Question 1

A falling interest rate affects the demand for consumer __________ and shifts the AD curve to the __________.

Accepted Answer

A) nondurables; right 
B) nondurables; left 
C) durables; right 
D) durables; left 
A) nondurables; right 
B) nondurables; left 
C) durables; right 
D) durables; left

Question 2

Which of the following is consistent with the sticky-wage explanation of the upward-sloping SRAS curve?

Accepted Answer

A) The price level rises, the real wage falls, and the quantity demanded of labor declines. 
B) The price level falls, the real wage rises, and the quantity demanded of labor falls. 
C) The price level rises, the real wage rises, and the quantity demanded of labor falls. 
D) The nominal wage rises, the real wage rises, and the quantity demanded and supplied of labor rise. 
E) a and b 
A) The price level rises, the real wage falls, and the quantity demanded of labor declines. 
B) The price level falls, the real wage rises, and the quantity demanded of labor falls. 
C) The price level rises, the real wage rises, and the quantity demanded of labor falls. 
D) The nominal wage rises, the real wage rises, and the quantity demanded and supplied of labor rise. 
E) a and b

Question 3

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 4

Which of the following will cause a movement from one point on an AD curve to another point on the same AD curve?

Accepted Answer

A) a change in consumption 
B) a change in government expenditures 
C) a change in net exports 
D) a change in the price level 
E) all of the above 
A) a change in consumption 
B) a change in government expenditures 
C) a change in net exports 
D) a change in the price level 
E) all of the above

Question 5

In short-run equilibrium, it is always true that

Accepted Answer

A) quantity demanded of Real GDP = quantity supplied of Real GDP = Natural Real GDP. 
B) quantity demanded of Real GDP > quantity supplied of Real GDP. 
C) quantity demanded of Real GDP = quantity supplied of Real GDP. 
D) a and b 
E) There is not enough information to answer the question. 
A) quantity demanded of Real GDP = quantity supplied of Real GDP = Natural Real GDP. 
B) quantity demanded of Real GDP > quantity supplied of Real GDP. 
C) quantity demanded of Real GDP = quantity supplied of Real GDP. 
D) a and b 
E) There is not enough information to answer the question.

Question 6

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 7

A change in the quantity demanded of Real GDP is graphically represented as a

Accepted Answer

A) shift in the AD curve. 
B) movement from one point on the AD curve to another point on the same curve. 
C) movement from a point on the AD curve to a point on the SRAS curve. 
D) shift in the real balance effect curve. 
E) shift in the interest rate effect curve. 
A) shift in the AD curve. 
B) movement from one point on the AD curve to another point on the same curve. 
C) movement from a point on the AD curve to a point on the SRAS curve. 
D) shift in the real balance effect curve. 
E) shift in the interest rate effect curve.

Question 8

Which set of changes is definitely predicted to raise Real GDP in the short run?

Accepted Answer

A) Wealth increases and there is an adverse supply shock. 
B) Individuals expect higher (future) incomes and wage rates fall. 
C) Business taxes rise and wage rates fall. 
D) The U.S.dollar appreciates and there is a beneficial supply shock. 
E) none of the above 
A) Wealth increases and there is an adverse supply shock. 
B) Individuals expect higher (future) incomes and wage rates fall. 
C) Business taxes rise and wage rates fall. 
D) The U.S.dollar appreciates and there is a beneficial supply shock. 
E) none of the above

Question 9

A rise in wage rates

Accepted Answer

A) causes the AD curve to shift leftward. 
B) causes the short-run aggregate supply (SRAS) curve to shift rightward. 
C) does not affect the present position of the SRAS curve. 
D) causes the AD curve to shift rightward. 
E) causes the SRAS curve to shift leftward. 
A) causes the AD curve to shift leftward. 
B) causes the short-run aggregate supply (SRAS) curve to shift rightward. 
C) does not affect the present position of the SRAS curve. 
D) causes the AD curve to shift rightward. 
E) causes the SRAS curve to shift leftward.

Question 10

Exhibit 8-3
  
-Refer to Exhibit 8-3. A movement from point A to point B on AD1 would have been the result of

Accepted Answer

A) a decrease in the price level. 
B) an increase in the price level. 
C) an increase in income taxes. 
D) a decrease in income taxes. 
A) a decrease in the price level. 
B) an increase in the price level. 
C) an increase in income taxes. 
D) a decrease in income taxes.

Question 11

Part of the story of the interest rate effect is that a lower price level causes __________ in the demand for credit, which then causes the interest rate to __________.

Accepted Answer

A) a decrease; fall 
B) a decrease; rise 
C) an increase; fall 
D) an increase; rise 
A) a decrease; fall 
B) a decrease; rise 
C) an increase; fall 
D) an increase; rise

Question 12

Exhibit 8-1
  
-Refer to Exhibit 8-1. Assume the economy is originally in equilibrium at point A. If the price of oil rises, at which point is the economy most likely to end up in the short run?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 13

Suppose that C = $900, I = $300, G = $200, NX = $100, and that the money supply is equal to $300. 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) 5; must 
B) 5; does not 
C) 3; must 
D) 3; does not 
A) 5; must 
B) 5; does not 
C) 3; must 
D) 3; does not

Question 14

A decrease in the price of a nonlabor input such as electricity will cause

Accepted Answer

A) a movement down the SRAS curve. 
B) a movement up the SRAS curve. 
C) a leftward shift in the SRAS curve. 
D) a rightward shift in the SRAS curve. 
E) no change regarding the SRAS curve. 
A) a movement down the SRAS curve. 
B) a movement up the SRAS curve. 
C) a leftward shift in the SRAS curve. 
D) a rightward shift in the SRAS curve. 
E) no change regarding the SRAS curve.

Question 15

Exhibit 8-3
  
-Refer to Exhibit 8-3. Which of the following could not have caused a shift in aggregate demand from AD1 to AD2?

Accepted Answer

A) a change in the price level 
B) an increase in wealth 
C) an increase in foreign real national income 
D) a decrease in personal income taxes 
E) a decrease in business taxes 
A) a change in the price level 
B) an increase in wealth 
C) an increase in foreign real national income 
D) a decrease in personal income taxes 
E) a decrease in business taxes

Question 16

A simultaneous rise in aggregate demand and fall in short-run aggregate supply will definitely

Accepted Answer

A) raise the price level, but there is not enough information to know how Real GDP will change. 
B) lower Real GDP, but there is not enough information to know how the price level will change. 
C) raise the price level and Real GDP. 
D) raise Real GDP, but there is not enough information to know how the price level will change. 
E) raise the price level and lower Real GDP. 
A) raise the price level, but there is not enough information to know how Real GDP will change. 
B) lower Real GDP, but there is not enough information to know how the price level will change. 
C) raise the price level and Real GDP. 
D) raise Real GDP, but there is not enough information to know how the price level will change. 
E) raise the price level and lower Real GDP.

Question 17

The real balance effect describes the change in

Accepted Answer

A) checking account balances that occur when the money supply increases or decreases. 
B) the value of physical assets (e.g., houses) that results from a change in the price level. 
C) the output producers produce as they attempt to balance their production in response to changes in consumers' demand. 
D) the value of cash holdings that results from a change in the price level. 
E) the balance of cash holdings that results from a change in the amount of income earned. 
A) checking account balances that occur when the money supply increases or decreases. 
B) the value of physical assets (e.g., houses) that results from a change in the price level. 
C) the output producers produce as they attempt to balance their production in response to changes in consumers' demand. 
D) the value of cash holdings that results from a change in the price level. 
E) the balance of cash holdings that results from a change in the amount of income earned.

Question 18

An increase in short-run aggregate supply is

Accepted Answer

A) the result of an increase in the price level. 
B) represented by a movement from one point to another up along the existing SRAS curve. 
C) represented by a rightward shift in the SRAS curve. 
D) both a and b 
E) both a and C 
A) the result of an increase in the price level. 
B) represented by a movement from one point to another up along the existing SRAS curve. 
C) represented by a rightward shift in the SRAS curve. 
D) both a and b 
E) both a and C

Question 19

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 20

The interest rate effect, the real balance effect, and the international trade effect all begin with a change in the price level.

Accepted Answer

A) True 
 B)False

Exam 8: Aggregate Demand and Aggregate Supply

A falling interest rate affects the demand for consumer __________ and shifts the AD curve to the __________.

Which of the following is consistent with the sticky-wage explanation of the upward-sloping SRAS curve?

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

Which of the following will cause a movement from one point on an AD curve to another point on the same AD curve?

In short-run equilibrium, it is always true that

Which of the following statements is false?

A change in the quantity demanded of Real GDP is graphically represented as a

Which set of changes is definitely predicted to raise Real GDP in the short run?

A rise in wage rates

Exhibit 8-3 -Refer to Exhibit 8-3. A movement from point A to point B on AD1 would have been the result of

Part of the story of the interest rate effect is that a lower price level causes __________ in the demand for credit, which then causes the interest rate to __________.

Exhibit 8-1 -Refer to Exhibit 8-1. Assume the economy is originally in equilibrium at point A. If the price of oil rises, at which point is the economy most likely to end up in the short run?

A decrease in the price of a nonlabor input such as electricity will cause

Exhibit 8-3 -Refer to Exhibit 8-3. Which of the following could not have caused a shift in aggregate demand from AD1 to AD2?

A simultaneous rise in aggregate demand and fall in short-run aggregate supply will definitely

The real balance effect describes the change in

An increase in short-run aggregate supply is

Which of the following statements is false?

The interest rate effect, the real balance effect, and the international trade effect all begin with a change in the price level.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II 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

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice 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

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

A falling interest rate affects the demand for consumer and shifts the AD curve to the .

Exhibit 8-3 -Refer to Exhibit 8-3. A movement from point A to point B on AD₁ would have been the result of

Part of the story of the interest rate effect is that a lower price level causes in the demand for credit, which then causes the interest rate to .

Exhibit 8-3 -Refer to Exhibit 8-3. Which of the following could not have caused a shift in aggregate demand from AD₁ to AD₂?