Question 1

When the government lowers income taxes,consumption is ______________,causing a __________ the AD curve.

Accepted Answer

A) stimulated;rightward shift of 
B) stimulated;movement down along 
C) reduced;leftward shift of 
D) reduced;movement up along 
A) stimulated;rightward shift of 
B) stimulated;movement down along 
C) reduced;leftward shift of 
D) reduced;movement up along

Question 2

The change in the purchasing power of dollar-denominated assets (such as cash holdings)is the

Accepted Answer

A) money effect. 
B) interest rate effect. 
C) asset effect. 
D) real balance effect. 
E) none of the above 
A) money effect. 
B) interest rate effect. 
C) asset effect. 
D) real balance effect. 
E) none of the above

Question 3

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

Accepted Answer

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

Question 4

The worker-misperception explanation of the SRAS curve is used to explain why

Accepted Answer

A) SRAS curves shift to the right 
B) SRAS curves shift to the left 
C) the AD curve cannot change the price level if the SRAS curve is operational. 
D) the SRAS curve slopes downward. 
E) none of the above 
A) SRAS curves shift to the right 
B) SRAS curves shift to the left 
C) the AD curve cannot change the price level if the SRAS curve is operational. 
D) the SRAS curve slopes downward. 
E) none of the above

Question 5

An appreciation of the U.S.dollar against foreign currencies tends to __________ U.S.net exports and shift the U.S.AD curve to the __________.

Accepted Answer

A) raise;right 
B) raise;left 
C) lower;right 
D) lower;left 
A) raise;right 
B) raise;left 
C) lower;right 
D) lower;left

Question 6

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 7

When foreign real national income rises,domestic Real GDP falls,ceteris paribus.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Only a change in the price level can cause a movement from one point to another point along a given aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 10

The real balance effect works through a change in the value of

Accepted Answer

A) monetary assets in response to changes in the unemployment rate. 
B) nonmonetary assets in response to changes in the unemployment rate. 
C) monetary assets in response to changes in the price level. 
D) nonmonetary assets in response to changes in the price level. 
A) monetary assets in response to changes in the unemployment rate. 
B) nonmonetary assets in response to changes in the unemployment rate. 
C) monetary assets in response to changes in the price level. 
D) nonmonetary assets in response to changes in the price level.

Question 11

Suppose the following: (1)the wage rate rises, (2)the interest rate rises, (3)any change in AD is greater than any change in SRAS.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 
A) rise;rise 
B) fall;rise 
C) fall;fall 
D) rise;fall

Question 12

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 13

Exhibit 8-1  
-Refer to Exhibit 8-2.Based on the given change,what word (rises or falls)should go in blank (11)and blank (12),respectively,to summarize the resulting impact on short run equilibrium?

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 14

If wage rates fall at the same time that labor productivity increases,what is the effect on short-run aggregate supply (SRAS)?

Accepted Answer

A) SRAS falls. 
B) SRAS remains constant. 
C) SRAS rises. 
D) SRAS may rise,fall,or remain constant. 
A) SRAS falls. 
B) SRAS remains constant. 
C) SRAS rises. 
D) SRAS may rise,fall,or remain constant.

Question 15

Exhibit 8-1  
-Refer to Exhibit 8-2.Based on the given change,what word (rises or falls)should go in blank (1)and blank (2),respectively,to summarize the resulting impact on short run equilibrium?

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 16

The nominal wage is $40 an hour and the price level as measured by a price index is 2.00.If the nominal wage falls to $30 and the price index declines to 1.50,according to the worker misperception explanation of the upward-sloping SRAS curve,workers will initially perceive the

Accepted Answer

A) real wage as something greater than $20. 
B) real wage as something less than $20. 
C) real wage as $20. 
D) nominal wage as something more than $30. 
E) nominal wage as something less than $30. 
A) real wage as something greater than $20. 
B) real wage as something less than $20. 
C) real wage as $20. 
D) nominal wage as something more than $30. 
E) nominal wage as something less than $30.

Question 17

Starting from short-run equilibrium,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 falls. 
B) The price level falls and Real GDP rises. 
C) The price level rises and Real GDP rises. 
D) The price level falls Real GDP falls. 
A) The price level rises and Real GDP falls. 
B) The price level falls and Real GDP rises. 
C) The price level rises and Real GDP rises. 
D) The price level falls Real GDP falls.

Question 18

As the price level falls,

Accepted Answer

A) the purchasing power of cash holdings rises. 
B) the purchasing power of cash holdings falls. 
C) the purchasing power of cash holdings remains constant. 
D) cash holdings turn into dollar-denominated assets. 
E) none of the above 
A) the purchasing power of cash holdings rises. 
B) the purchasing power of cash holdings falls. 
C) the purchasing power of cash holdings remains constant. 
D) cash holdings turn into dollar-denominated assets. 
E) none of the above

Question 19

An adverse supply shock results in an increase in the price level and an increase in Real GDP.

Accepted Answer

A) True 
 B)False

Question 20

Which set of changes will definitely shift the aggregate demand (AD)curve to the right?

Accepted Answer

A) Business taxes decline and foreign real national income rises. 
B) Businesses become pessimistic about future sales and the U.S.dollar depreciates. 
C) Wealth increases and individuals expect higher (future)incomes. 
D) a and b 
E) a and c 
A) Business taxes decline and foreign real national income rises. 
B) Businesses become pessimistic about future sales and the U.S.dollar depreciates. 
C) Wealth increases and individuals expect higher (future)incomes. 
D) a and b 
E) a and c

Exam 8: Aggregate Demand and Aggregate Supply

When the government lowers income taxes,consumption is ______________,causing a __________ the AD curve.

The change in the purchasing power of dollar-denominated assets (such as cash holdings)is the

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

The worker-misperception explanation of the SRAS curve is used to explain why

An appreciation of the U.S.dollar against foreign currencies tends to __________ U.S.net exports and shift the U.S.AD curve to the __________.

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

When foreign real national income rises,domestic Real GDP falls,ceteris paribus.

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

Only a change in the price level can cause a movement from one point to another point along a given aggregate demand curve.

The real balance effect works through a change in the value of

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

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.

Exhibit 8-1 -Refer to Exhibit 8-2.Based on the given change,what word (rises or falls)should go in blank (11)and blank (12),respectively,to summarize the resulting impact on short run equilibrium?

If wage rates fall at the same time that labor productivity increases,what is the effect on short-run aggregate supply (SRAS)?

Exhibit 8-1 -Refer to Exhibit 8-2.Based on the given change,what word (rises or falls)should go in blank (1)and blank (2),respectively,to summarize the resulting impact on short run equilibrium?

The nominal wage is $40 an hour and the price level as measured by a price index is 2.00.If the nominal wage falls to $30 and the price index declines to 1.50,according to the worker misperception explanation of the upward-sloping SRAS curve,workers will initially perceive the

Starting from short-run equilibrium,wage rates rise.What is the effect on the price level and Real GDP in the short run?

As the price level falls,

An adverse supply shock results in an increase in the price level and an increase in Real GDP.

Which set of changes will definitely shift the aggregate demand (AD)curve to the right?

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

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

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

Filters

When the government lowers income taxes,consumption is ____,causing a the AD curve.

An appreciation of the U.S.dollar against foreign currencies tends to U.S.net exports and shift the U.S.AD curve to the .

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

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

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.