Aggregate Demand and Supply Quiz

According to classical macroeconomic theory, changes in the money supply affect

• nominal variables and real variables.

• nominal variables, but not real variables.

• real variables, but not nominal variables.

• neither nominal nor real variables.

The classical model is appropriate for analysis of the economy in the

• long run, since evidence indicates that money is not neutral in the long run.

• long run, since real and nominal variables are essentially determined separately in the long run.

• short run, provided money is not neutral.

• short run, provided real and nominal variables are highly intertwined.

Most economists believe that classical macroeconomic theory is a good description of the economy

• in neither the short nor long run.

• in the short run and in the long run.

• in the short run, but not in the long run.

• in the long run, but not in the short run.

The model of short-run economic fluctuations focuses on the price level and

• real GDP.

• economic growth.

• the neutrality of money.

• None of the above is correct.

Aggregate demand includes

• only the quantity of goods and services households want to buy.

• only the quantity of goods and services households and firms want to buy.

• only the quantity of goods and services households, firms, and the government want to buy.

• the quantity of goods and services households, firms, the government, and customer abroad want to buy.

Which of the following is included in the aggregate demand for goods and services?

• consumption demand

• investment demand

• net exports

• All of the above are correct.

If the price level falls, the real value of a dollar

• rises, so people will want to buy more.

• rises, so people will want to buy less.

• falls, so people will want to buy more.

• falls, so people will want to buy less.

The aggregate quantity of goods and services demanded changes as the price level rises because

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

• real wealth falls, interest rates rise, and the dollar depreciates.

• real wealth rises, interest rates fall, and the dollar appreciates.

• real wealth rises, interest rates fall, and the dollar depreciates.

The aggregate supply curve is upward sloping in

• the short and long run.

• neither the short nor long run.

• the long run, but not the short run.

• the short run, but not the long run.

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

• production is more profitable, and employment rises.

• production is more profitable and employment falls.

• production is less profitable, and employment rises.

• production is less profitable and employment falls.