Chapter 33
Aggregate Demand and Aggregate Supply
TRUE/FALSE
1. According to classical macroeconomic theory, changes in the money supply change nominal but not real
variables.
ANS: T DIF: 1 REF: 33-2
NAT: Analytic LOC: Aggregate demand and aggregate supply
TOP: Classical economics MSC: Definitional
2. Because economists understand what things change GDP, they can predict recessions with a fair amount of
accuracy.
ANS: F DIF: 1 REF: 33-1
NAT: Analytic LOC: Aggregate demand and aggregate supply
TOP: Economic fluctuations MSC: Analytical
3. Most macroeconomic variables that measure some type of income, spending, or production fluctuate closely
together.
ANS: T DIF: 1 REF: 33-1
NAT: Analytic LOC: Aggregate demand and aggregate supply
TOP: Economic fluctuations MSC: Interpretive
4. Like real GDP, investment fluctuates, but it fluctuates much less than real GDP..
ANS: F DIF: 1 REF: 33-1
NAT: Analytic LOC: Aggregate demand and aggregate supply
TOP: Economic fluctuations | Investment MSC: Definitional
5. When output rises, unemployment falls.
ANS: T DIF: 1 REF: 33-1
NAT: Analytic LOC: Aggregate demand and aggregate supply
TOP: Economic fluctuations | Unemployment MSC: Definitional
6. An increase in the money supply causes output to rise in the long run.
ANS: F DIF: 1 REF: 33-2
NAT: Analytic LOC: Aggregate demand and aggregate supply
TOP: Monetary neutrality MSC: Definitional
7. Most economists believe that classical theory describes the world in the short run but not in the long run. ANS: F DIF: 1 REF: 33-2
NAT: Analytic LOC: Aggregate demand and aggregate supply
TOP: Classical dichotomy MSC: Interpretive
8. A change in the money supply changes only nominal variables in the long run.
ANS: T DIF: 1 REF: 33-2
NAT: Analytic LOC: Aggregate demand and aggregate supply
TOP: Monetary neutrality MSC: Definitional
9. The explanations for the slopes of the aggregate 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: F DIF: 1 REF: 33-2
NAT: Analytic LOC: Aggregate demand and aggregate supply
TOP: Aggregate demand slope | Short-run aggregate supply slope
MSC: Definitional
10. 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: T DIF: 2 REF: 33-2
NAT: Analytic LOC: Aggregate demand and aggregate supply
TOP: Aggregate-demand curve MSC: Definitional
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