Aggregate Demand and Aggregate Supply 8055
131. If countries that imported goods and services from the United States went into recession, we
would expect that U.S. net exports would
a. rise, making aggregate demand shift right.
b. rise, making aggregate demand shift left.
c. fall, making aggregate demand shift right.
d. fall, making aggregate demand shift left.
132. 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.
8056 Aggregate Demand and Aggregate Supply
133. At the end of World War II many European countries were rebuilding and so were eager to buy
capital goods and had rising incomes. We would expect that the rebuilding increased aggregate
demand in
a. both the United States and Europe.
b. the United States but not Europe.
c. Europe, but not the United States.
d. neither the United States, nor Europe.
134. If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net
exports
a. increase which shifts aggregate demand right.
b. increase which shifts aggregate demand left.
c. decrease which shifts aggregate demand right.
d. decrease which shifts aggregate demand left.
Aggregate Demand and Aggregate Supply 8057
135. If the dollar depreciates because of speculation or government policy, U.S.
a. aggregate demand shifts left. U.S. aggregate demand also shifts left if other countries
experience an increase in real GDP.
b. aggregate demand shifts left. U.S. aggregate demand shifts right if other countries experience
an increase in real GDP.
c. aggregate demand shifts right. U.S. aggregate demand also shifts right if other countries
experience a decrease in real GDP.
d. aggregate demand shifts right. U.S. aggregate demand shifts left if other countries experience
a decrease in real GDP.
136. Other things the same, which of the following is correct?
a. A decrease in the price level causes the dollar to appreciate. Aggregate demand shifts right.
b. A decrease in the price level causes the dollar to depreciate. Aggregate demand shifts right.
c. If speculators lose confidence in the American economy, the dollar appreciates. Aggregate
demand shifts right.
d. If speculators lose confidence in the American economy, the dollar depreciates. Aggregate
demand shifts right.
8058 Aggregate Demand and Aggregate Supply
137. At a given price level, an increase in which of the following shifts aggregate demand to the
right?
a. consumption
b. investment
c. government expenditures
d. All of the above are correct.
138. Which of the following is correct?
a. An increase in the money supply causes the interest rate to decrease so that aggregate
demand shifts left.
b. An increase in stock prices reduces consumption spending so that aggregate demand shifts
left.
c. An increase in the price level causes the exchange rate to rise so that aggregate demand shifts
left.
d. A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts
left.
Aggregate Demand and Aggregate Supply 8059
139. 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.
140. 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.
8060 Aggregate Demand and Aggregate Supply
141. 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.
142. 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.
Aggregate Demand and Aggregate Supply 8061
143. The aggregate demand curve shifts left 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.
Political Instability Abroad
Suppose that political instability in other countries makes people fear for the value of their assets
in these countries so that they desire to purchase more U.S assets.
144. 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.
8062 Aggregate Demand and Aggregate Supply
145. 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.
146. 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.
Aggregate Demand and Aggregate Supply 8063
U.S. Financial Crisis
Suppose that foreigners had reduced confidence in U.S. financial institutions and believed that
privately issued U.S. bonds were more likely to be defaulted on.
147. 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.
148. 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.
8064 Aggregate Demand and Aggregate Supply
Multiple Choice – Section 04: The Aggregate-Supply Curve
1. Which of the following is not a determinant of the long-run level of real GDP?
a. the price level.
b. the amount of capital used by firms.
c. available stock of human capital.
d. available technology
2. 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.
Aggregate Demand and Aggregate Supply 8065
3. 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.
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.
8066 Aggregate Demand and Aggregate Supply
5. The position of the long–run aggregate supply curve
a. is determined by resource usage and technology.
b. is at the point where the unemployment rate is zero.
c. shifts to the right when the money supply increases.
d. is at the point where the economy would cease to grow.
Figure 33-3.
Aggregate Demand and Aggregate Supply 8067
6. Refer to Figure 33-3. The natural rate of output occurs at
a. Y1.
b. Y2.
c. Y3.
d. both Y1 and Y3.
7. 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.
8068 Aggregate Demand and Aggregate Supply
8. The long-run aggregate supply curve would shift left if the amount of labor available
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.
9. 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.
Aggregate Demand and Aggregate Supply 8069
10. 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.
11. Which of the following shifts long-run aggregate supply right?
a. an increase in either technology or the human capital stock.
b. an increase in human capital but not technology.
c. an increase in technology, but not the human capital stock.
d. neither an increase in technology nor the human capital stock.
8070 Aggregate Demand and Aggregate Supply
12. The discovery of a large amount of previously-undiscovered oil in the U.S. would shift
a. the long–run aggregate-supply curve to the right.
b. the long-run aggregate-supply curve to the left.
c. the aggregate-demand curve to the left.
d. None of the above is correct.
13. The long-run aggregate supply curve would shift right if the government were to
a. reduce the minimum-wage.
b. make unemployment benefits more generous.
c. raise taxes on investment spending.
d. All of the above are correct.
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14. Which of the following shifts the long–run aggregate supply curve to the left?
a. either an increase in the price of imported natural resources or a reduction in trade restrictions.
b. neither an increase in the price of imported natural resources or a reduction in trade
restrictions.
c. an increase in the price of imported natural resources and an increase in trade restrictions.
d. an increase in trade restrictions and a decrease in the price of imported natural resources.
15. Some countries have high minimum wages and require a lengthy and costly process to get
permission to open a business
a. Reducing either the minimum wage or the time and cost to open a business would have no
effect on the long- run aggregate supply curve.
b. Reducing the minimum wage and the time and cost to open a business would both shift the
long-run aggregate supply curve to the right.
c. Reducing the minimum wage would shift long–run aggregate supply to the right. Reducing the
time and cost to open a business would have no affect on the long-run aggregate supply curve.
d. Reducing the minimum wage would have no affect on the long-run aggregate supply curve.
Reducing the time and cost to open a business would shift the long-run aggregate supply curve
to the right.
8072 Aggregate Demand and Aggregate Supply
16. The long–run aggregate supply curve shifts right if
a. technology improves.
b. the price level decreases.
c. the money supply increases.
d. All of the above are correct.
17. The long–run aggregate supply curve shifts right if
a. the price level rises.
b. the price level falls.
c. the capital stock increases.
d. the capital stock decreases.
Aggregate Demand and Aggregate Supply 8073
18. Which of the following shifts the long-run aggregate supply curve to the right?
a. both an increase in the capital stock and technological improvements
b. an increase in the capital stock but not technological improvements
c. an increase in the capital stock but not technological improvements
d. neither an increase in the capital stock nor an technological improvements
19. The long–run aggregate supply curve shifts right if
a. either immigration from abroad increases or technology improves.
b. immigration from abroad increases, but not if technology improves.
c. technology improves, but not if immigration from abroad increases.
d. None of the above are correct.
8074 Aggregate Demand and Aggregate Supply
20. Which of the following would shift the long-run aggregate supply curve right?
a. both an increase in the capital stock and an increase in the price level
b. an increase in the capital stock, but not an increase in the price level
c. an increase in the money supply, but not an increase in the capital stock
d. neither an increase in the money supply nor an increase in the capital stock
21. Which of the following would shift long-run aggregate supply to the right?
a. increased immigration from abroad
b. a decrease in the price of an imported natural resource
c. opening the economy to international trade
d. All of the above are correct.