Aggregate Demand and Aggregate Supply 8095
63.
Other things the same, if the price level is lower than expected, then some firms believe that the
relative price of
what they produce has
a.
decreased, so they increase production.
b.
decreased, so they decrease production.
c.
increased, so they increase production.
d.
increased, so they decrease production.
64.
According to the misperceptions theory of aggregate supply, if a firm thought that inflation was
going to be 5 percent
and actual inflation was 6 percent, then the firm would believe that the
relative price of what it produce had
a.
increased, so it would increase production.
b.
increased, so it would decrease production.
c.
decreased, so it would increase production.
d.
decreased, so it would decrease production.
65.
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
a.
increased, so it would increase production.
b.
increased, so it would decrease production.
c.
decreased, so it would increase production.
d.
decreased, so it would decrease production.
66.
The misperceptions theory of the short–run aggregate supply curve says that the quantity of output
supplied will
increase if the price level
a.
increases by less than expected so that firms believe the relative price of their output has
increased.
b.
increases by less than expected so that firms believe the relative price of their output has
decreased.
c.
increases by more than expected so that firms believe the relative price of their output has
increased.
d.
increases by more than expected so that firms believe the relative price of their output has
decreased.
67.
Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things
they consume have
fallen by the same percentage. They may infer that the reward to working is
a.
temporarily low and so supply a smaller quantity of labor.
b.
temporarily low and so supply a larger quantity of labor.
c.
temporarily high and so supply a smaller quantity of labor.
d.
temporarily high and so supply a larger quantity of labor.
68.
Other things the same, the aggregate quantity of output supplied will decrease if the price level
a.
is lower than expected so that firms believe the relative price of their output has increased.
b.
is lower than expected so that firms believe the relative price of their output has decreased.
c.
is higher than expected so that firms believe the relative price of their output has increased.
d.
is higher than expected so that firms believe the relative price of their output has decreased.
69.
Other things the same, the aggregate quantity of output supplied will increase if the price level
a.
is lower than expected so that firms believe the relative price of their output has increased.
b.
is lower than expected so that firms believe the relative price of their output has decreased.
c.
is higher than expected so that firms believe the relative price of their output has increased.
d.
is higher than expected so that firms believe the relative price of their output has decreased.
70.
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?
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
71.
In the aggregate demand and aggregate supply model, sticky wages, sticky prices, and
misperceptions about relative
prices
a.
have temporary effects.
b.
explain why the short run aggregate supply curve might shift.
c.
explain why the aggregate demand curve is downward sloping.
d.
explain monetary neutrality.
72.
Of the following theories, which is consistent with a vertical long-run aggregate supply curve?
a.
the sticky–wage theory
b.
misperceptions theory
c.
both the sticky-wage and misperceptions theories.
d.
neither the sticky-wage nor the misperceptions theory.
73.
If the price level is higher than expected, firms might raise their production in the short run if
a.
the nominal wage they pay their employees was set based on the expected price level.
b.
prices are costly to adjust and they have set their price at some time in the past but are not
ready to change it.
c.
they believe that the price of their product has risen relative to the price of other products,
when in fact the
rise in the price of their product reflects an increase in the general price level.
d.
All of the above are correct.
74.
If the actual price level is 165, but people had been expecting it to be 160, then
a.
the quantity of output supplied rises, but only in the short run.
b.
the quantity of output supplied rises in the short run and the long run.
c.
the quantity of output supplied falls, but only in the short run.
d.
the quantity of output supplied falls in the short run and the long run.
75.
Assuming that a is positive, theories of short-run aggregate supply are expressed mathematically
as
a.
quantity of output supplied = natural rate of output + a(actual price level – expected price level).
b.
quantity of output supplied = natural rate of output + a(expected price level – actual price level).
c.
quantity of output supplied = a(actual price level -expected price level) – natural rate of output.
d.
quantity of output supplied = a(expected price level – actual price level) – natural rate of output.
76.
The equation: quantity of output supplied = natural rate of output + a(actual price level – expected
price level), where
a is a positive number, represents
a.
an upward-sloping short–run aggregate supply curve
b.
a vertical short-run aggregate supply curve
c.
a downward-sloping aggregate demand curve
d.
None of the above is correct.
8102 Aggregate Demand and Aggregate Supply
77.
The mathematical equation: quantity of output supplied = natural rate of output + a(actual price
level – expected price
level), expresses
a.
how the long run equilibrium adjusts to changes in money supply.
b.
how output deviates in the short run from its long run natural rate.
c.
how the short run aggregate supply curve shifts.
d.
how adverse shifts in aggregate supply can cause stagflation.
78.
Which of the following correctly expresses why the short-run aggregate-supply curve slopes
upward?
a.
b.
c.
d.
79.
The effects of a higher than expected price level are shown by
a.
shifting the short-run aggregate supply curve right.
b.
shifting the short-run aggregate supply curve left.
c.
moving to the right along a given aggregate supply curve.
d.
moving to the left along a given aggregate supply curve.
80.
A change in the expected price level is likely to cause which of the following?
a.
a shift in the short-run aggregate supply curve and long-run aggregate supply curve
b.
a shift in the short run aggregate supply curve
c.
a shift in the aggregate demand curve
d.
a shift in the long–run aggregate supply curve
81.
An increase in the expected price level shifts the
a.
short-run and long-run aggregate supply curves left.
b.
the short–run but not the long–run aggregate supply curve left.
c.
the long-run but not the short–run aggregate supply curve left.
d.
neither the long–run nor the short-run aggregate supply curve left.
82.
A decrease in the expected price level shifts
a.
only the long–run aggregate supply curve right.
b.
only the short-run aggregate supply curve right.
c.
both the short–run and the long–run aggregate supply curve right.
d.
Neither the short-run nor the long-run aggregate supply curve right.
83.
Which of the following shifts the short-run aggregate supply curve right?
a.
both an increase in the price level that is greater than expected and an increase in the expected
price level.
b.
an increase in the price level that is greater than expected, but not an increase in the expected
price level.
c.
an increase in the expected price level, but not an increase in the price level that is greater than
expected.
d.
neither an increase in the price level that is greater than expected nor an increase in the
expected price level.
84.
An increase in the expected price level shifts short–run aggregate supply to the
a.
right, and an increase in the actual price level shifts short-run aggregate supply to the right.
b.
right, and an increase in the actual price level does not shift short–run aggregate supply.
c.
left, and an increase in the actual price level shifts short-run aggregate supply to the left.
d.
left, and an increase in the actual price level does not shift short-run aggregate supply.
85.
A decrease in the expected price level shifts short–run aggregate supply to the
a.
right, and an increase in the actual price level shifts short-run aggregate supply to the right.
b.
right, and an increase in the actual price level does not shift short-run aggregate supply.
c.
left, and an increase in the actual price level shifts short–run aggregate supply to the left.
d.
left, and an increase in the actual price level does not shift short–run aggregate supply.
86.
Which of the following shifts both the short–run and long-run aggregate supply right?
a.
an increase in the actual price level
b.
an increase in the expected price level
c.
an increase in the capital stock
d.
None of the above is correct.
87.
Which of the following shifts both short–run and long-run aggregate supply left?
a.
a decrease in the actual price level
b.
a decrease in the expected price level
c.
a decrease in the capital stock
d.
a decrease in the money supply
88.
Which of the following shifts short–run, but not long-run aggregate supply right?
a.
a decrease in the actual price level
b.
a decrease in the expected price level
c.
a decrease in the capital stock
d.
an increase in the money supply
89.
Which of the following shifts short–run aggregate supply right?
a.
an increase in the minimum wage
b.
an increase in immigration from abroad
c.
an increase in the price of oil
d.
an increase in the actual price level
90.
Which of the following shifts short–run aggregate supply left?
a.
an increase in the actual price level
b.
an increase in the expected price level
c.
an increase in the capital stock
d.
None of the above is correct.
91.
Which of the following shifts the short–run aggregate supply curve to the right?
a.
an increase in the money supply
b.
an increase in the price level
c.
a decrease in the expected price level
d.
All of the above are correct.
92.
Which of the following shifts short–run aggregate supply right?
a.
an increase in the price level
b.
an increase in the minimum wage
c.
a decrease in the price of oil
d.
more people migrate abroad than immigrate from abroad
93.
Which of the following shifts the short–run aggregate supply curve to the right?
a.
a decrease in the actual price level
b.
an increase in the actual price level
c.
a decrease in the expected price level
d.
an increase in the expected price level
94.
The aggregate demand and aggregate supply model implies monetary neutrality
a.
only in the short run.
b.
only in the long run.
c.
in both the short run and the long run.
d.
in neither the short run nor long run.
95.
Imagine two economies that are identical except that for a long time, economy A has had a money
supply of $1,000
billion while economy B has had a money supply of $500 billion. It follows that
a.
real GDP and the price level are lower in country B.
b.
real GDP, but not the price level, is lower in country B.
c.
the price level, but not real GDP is lower in country B.
d.
neither the price level or real GDP is lower in country B.
Multiple Choice – Section 05: Two Causes of Economic Fluctuations
1.
If output is above its natural rate, then according to sticky-wage theory
a.
workers and firms will strike bargains for lower wages. In response to the lower wages firms
will produce
less at any given price level.
b.
workers and firms will strike bargains for lower wages. In response to the lower wages firms
will produce
more at any given price level.
c.
will strike bargains for higher wages. In response to the higher wages firms will produce less at
any given
price level.
d.
workers and firms will strike bargains for higher wages. In response to the higher wages firms
will produce
more at any given price level.
2.
The price level rises in the short run if
a.
aggregate demand or aggregate supply shifts right.
b.
aggregate demand shifts right or aggregate supply shifts left.
c.
aggregate demand shifts left or aggregate supply shifts right.
d.
aggregate demand or aggregate supply shifts right.
3.
If aggregate demand shifts left, then in the short run
a.
the price level and real GDP both rise.
b.
the price level rises and real GDP falls.
c.
the price level falls and real GDP rises.
d.
the price and real GDP both fall.
4.
Which of the following would cause prices and real GDP to rise in the short run?
a.
short-run aggregate supply shifts right
b.
short-run aggregate supply shifts left
c.
aggregate demand shifts right
d.
aggregate demand shifts left
5.
Which of the following would cause prices to fall and output to rise in the short run?
a.
short-run aggregate supply shifts right
b.
short-run aggregate supply shifts left
c.
aggregate demand shifts right
d.
aggregate demand shifts left