Question 1

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

Accepted Answer

The answer of Refer to Political Instability Abroad.What would happen...

Question 2

The long-run aggregate supply curve would shift right if immigration from abroad
A) increased or Congress made a substantial increase in the minimum wage.
B) decreased or Congress abolished the minimum wage.
C) increased or Congress abolished the minimum wage.
D) decreased or Congress made a substantial increase in the minimum wage.

Accepted Answer

Immigration from abroad would increase the labor force, leading to an increase in the potential output of the economy and shifting the long-run aggregate supply curve to the right. Abolishing the minimum wage would reduce labor costs for firms, leading to an increase in production and a rightward shift in the long-run aggregate supply curve.

Question 3

Which of the following is not a determinant of the long-run level of real GDP?
A) the price level
B) the supply of labor
C) available natural resources
D) available technology

Accepted Answer

The price level is not a determinant of the long-run level of real GDP, as it only affects the short-run aggregate supply. The supply of labor, available natural resources, and available technology are all important determinants of the long-run level of real GDP.

Question 4

Which of the following is correct?
A) The short-run,but not the long-run,aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
B) The long-run,but not the short-run,aggregate supply curve is consistent with the idea that nominal variables do not affect real variables.
C) The long-run and short-run supply curves are both consistent with the idea that nominal variables affect real variables.
D) Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real variables.

Accepted Answer

The long-run aggregate supply curve (LRAS) is vertical and represents the economy's potential output level, which is determined by real factors like technology and capital. In the long-run, nominal variables like monetary policy or inflation do not affect these real factors, and hence, the LRAS curve is consistent with the idea that nominal variables do not affect real variables. In contrast, the short-run aggregate supply curve (SRAS) is upward sloping, indicating that firms can increase output by using existing resources more efficiently or hiring more workers, but only in the short-run. In the short-run, nominal variables like changes in demand, monetary policy, or supply shocks do affect the SRAS curve, shifting it to a higher or lower level. Therefore, option B is correct as the short-run curve is affected by nominal variables, while the long-run curve is not.

Question 5

Refer to U.S.Financial Crisis.What would happen in the market for foreign-currency exchange?
A) the supply of dollars would shift right and the exchange rate would rise.
B) the supply of dollars would shift right and the exchange rate would fall.
C) the supply of dollars would shift left and the exchange rate would rise.
D) None of the above is correct.

Accepted Answer

During a financial crisis, investors tend to move their money out of the country and into safer investments, which leads to an increase in the supply of dollars in the foreign exchange market. As a result, the exchange rate falls as there is more supply of dollars than demand for them.

Question 6

The long-run aggregate supply curve shifts right if
A) immigration from abroad increases.
B) the capital stock increases.
C) technology advances.
D) All of the above are correct.

Accepted Answer

All three factors listed (increased immigration, increased capital stock, and technological advances) can contribute to an increase in potential output, or the maximum amount of goods and services an economy can produce in the long run. Therefore, the long-run aggregate supply curve will shift right if any of these occur.

Question 7

If speculators lost confidence in foreign economies and so wanted to buy more U.S.bonds
A) the dollar would appreciate which would cause aggregate demand to shift right.
B) the dollar would appreciate which would cause aggregate demand to shift left.
C) the dollar would depreciate which would cause aggregate demand to shift right.
D) the dollar would depreciate which would cause aggregate demand to shift left.

Accepted Answer

The answer of If speculators lost confidence in foreign economies...

Question 8

The classical dichotomy and monetary neutrality are represented graphically by
A) an upward-sloping long-run aggregate-supply curve.
B) a vertical long-run aggregate-supply curve.
C) an upward-sloping short-run aggregate-curve.
D) a downward-sloping aggregate-demand curve.

Accepted Answer

The classical dichotomy and monetary neutrality suggest that changes in the money supply only affect nominal variables in the economy, and have no impact on real variables. Therefore, the long-run aggregate supply curve should be vertical, indicating that changes in the price level have no effect on real GDP or output.

Question 9

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change
A) in the price level and output.
B) in the price level,but not output.
C) in output,but not the price level.
D) in neither the price level nor output.

Accepted Answer

The long-run aggregate supply curve is vertical, indicating that in the long run, changes in aggregate demand will only affect the price level and not output. This is because in the long run, all inputs (including labor, capital, and technology) can be adjusted, allowing output to return to its natural level. Therefore, the only long-run effect of a permanent change in aggregate demand would be on the price level.

Question 10

The aggregate demand curve shifts right if either
A) speculators gain confidence in U.S.assets or foreign countries enter into recession.
B) speculators gain confidence in U.S.assets or recessions in foreign countries end.
C) speculators lose confidence in U.S.assets or foreign countries enter into recession.
D) speculators lose confidence in U.S.assets or recessions in foreign countries end.

Accepted Answer

The answer of The aggregate demand curve shifts right if...

Question 11

Which of the following shifts long-run aggregate supply right?
A) an increase in either the physical or human capital stock
B) an increase in the human but not the physical capital stock
C) an increase in the physical capital stock,but no the human capital stock
D) neither an increase in the physical capital stock or the human capital stock

Accepted Answer

An increase in either the physical or human capital stock shifts the long-run aggregate supply right. This is because an increase in physical capital leads to higher productivity, and an increase in human capital leads to higher efficiency and innovation. Both of these factors lead to increased potential output in the long run. B, C, and D are incorrect because they do not involve an increase in both physical and human capital stock.

Question 12

Refer to Political Instability Abroad.What would the change in the exchange rate make happen to U.S.net exports and U.S.aggregate demand?
A) Net exports would rise which by itself would increase U.S.aggregate demand.
B) Net exports would rise which by itself would decrease U.S.aggregate demand.
C) Net exports would fall which by itself would increase U.S.aggregate demand.
D) Net exports would fall which by itself would decrease U.S.aggregate demand.

Accepted Answer

The answer of Refer to Political Instability Abroad.What would the...

Question 13

Refer to U.S.Financial Crisis.U.S.net exports would
A) rise which by itself would increase aggregate demand.
B) rise which by itself would decrease aggregate demand.
C) fall which by itself would increase aggregate demand.
D) fall which by itself would decrease aggregate demand.

Accepted Answer

The answer of Refer to U.S.Financial Crisis.U.S.net exports would
A) rise...

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.?
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.

Accepted Answer

The answer of Refer to Political Instability Abroad.What would the...

Question 15

The long-run aggregate supply curve
A) is vertical.
B) is a graphical representation of the classical dichotomy.
C) indicates monetary neutrality in the long run.
D) All of the above are correct.

Accepted Answer

The long-run aggregate supply curve is vertical, which represents the classical dichotomy, meaning that in the long run, changes in the money supply do not affect real variables such as output and employment. This also indicates monetary neutrality in the long run. Therefore, all of the above options are correct.

Question 16

If speculators bid up the value of the U.S.dollar in the market for foreign exchange,then
A) U.S.goods become more expensive relative to foreign goods so aggregate demand shifts right.
B) U.S.goods become less expensive relative to foreign goods so aggregate demand shifts right.
C) U.S.goods become more expensive relative to foreign goods so aggregate demand shifts left.
D) U.S.goods become less expensive relative to foreign goods so aggregate demand shifts left.

Accepted Answer

If speculators bid up the value of the U.S. dollar in the foreign exchange market, it means that the U.S. dollar becomes stronger compared to foreign currencies. This makes U.S. goods more expensive relative to foreign goods, which can lead to a decrease in demand for U.S. exports and an increase in demand for imports. As a result, aggregate demand in the U.S. shifts left.

Question 17

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
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.

Accepted Answer

The answer of If banks and speculators in the U.S.decided...

Question 18

The position of the long-run aggregate supply curve
A) is determined by the things that determine output in the classical model.
B) is at the point where the unemployment rate is zero.
C) shifts to the right when the price level increases.
D) is at the point where the economy would cease to grow.

Accepted Answer

The position of the long-run aggregate supply curve is determined by the factors that determine potential output in the classical model, such as technology, capital, and labor. It represents the level of output that can be sustained in the long-run without causing inflation or deflation. The LRAS curve is vertical, meaning that changes in the price level do not affect potential output, only nominal values. The LRAS curve does not represent a point where the economy would cease to grow.

Question 19

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S.bonds,
A) the dollar would appreciate which would cause aggregate demand to shift right.
B) the dollar would appreciate which would cause aggregate demand to shift left.
C) the dollar would depreciate which would cause aggregate demand to shift right.
D) the dollar would depreciate which would cause aggregate demand to shift left.

Accepted Answer

The answer of If speculators gained greater confidence in foreign...

Question 20

The long-run aggregate supply curve shifts left if
A) the capital stock increases.
B) there is a natural disaster.
C) the government removes some environmental regulations that limit production methods.
D) None of the above is correct.

Accepted Answer

A leftward shift in the long-run aggregate supply curve would occur if there is a natural disaster, such as an earthquake or hurricane, that damages physical capital and disrupts production. The other choices listed would not cause a leftward shift in the long-run aggregate supply curve.

Quiz 33: Aggregate Demand and Aggregate Supply

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

The long-run aggregate supply curve would shift right if immigration from abroad

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

Which of the following is correct?

Refer to U.S.Financial Crisis.What would happen in the market for foreign-currency exchange?

The long-run aggregate supply curve shifts right if

If speculators lost confidence in foreign economies and so wanted to buy more U.S.bonds

The classical dichotomy and monetary neutrality are represented graphically by

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

The aggregate demand curve shifts right if either

Which of the following shifts long-run aggregate supply right?

Refer to Political Instability Abroad.What would the change in the exchange rate make happen to U.S.net exports and U.S.aggregate demand?

Refer to U.S.Financial Crisis.U.S.net exports would

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.?

The long-run aggregate supply curve

If speculators bid up the value of the U.S.dollar in the market for foreign exchange,then

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

The position of the long-run aggregate supply curve

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S.bonds,

The long-run aggregate supply curve shifts left if