If the price level falls, the real value of a dollar
Answer
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a. |
falls, so people will want to buy less. This response helps explain the slope of the aggregate demand curve. |
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b. |
rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve. |
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c. |
falls, so people will want to buy less. This response shifts aggregate demand to the left. |
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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
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a. |
a lower level of output and a higher price level. |
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b. |
a higher level of output and a higher price level. |
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c. |
a higher level of output and a lower price level. |
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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
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a. |
employment and production rise. |
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b. |
employment and production fall. |
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c. |
employment falls and production rises. |
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d. |
employment rises and production falls.
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Other things the same, an increase in the expected price level shifts
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a. |
aggregate-demand right. |
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b. |
short-run aggregate supply right. |
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c. |
aggregated-demand left. |
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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
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a. |
in the price level and output. |
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b. |
in output, but not the price level. |
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c. |
in the price level, but not output. |
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d. |
in neither the price level nor output.
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As recessions begin, production
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a. |
and unemployment both fall. |
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b. |
rises and unemployment falls. |
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c. |
and unemployment both rise. |
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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
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a. |
rises, and interest rates fall. |
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b. |
falls, and interest rates fall. |
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c. |
falls, and interest rates rise. |
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d. |
rises, and interest rates rise.
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Which of the following shifts aggregate demand to the right?
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a. |
a decrease in the money supply |
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b. |
the repeal of an investment tax credit |
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c. |
increases in the profitability of capital due perhaps to technological progress. |
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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
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a. |
decreased, so it would decrease production. |
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b. |
increased, so it would increase production. |
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c. |
decreased, so it would increase production. |
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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
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a. |
the price level is higher than expected making production more profitable. |
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b. |
the price level is lower than expected making production more profitable. |
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c. |
the price level is higher than expected making production less profitable. |
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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
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a. |
is the same and output is lower than in the original long-run equilibrium. |
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b. |
is lower and output is the same as the original long-run equilibrium. |
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c. |
and output are higher than in the original long-run equilibrium. |
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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,
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a. |
production is less profitable and employment rises. |
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b. |
production is less profitable and employment falls. |
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c. |
production is more profitable and employment rises. |
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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?
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a. |
both menu costs and mistaking a price level change for a change in relative prices |
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b. |
menu costs but not mistaking a price level change for a change in relative prices |
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c. |
mistaking a price level change for a change in relative price but not menu costs |
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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
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a. |
a one-time permanent increase in both prices and real GDP. |
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b. |
continued increases in the price level but not continued increases in real GDP. |
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c. |
continued increases in the price level and real GDP. |
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d. |
continued increases in real GDP but not continued increases in the price level.
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During World War II, the economy’s production increased about
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a. |
50 percent and prices rose about 10 percent. |
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b. |
25 percent and prices rose about 5 percent. |
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c. |
75 percent and prices rose about 15 percent. |
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d. |
100 percent and prices rose about 20 percent. |
Jermaine Byrant
Nicole Johnson
OVER
RATING
YEARS
