Question 1

-In the above figure, if the price level is 150

Accepted Answer

A) total planned production exceeds total expenditures. 
B) total expenditures exceed total planned expenditures. 
C) total planned production equals total expenditures. 
D) total planned production is less than total expenditures. 
A) total planned production exceeds total expenditures. 
B) total expenditures exceed total planned expenditures. 
C) total planned production equals total expenditures. 
D) total planned production is less than total expenditures.

Question 2

The aggregate demand curve gives the

Accepted Answer

A) planned purchases for all goods and services in the economy, holding other things such as the price level constant. 
B) planned purchase rates for all goods and services in the economy at various price levels. 
C) demand for goods and services by the government at various price levels. 
D) amount of all goods everyone wants to buy at various income levels. 
A) planned purchases for all goods and services in the economy, holding other things such as the price level constant. 
B) planned purchase rates for all goods and services in the economy at various price levels. 
C) demand for goods and services by the government at various price levels. 
D) amount of all goods everyone wants to buy at various income levels.

Question 3

If aggregate demand is stable and there is economic growth, the economy will experience

Accepted Answer

A) secular degeneration. 
B) secular deflation. 
C) secular decline. 
D) secular depreciation. 
A) secular degeneration. 
B) secular deflation. 
C) secular decline. 
D) secular depreciation.

Question 4

A fall in the price level

Accepted Answer

A) increases the real value of money balances, which causes borrowing to decrease, leading to a decrease in investment and total planned real expenditures. 
B) causes exports to rise and imports to fall, leading to an increase in total planned real expenditures. 
C) leads to an increase in total planned real expenditures because of the indirect effect. 
D) causes total planned real expenditures to increase as long as the fall is less than the fall in the price level in other countries. 
A) increases the real value of money balances, which causes borrowing to decrease, leading to a decrease in investment and total planned real expenditures. 
B) causes exports to rise and imports to fall, leading to an increase in total planned real expenditures. 
C) leads to an increase in total planned real expenditures because of the indirect effect. 
D) causes total planned real expenditures to increase as long as the fall is less than the fall in the price level in other countries.

Question 5

What information is provided by the aggregate demand curve?

Accepted Answer

The aggregate demand curve relates total

Question 6

When a higher price level generates an increase in the interest rate that induces consumers to borrow less and buy less, this chain of events is referred to as

Accepted Answer

A) the real-balance effect. 
B) the interest rate effect. 
C) the open economy effect. 
D) the price level effect. 
A) the real-balance effect. 
B) the interest rate effect. 
C) the open economy effect. 
D) the price level effect.

Question 7

Which of the following is the main cause of the persistent inflation that we have experienced in the United States?

Accepted Answer

A) supply-side inflationary factors 
B) demand-side inflationary factors 
C) a combination of supply- and demand-side inflationary factors 
D) supply-side secularity factors 
A) supply-side inflationary factors 
B) demand-side inflationary factors 
C) a combination of supply- and demand-side inflationary factors 
D) supply-side secularity factors

Question 8

Holding nominal money balances constant, a decrease in the price level

Accepted Answer

A) causes the real value of the money balances to increase, in turn increasing total planned real expenditures. 
B) causes the real value of the money balances to decrease, in turn decreasing total planned real expenditures. 
C) causes the real value of the money balances to increase, thereby increasing the interest rate. 
D) generates a reduction in the value of the money balances, leading to higher interest rates and a decrease in total planned real expenditures. 
A) causes the real value of the money balances to increase, in turn increasing total planned real expenditures. 
B) causes the real value of the money balances to decrease, in turn decreasing total planned real expenditures. 
C) causes the real value of the money balances to increase, thereby increasing the interest rate. 
D) generates a reduction in the value of the money balances, leading to higher interest rates and a decrease in total planned real expenditures.

Question 9

Which of the following is NOT an explanation for the shape of the aggregate demand curve?

Accepted Answer

A) real balance effect 
B) interest rate effect 
C) open economy effect 
D) investment effect 
A) real balance effect 
B) interest rate effect 
C) open economy effect 
D) investment effect

Question 10

According to the interest rate effect, a decrease in the price level will

Accepted Answer

A) decrease the real value of money balances, which causes total planned real expenditures to increase. 
B) cause interest rates to fall, which generates an increase in borrowing, so that total planned real expenditures increase. 
C) lead to a decrease in net exports, which causes total planned real expenditures to decrease. 
D) increase the real value of money balances, which causes interest rates to increase, thereby reducing total planned expenditures. 
A) decrease the real value of money balances, which causes total planned real expenditures to increase. 
B) cause interest rates to fall, which generates an increase in borrowing, so that total planned real expenditures increase. 
C) lead to a decrease in net exports, which causes total planned real expenditures to decrease. 
D) increase the real value of money balances, which causes interest rates to increase, thereby reducing total planned expenditures.

Question 11

If your income stays the same and the price level increases, you will buy fewer goods and services due to the

Accepted Answer

A) interest rate effect. 
B) real-balance effect. 
C) open economy effect. 
D) aggregate balances effect. 
A) interest rate effect. 
B) real-balance effect. 
C) open economy effect. 
D) aggregate balances effect.

Question 12

In the long run, persistent inflation in the United States is caused by

Accepted Answer

A) leftward shifts in both the long-run aggregate supply curve and in the aggregate demand curve. 
B) rightward shifts in the long-run aggregate supply curve and the leftward shift of the aggregate demand curve. 
C) a faster rightward shift of the aggregate demand curve than the rightward shift of the long-run aggregate supply curve. 
D) leftward shifts in the aggregate demand curve while the position of the long-run supply curve is unchanged. 
A) leftward shifts in both the long-run aggregate supply curve and in the aggregate demand curve. 
B) rightward shifts in the long-run aggregate supply curve and the leftward shift of the aggregate demand curve. 
C) a faster rightward shift of the aggregate demand curve than the rightward shift of the long-run aggregate supply curve. 
D) leftward shifts in the aggregate demand curve while the position of the long-run supply curve is unchanged.

Question 13

When the aggregate demand curve shifts ________ than the long-run aggregate supply shifts rightward, the result will be inflation.

Accepted Answer

A) rightward at a slower rate 
B) leftward at a slower rate 
C) rightward at a faster rate 
D) leftward at the same rate 
A) rightward at a slower rate 
B) leftward at a slower rate 
C) rightward at a faster rate 
D) leftward at the same rate

Question 14

How does aggregate demand curve (AD)differ from an individual demand curve (D)?

Accepted Answer

A) AD is generally vertical while D is usually downward sloping. 
B) D represents the price-quantity relationship for a single good or service while AD looks at the entire economic system. 
C) Look for D in macroeconomic analyses and for AD in microeconomics. 
D) AD is generally a downward sloping curve while D usually slopes upward. 
A) AD is generally vertical while D is usually downward sloping. 
B) D represents the price-quantity relationship for a single good or service while AD looks at the entire economic system. 
C) Look for D in macroeconomic analyses and for AD in microeconomics. 
D) AD is generally a downward sloping curve while D usually slopes upward.

Question 15

-In the above figure, the long-run equilibrium price level is

Accepted Answer

A) 150. 
B) 130. 
C) 110. 
D) not displayed. 
A) 150. 
B) 130. 
C) 110. 
D) not displayed.

Question 16

An increase in the amount of physical capital will cause

Accepted Answer

A) an increase in both aggregate demand and real GDP, but have no effect on the price level. 
B) aggregate demand and aggregate supply to increase by the same amounts, causing real GDP to increase and the price level to remain constant. 
C) an increase in both aggregate supply and real GDP, but have no effect on the price level. 
D) an increase in both aggregate supply and real GDP and a reduction in the price level. 
A) an increase in both aggregate demand and real GDP, but have no effect on the price level. 
B) aggregate demand and aggregate supply to increase by the same amounts, causing real GDP to increase and the price level to remain constant. 
C) an increase in both aggregate supply and real GDP, but have no effect on the price level. 
D) an increase in both aggregate supply and real GDP and a reduction in the price level.

Question 17

Long-run aggregate supply reflects

Accepted Answer

A) total production in the economy at full employment. 
B) total spending in the economy at full employment. 
C) both production and spending in the economy. 
D) only foreign production from U.S. subsidiaries. 
A) total production in the economy at full employment. 
B) total spending in the economy at full employment. 
C) both production and spending in the economy. 
D) only foreign production from U.S. subsidiaries.

Question 18

-Refer to the above figure. Suppose the economy's initial equilibrium is represented by the intersection of LRAS₁ and AD₁. Suppose there is a persistent reduction in labor force participation, which reduces total planned production at any given price level. The resulting change in the economy's long-run equilibrium position would be represented by a

Accepted Answer

A) movement from A to C. 
B) movement from A to B. 
C) movement from B to C. 
D) movement from C to A. 
A) movement from A to C. 
B) movement from A to B. 
C) movement from B to C. 
D) movement from C to A.

Question 19

What is one implication of the real-balance effect?

Accepted Answer

A) The part of your wealth that you hold in the form of cash loses some of its value as the price level rises. 
B) When the price level rises, people have an incentive to work harder in order to earn a higher income. 
C) When the price level falls, most consumers reallocate their spending so as to have an equal balance between necessities and luxuries. 
D) Aggregate demand and aggregate supply can never reach long-run equilibrium. 
A) The part of your wealth that you hold in the form of cash loses some of its value as the price level rises. 
B) When the price level rises, people have an incentive to work harder in order to earn a higher income. 
C) When the price level falls, most consumers reallocate their spending so as to have an equal balance between necessities and luxuries. 
D) Aggregate demand and aggregate supply can never reach long-run equilibrium.

Question 20

The total of all planned real expenditures in the economy is called

Accepted Answer

A) aggregate demand. 
B) aggregate spending. 
C) aggregate GDP. 
D) aggregate consumption. 
A) aggregate demand. 
B) aggregate spending. 
C) aggregate GDP. 
D) aggregate consumption.

-In the above figure, if the price level is 150

The aggregate demand curve gives the

If aggregate demand is stable and there is economic growth, the economy will experience

A fall in the price level

What information is provided by the aggregate demand curve?

When a higher price level generates an increase in the interest rate that induces consumers to borrow less and buy less, this chain of events is referred to as

Which of the following is the main cause of the persistent inflation that we have experienced in the United States?

Holding nominal money balances constant, a decrease in the price level

Which of the following is NOT an explanation for the shape of the aggregate demand curve?

According to the interest rate effect, a decrease in the price level will

If your income stays the same and the price level increases, you will buy fewer goods and services due to the

In the long run, persistent inflation in the United States is caused by

When the aggregate demand curve shifts ________ than the long-run aggregate supply shifts rightward, the result will be inflation.

How does aggregate demand curve (AD)differ from an individual demand curve (D)?

-In the above figure, the long-run equilibrium price level is

An increase in the amount of physical capital will cause

Long-run aggregate supply reflects

What is one implication of the real-balance effect?

The total of all planned real expenditures in the economy is called

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 9: Real GDP and the Price Level in the Long Run

-In the above figure, if the price level is 150

The aggregate demand curve gives the

If aggregate demand is stable and there is economic growth, the economy will experience

A fall in the price level

What information is provided by the aggregate demand curve?

When a higher price level generates an increase in the interest rate that induces consumers to borrow less and buy less, this chain of events is referred to as

Which of the following is the main cause of the persistent inflation that we have experienced in the United States?

Holding nominal money balances constant, a decrease in the price level

Which of the following is NOT an explanation for the shape of the aggregate demand curve?

According to the interest rate effect, a decrease in the price level will

If your income stays the same and the price level increases, you will buy fewer goods and services due to the

In the long run, persistent inflation in the United States is caused by

When the aggregate demand curve shifts ________ than the long-run aggregate supply shifts rightward, the result will be inflation.

How does aggregate demand curve (AD)differ from an individual demand curve (D)?

-In the above figure, the long-run equilibrium price level is

An increase in the amount of physical capital will cause

Long-run aggregate supply reflects

What is one implication of the real-balance effect?

The total of all planned real expenditures in the economy is called

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters