Question 1

A decrease in U.S. prices relative to European prices

Accepted Answer

A)  will decrease European exports to the United States. 
B)  will increase U.S. imports from Europe. 
C)  will decrease U.S. exports to Europe. 
D)  will not affect U.S. trade with Europe. 
A)  will decrease European exports to the United States. 
B)  will increase U.S. imports from Europe. 
C)  will decrease U.S. exports to Europe. 
D)  will not affect U.S. trade with Europe.

Question 2

A rightward shift of long-run aggregate supply without any change in aggregate demand

Accepted Answer

A)  will leave real GDP unchanged. 
B)  results in a lower price level. 
C)  increases the price level without any change in real GDP. 
D)  increases the price level along with an increase in real GDP. 
A)  will leave real GDP unchanged. 
B)  results in a lower price level. 
C)  increases the price level without any change in real GDP. 
D)  increases the price level along with an increase in real GDP.

Question 3

When the U.S. price level falls, the open economy effect indicates that

Accepted Answer

A)  U.S. imports will rise. 
B)  U.S. residents will move away from domestic goods and buy more foreign goods. 
C)  U.S. exports will increase. 
D)  foreigners will buy fewer U.S. goods. 
A)  U.S. imports will rise. 
B)  U.S. residents will move away from domestic goods and buy more foreign goods. 
C)  U.S. exports will increase. 
D)  foreigners will buy fewer U.S. goods.

Question 4

The interest rate effect is part of the reason

Accepted Answer

A)  the short-run aggregate supply curve is upward sloping. 
B)  the long-run aggregate supply curve is vertical. 
C)  the aggregate demand curve is upward sloping. 
D)  the aggregate demand curve is downward sloping. 
A)  the short-run aggregate supply curve is upward sloping. 
B)  the long-run aggregate supply curve is vertical. 
C)  the aggregate demand curve is upward sloping. 
D)  the aggregate demand curve is downward sloping.

Question 5

A rise in the price level has a direct effect on spending because

Accepted Answer

A)  people like to spend more when prices are higher. 
B)  the real value of the money people have varies directly with the price level. 
C)  the real value of the money people have decreases and they can buy less with it. 
D)  a higher price gives people more money, and so the more goods and services they can buy. 
A)  people like to spend more when prices are higher. 
B)  the real value of the money people have varies directly with the price level. 
C)  the real value of the money people have decreases and they can buy less with it. 
D)  a higher price gives people more money, and so the more goods and services they can buy.

Question 6

The aggregate demand curve shows that, if other factors are held constant,

Accepted Answer

A)  higher price levels will result in lower total planned spending. 
B)  higher price levels will result in higher total planned spending. 
C)  higher price levels will result in lower interest rates. 
D)  lower price levels will result in inflationary conditions. 
A)  higher price levels will result in lower total planned spending. 
B)  higher price levels will result in higher total planned spending. 
C)  higher price levels will result in lower interest rates. 
D)  lower price levels will result in inflationary conditions.

Question 7

The aggregate demand curve differs from an individual demand curve in that

Accepted Answer

A)  the aggregate demand curve may not slope down while an individual demand curve must always slope down. 
B)  the aggregate demand curve looks at the entire circular flow of income and product, while an individual demand curve looks at one good, holding everything else constant. 
C)  prices change along an individual demand curve but prices are held constant along an aggregate demand curve. 
D)  the aggregate demand curve slopes up while an individual demand curve slopes down. 
A)  the aggregate demand curve may not slope down while an individual demand curve must always slope down. 
B)  the aggregate demand curve looks at the entire circular flow of income and product, while an individual demand curve looks at one good, holding everything else constant. 
C)  prices change along an individual demand curve but prices are held constant along an aggregate demand curve. 
D)  the aggregate demand curve slopes up while an individual demand curve slopes down.

Question 8

Explain how an economy can experience long-run economic growth and deflation at the same time.

Accepted Answer

If aggregate demand remains relatively c

Question 9

The sum of all planned expenditures for the entire economy at each possible price level is

Accepted Answer

A)  aggregate supply. 
B)  effective demand. 
C)  aggregate demand. 
D)  actual expenditures by consumers. 
A)  aggregate supply. 
B)  effective demand. 
C)  aggregate demand. 
D)  actual expenditures by consumers.

Question 10

An increase in the level of prices of goods and services will do what to the long-run aggregate supply curve?

Accepted Answer

A)  Shift it to the right 
B)  Shift it to the left 
C)  Not shift the curve at all 
D)  Depends upon the long-run aggregate demand curve 
A)  Shift it to the right 
B)  Shift it to the left 
C)  Not shift the curve at all 
D)  Depends upon the long-run aggregate demand curve

Question 11

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 12

The long-run aggregate supply curve occurs at the level of real GDP consistent with

Accepted Answer

A)  individuals' tastes and preferences. 
B)  the natural rate of unemployment. 
C)  no inflation. 
D)  low levels of inflation. 
A)  individuals' tastes and preferences. 
B)  the natural rate of unemployment. 
C)  no inflation. 
D)  low levels of inflation.

Question 13

Higher interest rates tend to

Accepted Answer

A)  reduce the total planned spending on goods and services. 
B)  lower the costs of building new plants and equipment. 
C)  increase the quantity demanded of goods and services. 
D)  make it less costly for people to buy houses and cars. 
A)  reduce the total planned spending on goods and services. 
B)  lower the costs of building new plants and equipment. 
C)  increase the quantity demanded of goods and services. 
D)  make it less costly for people to buy houses and cars.

Question 14

An increase in the money supply will cause which of the following to occur?

Accepted Answer

A)  a rightward shift of the aggregate supply curve 
B)  a leftward shift of the aggregate demand curve 
C)  a leftward shift of the aggregate supply curve 
D)  a rightward shift of the aggregate demand curve 
A)  a rightward shift of the aggregate supply curve 
B)  a leftward shift of the aggregate demand curve 
C)  a leftward shift of the aggregate supply curve 
D)  a rightward shift of the aggregate demand curve

Question 15

When the price level is below the level at which the aggregate demand curve crosses the long run aggregate supply curve

Accepted Answer

A)  there will be no price level change. 
B)  there will be pressures that will lead to a shift of either the aggregate demand or the long run aggregate supply curves. 
C)  total planned real expenditures will exceed actual real GDP, and the price level will increase. 
D)  total planned real expenditure will be lower than actual real GDP, and the price level will increase. 
A)  there will be no price level change. 
B)  there will be pressures that will lead to a shift of either the aggregate demand or the long run aggregate supply curves. 
C)  total planned real expenditures will exceed actual real GDP, and the price level will increase. 
D)  total planned real expenditure will be lower than actual real GDP, and the price level will increase.

Question 16

Which of the following will cause a leftward shift in the aggregate demand curve?

Accepted Answer

A)  a reduction in the money supply 
B)  an increase in taxes 
C)  a reduction in government spending 
D)  all of the above 
A)  a reduction in the money supply 
B)  an increase in taxes 
C)  a reduction in government spending 
D)  all of the above

Question 17

A human resource such as ingenuity can be thought of as

Accepted Answer

A)  a positive for imports. 
B)  part of a country's endowment. 
C)  part of government spending programs. 
D)  a causal factor for aggregate supply shifting left. 
A)  a positive for imports. 
B)  part of a country's endowment. 
C)  part of government spending programs. 
D)  a causal factor for aggregate supply shifting left.

Question 18

The aggregate supply curve

Accepted Answer

A)  shows what each producer is willing and able to produce at each income level. 
B)  relates planned aggregate production to price level. 
C)  becomes vertical if there is excess production capacity within the economy. 
D)  shows a negative relationship between the price level and real Gross Domestic Product (GDP). 
A)  shows what each producer is willing and able to produce at each income level. 
B)  relates planned aggregate production to price level. 
C)  becomes vertical if there is excess production capacity within the economy. 
D)  shows a negative relationship between the price level and real Gross Domestic Product (GDP).

Question 19

The total of all planned expenditures in the entire economy is the definition of

Accepted Answer

A)  aggregate supply. 
B)  production possibilities curve. 
C)  aggregate demand. 
D)  net domestic product. 
A)  aggregate supply. 
B)  production possibilities curve. 
C)  aggregate demand. 
D)  net domestic product.

Question 20

The long-run aggregate supply curve of an economy corresponds to

Accepted Answer

A)  a point inside the production possibilities curve. 
B)  a point outside the production possibilities curve. 
C)  a point on the production possibilities curve. 
D)  none of the above: there is no relationship between the long-run aggregate supply curve and the production possibilities curve. 
A)  a point inside the production possibilities curve. 
B)  a point outside the production possibilities curve. 
C)  a point on the production possibilities curve. 
D)  none of the above: there is no relationship between the long-run aggregate supply curve and the production possibilities curve.

Exam 10: Real GDP and the Price Level in the Long Run

A decrease in U.S. prices relative to European prices

A rightward shift of long-run aggregate supply without any change in aggregate demand

When the U.S. price level falls, the open economy effect indicates that

The interest rate effect is part of the reason

A rise in the price level has a direct effect on spending because

The aggregate demand curve shows that, if other factors are held constant,

The aggregate demand curve differs from an individual demand curve in that

Explain how an economy can experience long-run economic growth and deflation at the same time.

The sum of all planned expenditures for the entire economy at each possible price level is

An increase in the level of prices of goods and services will do what to the long-run aggregate supply curve?

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

The long-run aggregate supply curve occurs at the level of real GDP consistent with

Higher interest rates tend to

An increase in the money supply will cause which of the following to occur?

When the price level is below the level at which the aggregate demand curve crosses the long run aggregate supply curve

Which of the following will cause a leftward shift in the aggregate demand curve?

A human resource such as ingenuity can be thought of as

The aggregate supply curve

The total of all planned expenditures in the entire economy is the definition of

The long-run aggregate supply curve of an economy corresponds to

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

Measuring the Economys Performance

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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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