Macro Final (15)

Most economists believe that money neutrality a. does not hold in the short run. b. does not hold in the long run. c. does not hold in either the short run or long run. d. holds in the short run and the long run

a. does not hold in the short run.

Other things the same, if the price level falls, people a. increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. b. increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. c. decrease foreign bond purchases, so the supply of dollars in market for foreign-currency exchange increases. d. decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.

a. increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases.

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire a. increased consumption, which shifts the aggregate-demand curve right. b. increased consumption, which shifts the aggregate-demand curve left. c. decreased consumption, which shifts the aggregate-demand curve right. d. decreased consumption, which shifts the aggregate-demand curve left.

a. increased consumption, which shifts the aggregate-demand curve right.

When the money supply increases a. interest rates fall and so aggregate demand shifts right. b. interest rates fall and so aggregate demand shifts left. c. interest rates rise and so aggregate demand shifts right. d. interest rates rise and so aggregate demand shifts left.

a. interest rates fall and so aggregate demand shifts right.

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.

a. is determined by resource usage and technology.

When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is a. less than it desires and increase its production. b. less than it desires and decrease its production. c. more than it desires and increase its production. d. less than it desires and decrease its production.

a. less than it desires and increase its production.

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected, a. production is more profitable and employment rises. b. production is more profitable and employment falls. c. production is less profitable and employment rises. d. production is less profitable and employment falls.

a. production is more profitable and employment rises.

The aggregate quantity of goods and services demanded changes as the price level rises because a. real wealth falls, interest rates rise, and the dollar appreciates. b. real wealth falls, interest rates rise, and the dollar depreciates. c. real wealth rises, interest rates fall, and the dollar appreciates. d. real wealth rises, interest rates fall, and the dollar depreciates.

a. real wealth falls, interest rates rise, and the dollar appreciates.

Most economists use the aggregate demand and aggregate supply model primarily to analyze a. short-run fluctuations in the economy. b. the effects of macroeconomic policy on the prices of individual goods. c. the long-run effects of international trade policies. d. productivity and economic growth.

a. short-run fluctuations in the economy.

When the Fed buys bonds a. the supply of money increases and so aggregate demand shifts right. b. the supply of money decreases and so aggregate demand shifts left. c. the supply of money decreases and so aggregate demand shifts right. d. the supply of money increases and so aggregate demand shifts left.

a. the supply of money increases and so aggregate demand shifts right.

When the price level falls the quantity of a. consumption goods demanded rises, while the quantity of net exports demanded falls. b. consumption goods demanded and the quantity of net exports demanded both rise. c. consumption goods demanded and the quantity of net exports demanded both fall. d. consumption goods demanded falls, while the quantity of net exports demand rises.

b. consumption goods demanded and the quantity of net exports demanded both rise.

Other things the same, if the price level rises, then domestic interest rates a. rise, so domestic residents will want to hold more foreign bonds. b. rise, so domestic residents will want to hold fewer foreign bonds. c. fall, so domestic residents will want to hold more foreign bonds. d. fall, so domestic residents will want to hold fewer foreign bonds.

b. rise, so domestic residents will want to hold fewer foreign bonds.

Other things the same, when the price level rises, interest rates a. rise, so firms increase investment. b. rise, so firms decrease investment. c. fall, so firms increase investment. d. fall, so firms decrease investment.

b. rise, so firms decrease investment.

As the price level falls a. people will want to buy more bonds, so the interest rate rises. b. people will want to buy fewer bonds, so the interest rate falls. c. people will want to buy more bonds, so the interest rate falls. d. people will want to buy fewer bonds, so the interest rate rises

c. people will want to buy more bonds, so the interest rate falls.

According to classical macroeconomic theory, changes in the money supply affect a. real GDP and the price level. b. real GDP but not the price level. c. the price level, but not real GDP. d. neither the price level nor real GDP

c. the price level, but not real GDP.

Which of the following effects helps to explain the slope of the aggregate-demand curve? a. the exchange-rate effect b. the wealth effect c. the interest-rate effect d. All of the above are correct.

d. All of the above are correct.

A decrease in the price level a. increases the quantity of goods and services supplied in the short run. b. decreases the quantity of goods and services supplied in the long run. c. decreases the quantity of goods and services demanded. d. increases the quantity of goods and services demanded.

d. increases the quantity of goods and services demanded.

Other things the same, a decrease in the price level causes real wealth to a. fall, interest rates to fall, and the dollar to appreciate. b. fall, interest rates to rise, and the dollar to depreciate. c. rise, interest rates to rise, and the dollar to appreciate. d. rise, interest rates to fall, and the dollar to depreciate.

d. rise, interest rates to fall, and the dollar to depreciate.

As the price level rises, the exchange rate a. falls, so exports rise and imports fall. b. falls, so exports fall and imports rise. c. rises, so exports rise and imports fall. d. rises, so exports fall and imports rise.

d. rises, so exports fall and imports rise.

Other things the same, a decrease in the price level motivates people to hold a. less money, so they lend less, and the interest rate rises. b. less money, so they lend more, and the interest rate falls. c. more money, so they lend more, and the interest rate rises. d. more money, so they lend less, and the interest rate falls

b. less money, so they lend more, and the interest rate falls.

The classical model is the appropriate model for analysis of the economy in the a. long run, because evidence indicates that money is not neutral in the long run. b. long run, because real and nominal variables are essentially determined separately in the long run. c. short run, because money is neutral in the short run. d. short run, because real and nominal variables are not highly intertwined in the short run.

b. long run, because real and nominal variables are essentially determined separately in the long run.

Recessions in Canada and Mexico would cause a. the U.S. price level and real GDP to rise. b. the U.S. price level and real GDP to fall. c. the U.S. price level to rise and real GDP to fall. d. the U.S. price level to fall and real GDP to rise.

b. the U.S. price level and real GDP to fall.

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.

b. there is a natural disaster.

Which of the following explains why production rises in most years? a. increases in the labor force b. increases in the capital stock c. advances in technological knowledge d. All of the above are correct.

d. All of the above are correct.