Question 1

Aggregate demand refers to the

Accepted Answer

A) quantity demanded of all goods and services at various price levels, ceteris paribus. 
B) quantity demanded of all goods and services at a particular price level, ceteris paribus. 
C) quantity demanded of Real GDP at various price levels, ceteris paribus. 
D) various amounts of GDP that are demanded at various price levels, ceteris paribus. 
E) a and c 
A) quantity demanded of all goods and services at various price levels, ceteris paribus. 
B) quantity demanded of all goods and services at a particular price level, ceteris paribus. 
C) quantity demanded of Real GDP at various price levels, ceteris paribus. 
D) various amounts of GDP that are demanded at various price levels, ceteris paribus. 
E) a and c

Question 2

Which of the following best describes how the international trade effect works?

Accepted Answer

A) The price level in the U.S.falls relative to foreign price levels, U.S.goods become relatively less expensive than foreign goods, and both Americans and foreigners buy more U.S.goods. 
B) The price level in the U.S.falls relative to foreign price levels, U.S.goods become relatively more expensive than foreign goods, and both Americans and foreigners buy more U.S.goods. 
C) The price level in the U.S.rises relative to foreign price levels, U.S.goods become relatively more expensive than foreign goods, and both Americans and foreigners buy fewer U.S.goods. 
D) The price level in the U.S.rises relative to foreign price levels, U.S.goods become relatively more expensive than foreign goods, and both Americans and foreigners buy more U.S.goods. 
E) a and c 
A) The price level in the U.S.falls relative to foreign price levels, U.S.goods become relatively less expensive than foreign goods, and both Americans and foreigners buy more U.S.goods. 
B) The price level in the U.S.falls relative to foreign price levels, U.S.goods become relatively more expensive than foreign goods, and both Americans and foreigners buy more U.S.goods. 
C) The price level in the U.S.rises relative to foreign price levels, U.S.goods become relatively more expensive than foreign goods, and both Americans and foreigners buy fewer U.S.goods. 
D) The price level in the U.S.rises relative to foreign price levels, U.S.goods become relatively more expensive than foreign goods, and both Americans and foreigners buy more U.S.goods. 
E) a and c

Question 3

As interest rates rise, the ____________ curve shifts _____________ resulting in a(n) _________________ in the price level and a(n) ________________ in Real GDP.

Accepted Answer

A) AD; leftward; decrease; decrease 
B) AD; rightward; increase; increase 
C) SRAS; rightward; decrease; increase 
D) SRAS; leftward; increase; decrease 
A) AD; leftward; decrease; decrease 
B) AD; rightward; increase; increase 
C) SRAS; rightward; decrease; increase 
D) SRAS; leftward; increase; decrease

Question 4

One reason the AD curve is downward sloping is the __________ effect.

Accepted Answer

A) wage rate 
B) productivity 
C) interest rate 
D) structural 
E) none of the above 
A) wage rate 
B) productivity 
C) interest rate 
D) structural 
E) none of the above

Question 5

Individuals' expectations of lower future prices is a

Accepted Answer

A) rightward shifter of the AD curve. 
B) leftward shifter of the AD curve. 
C) reason for moving up along a given AD curve. 
D) reason for moving down along a given AD curve. 
A) rightward shifter of the AD curve. 
B) leftward shifter of the AD curve. 
C) reason for moving up along a given AD curve. 
D) reason for moving down along a given AD curve.

Question 6

Exhibit 8-2
  
-Refer to Exhibit 8-2. What word (rises or falls) should go in blank (5) and blank (6), respectively, to summarize the resulting impact on short run equilibrium of the given change in the economy?

Accepted Answer

A) rises; rises 
B) falls; falls 
C) rises; falls 
D) falls; rises 
A) rises; rises 
B) falls; falls 
C) rises; falls 
D) falls; rises

Question 7

Suppose the real exchange rate of 105 Japanese yen to the dollar changes to 115 yen to the dollar. In this situation, the dollar has _________________, making Japanese goods __________ expensive for Americans.

Accepted Answer

A) appreciated; less 
B) appreciated; more 
C) depreciated; less 
D) depreciated; more 
A) appreciated; less 
B) appreciated; more 
C) depreciated; less 
D) depreciated; more

Question 8

Explain why the short-run aggregate supply curve (SRAS) is upward sloping, while the long-run aggregate supply (LRAS) curve is a vertical line.

Accepted Answer

The SRAS curve slopes upward because of

Question 9

Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar. In this situation, the dollar has __________________, making American goods __________ expensive for Mexicans.

Accepted Answer

A) appreciated; less 
B) appreciated; more 
C) depreciated; less 
D) depreciated; more 
A) appreciated; less 
B) appreciated; more 
C) depreciated; less 
D) depreciated; more

Question 10

Starting from short-run equilibrium, the following occurs: individuals expect higher (future) incomes and wage rates rise. What is the effect on the price level and Real GDP in the short run?

Accepted Answer

A) The price level rises and Real GDP rises. 
B) The price level falls and Real GDP falls. 
C) The price level rises, but the effect on Real GDP cannot be determined. 
D) Real GDP rises, but the effect on the price level cannot be determined. 
E) Real GDP falls, but the effect on the price level cannot be determined. 
A) The price level rises and Real GDP rises. 
B) The price level falls and Real GDP falls. 
C) The price level rises, but the effect on Real GDP cannot be determined. 
D) Real GDP rises, but the effect on the price level cannot be determined. 
E) Real GDP falls, but the effect on the price level cannot be determined.

Question 11

A short-run aggregate supply curve shows the

Accepted Answer

A) amount of a particular good producers are willing and able to buy at a particular price, ceteris paribus. 
B) real output (Real GDP) producers are willing and able to sell at different price levels, ceteris paribus. 
C) real output (Real GDP) people are willing and able to buy and to sell at different price levels, ceteris paribus. 
D) real output (Real GDP) people are willing and able to buy at different price levels, ceteris paribus. 
A) amount of a particular good producers are willing and able to buy at a particular price, ceteris paribus. 
B) real output (Real GDP) producers are willing and able to sell at different price levels, ceteris paribus. 
C) real output (Real GDP) people are willing and able to buy and to sell at different price levels, ceteris paribus. 
D) real output (Real GDP) people are willing and able to buy at different price levels, ceteris paribus.

Question 12

Unusually good weather that improves crop production and a major oil discovery are both examples of a beneficial supply shock.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following would cause a rightward shift of 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 14

The real balance effect is the change in

Accepted Answer

A) purchasing power that results from a change in income. 
B) the amount of money one has that results from a change in income. 
C) purchasing power that results from a change in the price level. 
D) the amount of money one has that results from a change in the price level. 
E) none of the above 
A) purchasing power that results from a change in income. 
B) the amount of money one has that results from a change in income. 
C) purchasing power that results from a change in the price level. 
D) the amount of money one has that results from a change in the price level. 
E) none of the above

Question 15

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

Accepted Answer

A) Interest rates rise and wage rates fall. 
B) Interest rates rise and there is a beneficial supply shock. 
C) Interest rates rise and labor productivity increases. 
D) Interest rates rise and individuals expect lower (future) incomes. 
E) c and d 
A) Interest rates rise and wage rates fall. 
B) Interest rates rise and there is a beneficial supply shock. 
C) Interest rates rise and labor productivity increases. 
D) Interest rates rise and individuals expect lower (future) incomes. 
E) c and d

Question 16

As the price level rises, ceteris paribus, people holding some of their wealth in monetary form become

Accepted Answer

A) less wealthy and they buy less. 
B) more wealthy and they buy more. 
C) less wealthy and they buy more. 
D) more wealthy and they buy less. 
A) less wealthy and they buy less. 
B) more wealthy and they buy more. 
C) less wealthy and they buy more. 
D) more wealthy and they buy less.

Question 17

If velocity is rising, an increase in one spending component can occur without requiring other spending components to decline.

Accepted Answer

A) True 
 B)False

Question 18

Exhibit 8-2
  
-Refer to Exhibit 8-2. What word (rises or falls) should go in blank (3) and blank (4), respectively, to summarize the resulting impact on short run equilibrium of the given change in the economy?

Accepted Answer

A) rises; rises 
B) falls; falls 
C) rises; falls 
D) falls; rises 
A) rises; rises 
B) falls; falls 
C) rises; falls 
D) falls; rises

Question 19

The short-run aggregate supply curve shows the various amounts of real output that producers are willing to

Accepted Answer

A) sell at different profit levels. 
B) sell at different price levels. 
C) buy at different income levels. 
D) buy at different price levels. 
A) sell at different profit levels. 
B) sell at different price levels. 
C) buy at different income levels. 
D) buy at different price levels.

Question 20

The real balance effect is one of the

Accepted Answer

A) reasons why an AD curve is downward-sloping. 
B) shifters of an AD curve. 
C) reasons why a short-run aggregate supply curve can be derived. 
D) shifters of a short-run aggregate supply curve. 
A) reasons why an AD curve is downward-sloping. 
B) shifters of an AD curve. 
C) reasons why a short-run aggregate supply curve can be derived. 
D) shifters of a short-run aggregate supply curve.

Exam 8: Aggregate Demand and Aggregate Supply

Aggregate demand refers to the

Which of the following best describes how the international trade effect works?

As interest rates rise, the ____________ curve shifts _____________ resulting in a(n) _________________ in the price level and a(n) ________________ in Real GDP.

One reason the AD curve is downward sloping is the __________ effect.

Individuals' expectations of lower future prices is a

Exhibit 8-2 -Refer to Exhibit 8-2. What word (rises or falls) should go in blank (5) and blank (6), respectively, to summarize the resulting impact on short run equilibrium of the given change in the economy?

Suppose the real exchange rate of 105 Japanese yen to the dollar changes to 115 yen to the dollar. In this situation, the dollar has _________________, making Japanese goods __________ expensive for Americans.

Explain why the short-run aggregate supply curve (SRAS) is upward sloping, while the long-run aggregate supply (LRAS) curve is a vertical line.

Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar. In this situation, the dollar has __________________, making American goods __________ expensive for Mexicans.

Starting from short-run equilibrium, the following occurs: individuals expect higher (future) incomes and wage rates rise. What is the effect on the price level and Real GDP in the short run?

A short-run aggregate supply curve shows the

Unusually good weather that improves crop production and a major oil discovery are both examples of a beneficial supply shock.

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

The real balance effect is the change in

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

As the price level rises, ceteris paribus, people holding some of their wealth in monetary form become

If velocity is rising, an increase in one spending component can occur without requiring other spending components to decline.

Exhibit 8-2 -Refer to Exhibit 8-2. What word (rises or falls) should go in blank (3) and blank (4), respectively, to summarize the resulting impact on short run equilibrium of the given change in the economy?

The short-run aggregate supply curve shows the various amounts of real output that producers are willing to

The real balance effect is one of 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 Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

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Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

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Filters

As interest rates rise, the ______ curve shifts _ resulting in a(n) _ in the price level and a(n) ______ in Real GDP.

Suppose the real exchange rate of 105 Japanese yen to the dollar changes to 115 yen to the dollar. In this situation, the dollar has _______, making Japanese goods expensive for Americans.

Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar. In this situation, the dollar has ________, making American goods expensive for Mexicans.