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Exam 33: Aggregate Demand and Aggregate Supply

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Question 71

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In 2008, the United States was in recession. Which of the following things would you not expect to have happened?

A) Increased layoffs and firings
B) A higher rate of bankruptcy
C) Increased claims for unemployment insurance
D) Increased real GDP

E) All of the above
F) A) and B)

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Question 72

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In which case can we be sure aggregate demand shifts left overall?

A) People want to save more for retirement and the Fed increases the money supply.
B) People want to save more for retirement and the Fed decreases the money supply.
C) People want to save less for retirement and the Fed increases the money supply.
D) People want to save less for retirement and the Fed decreases the money supply.

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

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Question 73

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The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

Figure 33-2 ​ -Refer to Figure 33-2. If the economy starts at S and moves to V in the short run, the economy

Which of the following would shift the long-run aggregate supply curve right?

Figure 33-2 ​ -Refer to Figure 33-2. A decrease in taxes would move the economy from U to

Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.

During World War II government expenditures increased almost five-fold and output almost doubled.

The classical dichotomy and monetary neutrality are represented graphically by

Figure 33-12 ​ ​ -Refer to Figure 33-12. Suppose the economy starts at P₃ and Y₂. If there is a decrease in government purchases, identify the price and output levels that the economy would move to in the short run.

The wealth effect helps explain what feature in the aggregate demand and aggregate supply model?

Figure 33-2 ​ -Refer to Figure 33-2. If the economy is at S and there is a reduction in aggregate demand, in the short run the economy

If speculators bid up the value of the dollar in the market for foreign-currency exchange, U.S. aggregate demand would shift to the left.

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.

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.

List the three alternative explanations for the upward slope of the short run aggregate supply curve.

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.

Figure 33-5 ​ -Refer to Figure 33-5. Suppose the economy starts at Point Y. If there is a reduction in aggregate demand, then in the long run the economy moves to

Suppose a boom in stock market prices helps make people feel wealthier. Using the model of aggregate demand and aggregate supply, identify the curves that are affected, and which way these curves would shift.