates rise. |
| d. | rises, and interest rates rise.
|
Which of the following shifts aggregate demand to the right?
Answer
| a. | a decrease in the money supply |
| b. | the repeal of an investment tax credit |
| c. | increases in the profitability of capital due perhaps to technological progress. |
| d. | a decrease in the price level
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According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had
Answer
| a. | decreased, so it would decrease production. |
| b. | increased, so it would increase production. |
| c. | decreased, so it would increase production. |
| d. | increased, so it would decrease production.
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The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if
Answer
| a. | the price level is higher than expected making production more profitable. |
| b. | the price level is lower than expected making production more profitable. |
| c. | the price level is higher than expected making production less profitable. |
| d. | the price level is higher than expected making production less profitable.
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If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level
Answer
| a. | is the same and output is lower than in the original long-run equilibrium. |
| b. | is lower and output is the same as the original long-run equilibrium. |
| c. | and output are higher than in the original long-run equilibrium. |
| d. | and output are lower than in the original long-run equilibrium.
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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,
Answer
| a. | production is less profitable and employment rises. |
| b. | production is less profitable and employment falls. |
| c. | production is more profitable and employment rises. |
| d. | production is more profitable and employment falls.
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When the actual change in the price level differs from its expected change, which of the following can explain why firms might change their production?
Answer
| a. | both menu costs and mistaking a price level change for a change in relative prices |
| b. | menu costs but not mistaking a price level change for a change in relative prices |
| c. | mistaking a price level change for a change in relative price but not menu costs |
| d. | neither menu costs nor mistaking a price level change for a change in relative prices
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Other things the same, continued increases in the money supply lead to
Answer
| a. | a one-time permanent increase in both prices and real GDP. |
| b. | continued increases in the price level but not continued increases in real GDP. |
| c. | continued increases in the price level and real GDP. |
| d. | continued increases in real GDP but not continued increases in the price level.
|
During World War II, the economy's production increased about
Answer
| a. | 50 percent and prices rose about 10 percent. |
| b. | 25 percent and prices rose about 5 percent. |
| c. | 75 percent and prices rose about 15 percent. |
| d. | 100 percent and prices rose about 20 percent. |
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