Question 1

During World War II,

Accepted Answer

During World War II, government purchases of goods and services increased significantly, contributing to the war effort and economic mobilization. The other statements are not accurate in the context of the economic changes during the war.

Question 2

During World War II,the economy's production increased about

Accepted Answer

During World War II, the U.S. economy experienced a significant increase in production, approximately doubling, while prices rose by about 20 percent due to increased demand and government spending.

Question 3

In the first few years of the Great Depression,unemployment rose to about

Accepted Answer

In the first few years of the Great Depression, unemployment rose to about 25 percent and prices fell about 22 percent. This was due to a decrease in demand, leading to a decrease in production, and ultimately, a decrease in prices.

Question 4

Suppose that during the Great Depression long-run aggregate supply shifted left.To be consistent with what happened to the price level and output,what would have had to happen to aggregate demand?

Accepted Answer

If long-run aggregate supply shifted left during the Great Depression, it means that the economy's potential output decreased. Therefore, to be consistent with the decrease in output, aggregate demand would have had to shift left by a corresponding amount. However, during the Great Depression, the actual decrease in output and the price level was much greater than the decrease in potential output. This suggests that aggregate demand must have shifted left by more than long-run aggregate supply to explain the observed decrease in output and prices. Thus, the correct answer is B.

Question 5

Which of the following alone can explain the change in the price level and output during World War II?

Accepted Answer

During World War II, increased government spending and production for the war effort led to a rightward shift in aggregate demand, which increased both the price level and output.

Question 6

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

Accepted Answer

If there is a contraction caused by a shift in aggregate supply, it means that the economy is producing less than it could potentially produce. To offset these effects on output, policymakers could use policy to shift aggregate demand to the right. By increasing aggregate demand, they could stimulate spending and therefore increase production levels.

Question 7

A decrease in the availability of an important major resource such as oil shifts

Accepted Answer

A decrease in the availability of an important major resource such as oil would increase the cost of production for many goods and services, meaning that firms would produce fewer goods and services at any given price level. This would cause a leftward shift in the aggregate supply curve.

Question 8

When production costs rise,

Accepted Answer

When production costs rise, the short-run aggregate supply curve shifts to the left because it becomes more expensive for firms to produce goods and services, resulting in a decrease in the quantity that they are willing to supply at any given price level.

Question 9

Suppose that during World War II the long-run aggregate supply curve shifted right.In order for price and output to have changed in the direction they did,what would have to have happened to aggregate demand?

Accepted Answer

The answer of Suppose that during World War II the...

Question 10

An increase in the price level and a reduction in output would result from

Accepted Answer

Bad weather in farm states would reduce the output of agricultural goods, leading to a decrease in aggregate supply. This, in turn, would lead to an increase in the price level and a reduction in output, as the economy moves up along the aggregate demand curve. The other options do not necessarily lead to both an increase in the price level and a reduction in output.

Question 11

Which of the following would cause stagflation?

Accepted Answer

Stagflation is a combination of high inflation and stagnant economic growth. This can occur when aggregate supply shifts left, meaning that the economy's production capacity decreases, while demand remains constant or increases. In this scenario, prices will rise due to the decreased supply, while output and employment will decrease due to the decrease in production capacity.

Question 12

An increase in the price level and a reduction in output would result from

Accepted Answer

A decrease in the supply of an important resource would cause the cost of production to increase, leading to a decrease in output and an increase in the price level. A fall in stock prices, an increase in government expenditures, and an increase in taxes would not necessarily lead to a decrease in output.

Question 13

The economic boom of the early 1940s resulted mostly from

Accepted Answer

The economic boom of the early 1940s was largely a result of increased government expenditures, primarily due to the United States' entry into World War II. The government spent heavily on military production and infrastructure, leading to a surge in economic activity and job creation.

Question 14

Which of the following shifts short-run aggregate supply left?

Accepted Answer

An increase in price expectations can lead to higher wage demands and production costs, reducing short-run aggregate supply.

Question 15

Stagflation exists when prices

Accepted Answer

Stagflation is a rare phenomenon in which there is both high inflation (i.e., prices are rising) and high unemployment. Option A is incorrect because it describes a situation of economic growth, which is not the case in stagflation. Option C is also incorrect because falling prices would typically be accompanied by lower unemployment (as companies can afford to hire more workers with lower costs). Option D is incorrect because falling unemployment would generally lead to higher inflation (as companies compete for a smaller pool of available workers by offering higher wages).

Question 16

Which of the following did not happen during the onset of the Great Depression?

Accepted Answer

During the onset of the Great Depression, the Fed actually conducted contractionary monetary policy by decreasing the money supply, which worsened the economic downturn. Expansionary monetary policy would have involved increasing the money supply to stimulate economic activity.

Question 17

Which of the following by itself is consistent with the directions that the price level and real GDP changed at the onset of the Great Depression?

Accepted Answer

At the onset of the Great Depression, there was a significant decrease in aggregate demand, leading to a lower price level and a reduction in real GDP.

Question 18

Suppose a shift in aggregate demand creates an economic contraction.If policymakers can respond with sufficient speed and precision,they can offset the initial shift by shifting

Accepted Answer

If policymakers can respond with sufficient speed and precision, they can offset the initial shift caused by a decrease in aggregate demand by shifting aggregate demand right. This can be done through policies such as fiscal stimulus, monetary policy or exchange rate interventions. Shifting aggregate supply would not be effective in this scenario as it would not directly address the decrease in demand.

Question 19

If there are floods or droughts or a decrease in the availability of raw materials

Accepted Answer

Floods or droughts can damage crops or affect irrigation, leading to a decrease in output in the short run. A decrease in the availability of raw materials can also decrease output in the short run, as firms may not have access to the necessary inputs to produce goods. Aggregate supply shifting right would indicate an increase in the availability of resources, which is not the case in these scenarios. Prices may also increase in the short run due to the decrease in supply, so choice C is not correct.

Question 20

In the short-run an increase in the costs of production makes

Accepted Answer

An increase in the costs of production will lead to a decrease in the supply of goods as producers will reduce output in response to the higher costs. With lesser supply, the demand for the goods will remain unchanged leading to a rise in prices. Thus, the output will fall and prices will rise.

Quiz 20: Aggregate Demand and Aggregate Supply: Two Causes of Economic Fluctuations

During World War II,

During World War II,the economy's production increased about

In the first few years of the Great Depression,unemployment rose to about

Suppose that during the Great Depression long-run aggregate supply shifted left.To be consistent with what happened to the price level and output,what would have had to happen to aggregate demand?

Which of the following alone can explain the change in the price level and output during World War II?

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

A decrease in the availability of an important major resource such as oil shifts

When production costs rise,

Suppose that during World War II the long-run aggregate supply curve shifted right.In order for price and output to have changed in the direction they did,what would have to have happened to aggregate demand?

An increase in the price level and a reduction in output would result from

Which of the following would cause stagflation?

An increase in the price level and a reduction in output would result from

The economic boom of the early 1940s resulted mostly from

Which of the following shifts short-run aggregate supply left?

Stagflation exists when prices

Which of the following did not happen during the onset of the Great Depression?

Which of the following by itself is consistent with the directions that the price level and real GDP changed at the onset of the Great Depression?

Suppose a shift in aggregate demand creates an economic contraction.If policymakers can respond with sufficient speed and precision,they can offset the initial shift by shifting

If there are floods or droughts or a decrease in the availability of raw materials

In the short-run an increase in the costs of production makes