Question 1

Which of the following statements is false?

Accepted Answer

A)  Some prices in an economy adjust faster than other prices. 
B)  Aggregate demand curves slope downward. 
C)  Firms may not adjust their prices immediately because they may be unable to figure out whether a decline in demand is temporary or permanent. 
D)  The absolute price of a good is the dollar or money price of the good. 
E)  none of the above 
A)  Some prices in an economy adjust faster than other prices. 
B)  Aggregate demand curves slope downward. 
C)  Firms may not adjust their prices immediately because they may be unable to figure out whether a decline in demand is temporary or permanent. 
D)  The absolute price of a good is the dollar or money price of the good. 
E)  none of the above

Question 2

Which of the following statements is false?

Accepted Answer

A)  The exchange rate is the price of one (country's) currency in terms of another (country's) currency. 
B)  A currency has appreciated in value if more of a foreign currency is needed to buy it. 
C)  A change in the money supply can change aggregate demand. 
D)  A change in business taxes can change investment, which can change aggregate demand. 
E)  none of the above 
A)  The exchange rate is the price of one (country's) currency in terms of another (country's) currency. 
B)  A currency has appreciated in value if more of a foreign currency is needed to buy it. 
C)  A change in the money supply can change aggregate demand. 
D)  A change in business taxes can change investment, which can change aggregate demand. 
E)  none of the above

Question 3

Which of the following is false?

Accepted Answer

A)  Aggregate demand is a specific dollar amount, such as $400 billion. 
B)  At a given price level, anything that changes total expenditures changes aggregate demand. 
C)  Total expenditures rises if consumption rises, ceteris paribus. 
D)  Total expenditures rises if investment spending rises, ceteris paribus. 
A)  Aggregate demand is a specific dollar amount, such as $400 billion. 
B)  At a given price level, anything that changes total expenditures changes aggregate demand. 
C)  Total expenditures rises if consumption rises, ceteris paribus. 
D)  Total expenditures rises if investment spending rises, ceteris paribus.

Question 4

A lower income tax rate __________ consumption,causing a __________ the AD curve.

Accepted Answer

A)  stimulates; rightward shift of 
B)  stimulates; movement down along 
C)  depresses; leftward shift of 
D)  depresses; movement up along 
A)  stimulates; rightward shift of 
B)  stimulates; movement down along 
C)  depresses; leftward shift of 
D)  depresses; movement up along

Question 5

Define the term subprime loan. Give a brief history of how the incidence of subprime mortgage loans changed between 1995 and 2003,and explain the factors that contributed to a number of subprime borrowers being unable to repay their loans in recent years.

Accepted Answer

The term subprime loan refers to a loan

Question 6

Assume that the economy is currently in short-run equilibrium,then personal income taxes decline.Describe the correct sequence of events that happen as the economy adjusts to a new short-run equilibrium (be sure to state what the impact would be on the price level and Real GDP).

Accepted Answer

As personal income taxes decline,househo

Question 7

Which of the following would cause a rightward shift in the AD curve?

Accepted Answer

A)  an increase in the price level 
B)  a decrease in the price level 
C)  an increase in imports 
D)  a decrease in the quantity of money available in the economy 
E)  an increase in government purchases of goods and services 
A)  an increase in the price level 
B)  a decrease in the price level 
C)  an increase in imports 
D)  a decrease in the quantity of money available in the economy 
E)  an increase in government purchases of goods and services

Question 8

Assume that the economy is currently in short-run equilibrium,then the dollar appreciates in the foreign exchange market.Describe the correct sequence of events that happen as the economy adjusts to a new short-run equilibrium (be sure to state what the impact would be on the price level and Real GDP).

Accepted Answer

As the dollar appreciates,foreign goods

Question 9

Suppose the following: (1)the wage rate falls,(2)business taxes decline,(3)any change in SRAS is greater than any change in AD.Based on this information,in the short run Real GDP will __________ and the price level will __________.

Accepted Answer

A)  rise; rise 
B)  fall; rise 
C)  fall; fall 
D)  rise; fall 
E)  none of the above 
A)  rise; rise 
B)  fall; rise 
C)  fall; fall 
D)  rise; fall 
E)  none of the above

Question 10

Which of the following statements represents a correct and sequentially accurate economic explanation?

Accepted Answer

A)  If government purchases rise, total expenditures on goods and services rises, and the AD curve shifts leftward. 
B)  If government purchases rise, total expenditures on goods and services rises, and the AD curve shifts rightward. 
C)  If consumption rises, total expenditures on goods and services rises, and the AD curve shifts rightward. 
D)  If consumption rises, total expenditures on goods and services rises, and the quantity demanded of Real GDP rises. 
E)  b and c 
A)  If government purchases rise, total expenditures on goods and services rises, and the AD curve shifts leftward. 
B)  If government purchases rise, total expenditures on goods and services rises, and the AD curve shifts rightward. 
C)  If consumption rises, total expenditures on goods and services rises, and the AD curve shifts rightward. 
D)  If consumption rises, total expenditures on goods and services rises, and the quantity demanded of Real GDP rises. 
E)  b and c

Question 11

Suppose that C = $700,I = $200,G = $200,NX = $100,and that the money supply is equal to $400. Based upon these assumptions,velocity is equal to ________________. If consumption and velocity both rise beyond their initial levels,then it follows that another component of spending ___________ necessarily fall.

Accepted Answer

A)  3; must 
B)  3; does not 
C)  4; must 
D)  4; does not 
A)  3; must 
B)  3; does not 
C)  4; must 
D)  4; does not

Question 12

If consumption changes because of a change in the price level,then the

Accepted Answer

A)  economy moves from one point on an AD curve to another point on the same curve. 
B)  AD curve shifts. 
C)  economy moves from one point on a SRAS curve to another point on the same curve. 
D)  SRAS curve shifts. 
E)  none of the above 
A)  economy moves from one point on an AD curve to another point on the same curve. 
B)  AD curve shifts. 
C)  economy moves from one point on a SRAS curve to another point on the same curve. 
D)  SRAS curve shifts. 
E)  none of the above

Question 13

An increase in the price of nonlabor inputs

Accepted Answer

A)  shifts the AD curve leftward. 
B)  shifts the SRAS curve leftward. 
C)  is the same thing as a beneficial supply shock. 
D)  shifts the AD curve rightward. 
E)  shifts the SRAS curve rightward. 
A)  shifts the AD curve leftward. 
B)  shifts the SRAS curve leftward. 
C)  is the same thing as a beneficial supply shock. 
D)  shifts the AD curve rightward. 
E)  shifts the SRAS curve rightward.

Question 14

The short-run aggregate supply curve is ________ and the long-run aggregate supply curve is _________.

Accepted Answer

A)  upward sloping; horizontal 
B)  vertical; upward sloping 
C)  vertical; horizontal 
D)  upward sloping; vertical 
E)  none of the above 
A)  upward sloping; horizontal 
B)  vertical; upward sloping 
C)  vertical; horizontal 
D)  upward sloping; vertical 
E)  none of the above

Question 15

In the short run,a decrease in wage rates,ceteris paribus,shifts the

Accepted Answer

A)  AD curve to the right, causing equilibrium price level to rise and equilibrium Real GDP to increase. 
B)  AD curve to the left, causing equilibrium price level to fall and equilibrium Real GDP to decrease. 
C)  SRAS curve to the right, causing equilibrium price level to fall and equilibrium Real GDP to increase. 
D)  SRAS curve to the left, causing equilibrium price level to rise and equilibrium Real GDP to decrease. 
A)  AD curve to the right, causing equilibrium price level to rise and equilibrium Real GDP to increase. 
B)  AD curve to the left, causing equilibrium price level to fall and equilibrium Real GDP to decrease. 
C)  SRAS curve to the right, causing equilibrium price level to fall and equilibrium Real GDP to increase. 
D)  SRAS curve to the left, causing equilibrium price level to rise and equilibrium Real GDP to decrease.

Question 16

The product of ____________________ and _________________ is equal to the total amount of spending in an economy.

Accepted Answer

A)  the money supply; the price level 
B)  velocity; the price level 
C)  the money supply; velocity 
D)  velocity; the level of output 
A)  the money supply; the price level 
B)  velocity; the price level 
C)  the money supply; velocity 
D)  velocity; the level of output

Question 17

As the interest rate rises,businesses invest __________ and the AD curve shifts to the __________.

Accepted Answer

A)  more; right 
B)  more; left 
C)  less; right 
D)  less; left 
A)  more; right 
B)  more; left 
C)  less; right 
D)  less; left

Question 18

A change in Real GDP in the short run can be brought about by a change in

Accepted Answer

A)  the exchange rate. 
B)  labor productivity. 
C)  expectations of future sales. 
D)  wealth. 
E)  all of the above 
A)  the exchange rate. 
B)  labor productivity. 
C)  expectations of future sales. 
D)  wealth. 
E)  all of the above

Question 19

Suppose consumption increases at each price level.As a result,aggregate demand __________,and the AD curve shifts __________.

Accepted Answer

A)  increases; leftward 
B)  decreases; leftward 
C)  increases; rightward 
D)  decreases; rightward 
A)  increases; leftward 
B)  decreases; leftward 
C)  increases; rightward 
D)  decreases; rightward

Question 20

If consumption changes because of a change in a factor other than the price level,then the

Accepted Answer

A)  economy moves from one point on an AD curve to another point on the same curve. 
B)  AD curve shifts. 
C)  economy moves from one point on a short-run aggregate supply (SRAS) curve to another point on the same curve. 
D)  SRAS curve shifts. 
E)  none of the above 
A)  economy moves from one point on an AD curve to another point on the same curve. 
B)  AD curve shifts. 
C)  economy moves from one point on a short-run aggregate supply (SRAS) curve to another point on the same curve. 
D)  SRAS curve shifts. 
E)  none of the above

Exam 8: Aggregate Demand and Aggregate Supply

Which of the following statements is false?

Which of the following statements is false?

Which of the following is false?

A lower income tax rate __________ consumption,causing a __________ the AD curve.

Define the term subprime loan. Give a brief history of how the incidence of subprime mortgage loans changed between 1995 and 2003,and explain the factors that contributed to a number of subprime borrowers being unable to repay their loans in recent years.

Assume that the economy is currently in short-run equilibrium,then personal income taxes decline.Describe the correct sequence of events that happen as the economy adjusts to a new short-run equilibrium (be sure to state what the impact would be on the price level and Real GDP).

Which of the following would cause a rightward shift in the AD curve?

Suppose the following: (1)the wage rate falls,(2)business taxes decline,(3)any change in SRAS is greater than any change in AD.Based on this information,in the short run Real GDP will __________ and the price level will __________.

Which of the following statements represents a correct and sequentially accurate economic explanation?

If consumption changes because of a change in the price level,then the

An increase in the price of nonlabor inputs

The short-run aggregate supply curve is ________ and the long-run aggregate supply curve is _________.

In the short run,a decrease in wage rates,ceteris paribus,shifts the

The product of ____________________ and _________________ is equal to the total amount of spending in an economy.

As the interest rate rises,businesses invest __________ and the AD curve shifts to the __________.

A change in Real GDP in the short run can be brought about by a change in

Suppose consumption increases at each price level.As a result,aggregate demand __________,and the AD curve shifts __________.

If consumption changes because of a change in a factor other than the price level,then the

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

A lower income tax rate consumption,causing a the AD curve.

Suppose the following: (1)the wage rate falls,(2)business taxes decline,(3)any change in SRAS is greater than any change in AD.Based on this information,in the short run Real GDP will and the price level will .

The short-run aggregate supply curve is and the long-run aggregate supply curve is _.

The product of ____ and _ is equal to the total amount of spending in an economy.

As the interest rate rises,businesses invest and the AD curve shifts to the .

Suppose consumption increases at each price level.As a result,aggregate demand ,and the AD curve shifts .