1、Chapter 33/Aggregate Demand and Aggregate Supply v 2249Chapter 33Aggregate Demand and Aggregate SupplyTRUE/FALSE1.According to classical macroeconomic theory, changes in the money supply change nominal but not real variables.ANS:TDIF:1REF:33-2NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:
2、Classical economicsMSC:Definitional2.Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.ANS:FDIF:1REF:33-1NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Economic fluctuationsMSC:Analytical3.Most macroeconomic variables that meas
3、ure some type of income, spending, or production fluctuate closely together.ANS:TDIF:1REF:33-1NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Economic fluctuationsMSC:Interpretive4.Like real GDP, investment fluctuates, but it fluctuates much less than real GDP.ANS:FDIF:1REF:33-1NAT:Analytic
4、LOC:Aggregate demand and aggregate supplyTOP:Economic fluctuations | InvestmentMSC:Definitional5.When output rises, unemployment falls.ANS:TDIF:1REF:33-1NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Economic fluctuations | UnemploymentMSC:Definitional6.An increase in the money supply caus
5、es output to rise in the long run.ANS:FDIF:1REF:33-2NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Monetary neutralityMSC:Definitional7.Most economists believe that classical theory describes the world in the short run but not in the long run.ANS:FDIF:1REF:33-2NAT:AnalyticLOC:Aggregate dem
6、and and aggregate supplyTOP:Classical dichotomyMSC:Interpretive8.A change in the money supply changes only nominal variables in the long run.ANS:TDIF:1REF:33-2NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Monetary neutralityMSC:Definitional9.The explanations for the slopes of the aggregat
7、e demand and short-run aggregate supply curves are the same as the explanations for the slopes of demand and supply curves for specific goods and services.ANS:FDIF:1REF:33-2NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Aggregate demand slope | Short-run aggregate supply slopeMSC:Definitio
8、nal10.The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level.ANS:TDIF:2REF:33-2NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Aggregate-demand curveMSC:Definitional11.A decrea
9、se in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.ANS:TDIF:1REF:33-3NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Wealth effectMSC:Analytical12.Other things the same, a decrease in the price
10、 level makes the interest rate decrease, which leads to a depreciation of the dollar in the foreign-currency exchange.ANS:TDIF:2REF:33-3NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Wealth effect | Exchange-rate effectMSC:Analytical13.The exchange-rate effect is the idea that a higher U.S
11、. 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.ANS:TDIF:2REF:33-3NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Aggregate demand slopeMSC:Interpretive14.The downward slope
12、 of the aggregate demand curve is based on logic that as the price level rises, consumption, investment, and net exports all fall.ANS:TDIF:2REF:33-3NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Aggregate demand slopeMSC:Interpretive15.Aggregate demand shifts to the left if the money suppl
13、y increases.ANS:FDIF:1REF:33-3NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Aggregate demand shifts | Monetary policyMSC:Applicative16.A decrease in the money supply causes the interest rate to rise so that investment falls.ANS:TDIF:2REF:33-3NAT:AnalyticLOC:Aggregate demand and aggregate
14、supplyTOP:Aggregate demand shifts | Money supplyMSC:Analytical17.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.ANS:TDIF:2REF:33-3NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Aggregate demand shifts
15、 | Net exportsMSC:Analytical18.The effect of a change in the value of the dollar in the foreign exchange market due to a change in the price level helps explain the slope of aggregate demand, but does not shift it. The effects of a change in the value of the dollar in the foreign exchange market due
16、 to speculation is shown by shifting the aggregate demand curve.ANS:TDIF:3REF:33-3NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Aggregate-demand curveMSC:Analytical19.An increase in the money supply shifts the long-run aggregate supply curve to the right.ANS:FDIF:1REF:33-4NAT:AnalyticLOC:
17、Aggregate demand and aggregate supplyTOP:Long-run aggregate supply | Monetary policyMSC:Applicative20.Technological progress shifts the long-run aggregate supply curve to the right.ANS:TDIF:1REF:33-4NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Economic growth and inflationMSC:Applicative
18、21.Other things the same, technological progress raises the price level.ANS:FDIF:2REF:33-4NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Economic growth and inflationMSC:Applicative22.Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supp
19、ly is vertical.ANS:TDIF:1REF:33-4NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Long-run aggregate supplyMSC:Interpretive23.We could explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.ANS:FDIF:2REF:33-4NAT:Analytic
20、LOC:Aggregate demand and aggregate supplyTOP:Economic growth and inflationMSC:Analytical24.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 sale
21、s and induce firms to reduce the quantity of goods and services they produce.ANS:TDIF:1REF:33-4NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Misperceptions theoryMSC:Interpretive25.All explanations for the upward slope of the short-run aggregate supply curve suppose that the quantity of o
22、utput supplied increases when the actual price level exceeds the expected price level.ANS:TDIF:1REF:33-4NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Short-run aggregate supply slopeMSC:Interpretive26.The only way to rationalize an upward slope for the short-run aggregate-supply curve is
23、to argue that wages are sticky in the short run.ANS:FDIF:2REF:33-4NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Short-run aggregate-supply curveMSC:Interpretive27.An increase in the actual price level does not shift the short-run aggregate supply curve, but an expected increase in the pri
24、ce level shifts the short-run aggregate supply curve to the left.ANS:TDIF:2REF:33-4NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Short-run aggregate supplyMSC:Analytical28.Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.ANS:FD
25、IF:1REF:33-5NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Short-run equilibrium | Economic fluctuationsMSC:Definitional29.Increased uncertainty and pessimism about the future of the economy leads firms to desire less investment spending which shifts the aggregate-demand curve to the left.
26、ANS:TDIF:1REF:33-5NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Aggregate demand shifts | PessimismMSC:Applicative30.Increased optimism about the future leads to rising prices and falling unemployment in the short run.ANS:TDIF:2REF:33-5NAT:AnalyticLOC:Aggregate demand and aggregate supply
27、TOP:Short-run equilibrium | PessimismMSC:Analytical31.In response to a decrease in output, the economy would revert to its original level of prices and output whether the decrease in output was caused by a decrease in aggregate demand or a decrease in aggregate supply.ANS:FDIF:2REF:33-5NAT:AnalyticL
28、OC:Aggregate demand and aggregate supplyTOP:Long-run equilibriumMSC:Analytical32.If aggregate demand shifts right, then eventually price level expectations rise. The increase in price level expectations causes the short-run aggregate-supply curve to shift to the left.ANS:TDIF:2REF:33-5NAT:AnalyticLO
29、C:Aggregate demand and aggregate supplyTOP:Long-run equilibriumMSC:Analytical33.If aggregate demand and aggregate supply both shift right, we can be sure that the price level is higher in the short run.ANS:FDIF:2REF:33-5NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Short-run equilibriumMS
30、C:Analytical34.Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.ANS:FDIF:1REF:33-5NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Great DepressionMSC:Definitional35.The primary purpose of the aggregate demand an
31、d aggregate supply model is to demonstrate the classical dichotomy.ANS:FDIF:1REF:33-4NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Aggregate demand and aggregate supply modelMSC:Interpretive36.Increased output and prices in the United States in the early 1940s were mostly the result of in
32、creased government expenditures.ANS:TDIF:1REF:33-5NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:World War IIMSC:Definitional37.During World War II government expenditures increased almost five-fold and output almost doubled.ANS:TDIF:2REF:33-5NAT:AnalyticLOC:Aggregate demand and aggregate
33、supplyTOP:World War IIMSC:Definitional38.Stagflation results from continued decreases in aggregate demand.ANS:FDIF:2REF:33-5NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:StagflationMSC:Applicative39.If the central bank increased the money supply in response to a decrease in short-run aggr
34、egate supply, unemployment would return towards its natural rate, but prices would rise even more.ANS:TDIF:2REF:33-5NAT:AnalyticLOC:Fiscal and monetary policyTOP:Monetary policyMSC:Analytical40.John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemploym
35、ent caused by recessions.ANS:TDIF:1REF:33-5NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:KeynesMSC:DefinitionalSHORT ANSWER1.The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?ANS:There are occasional short-lived periods of
36、 negative real GDP growth. However, in most years real GDP increases. The years of increase are more frequent and the increases large enough that over long periods of time real GDP increases despite the occasional declines. The long-run upward trend in real GDP is due to increases in the labor force
37、 and capital stock and advances in technological knowledge.DIF:2REF:33-1NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Economic growth and inflationMSC:Interpretive2.What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in
38、these variables are to be expected.ANS:Variables that fall along with real GDP include employment, incomes, investment, sales, and home purchases. GDP may be measured as either the production of, expenditures on, or income generated from final goods and services. It follows that any other variable t
39、hat could be used to measure production, expenditures, or income will generally move in the same direction as GDP.DIF:2REF:33-1NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Economic fluctuationsMSC:Interpretive3.What do most economists believe concerning the relation between the price lev
40、el and real output?ANS:Most economists believe that in the long run, real variables are not affected by nominal variables. So, for example, changes in the money supply do not change real variables in the long run. However, most economists believe that nominal variables do change real variables in th
41、e short run. In the short-run prices and wages may be fixed based on the expected price level. If the actual price level differs from the expected price level, real variables are affected.DIF:2REF:33-2NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Long-run equilibrium | Short-run equilibri
42、umMSC:Interpretive4.Make a list of expenditures whose sum equals GDP.ANS:consumption, investment, government expenditures, and net exports.DIF:1REF:33-3NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Aggregate-demand curveMSC:Definitional5.Explain how an increase in the price level changes
43、interest rates. How does this change in interest rates lead to changes in investment and net exports?ANS:When the price level increases, the purchasing power of money held on hand and in bank accounts declines. This decline makes people feel less wealthy so that they lend less. The reduction in lend
44、ing causes the interest rate to rise. The rise in interest rates discourages spending on investment goods so that the aggregate quantity of goods and services demanded decreases. As the interest rate increases, the supply of dollars in the market for foreign-currency exchange falls as people wish to
45、 purchase fewer foreign assets. This makes the dollar appreciate which decreases net exports.DIF:3REF:33-3NAT:AnalyticLOC:Aggregate demand and aggregate supplyTOP:Aggregate-demand curveMSC:Analytical6.Make a list of things that would shift the aggregate demand curve to the right.ANS:Examples (and va
46、riations on examples) in the text include a stock market boom that increases consumption spending, a tax cut that increases consumption, improvements in capital goods such as computers that increase investment, increased optimism about the future of the economy induces increased investment, an investment tax credit, an increase in the money supply, an increase in government defense expenditures, and economic expansions overseas that create increases in net exports.DIF:2REF:33-3NAT:
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