Question 1

The vertical axis for an aggregate demand curve measures

Accepted Answer

A) real GDP per year. 
B) nominal GDP per year. 
C) the price level. 
D) real income. 
A) real GDP per year. 
B) nominal GDP per year. 
C) the price level. 
D) real income.

Question 2

What is the shape of the long-run aggregate supply curve? Why?

Accepted Answer

The long-run aggregate supply curve is v

Question 3

If the price level increases,the value of money balances held by individuals,firms,government,and foreigners decreases,and spending decreases.This is an example of

Accepted Answer

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

Question 4

What are the three forces that cause the aggregate demand curve to slope down? Explain.

Accepted Answer

The three forces are the real-balance ef

Question 5

When prices increase the interest rate effect

Accepted Answer

A) will increase and the aggregate demand for goods and services will increase. 
B) will increase and the aggregate demand for goods and services will decrease. 
C) will decrease and the aggregate demand for goods and services will decrease. 
D) will not be affected. 
A) will increase and the aggregate demand for goods and services will increase. 
B) will increase and the aggregate demand for goods and services will decrease. 
C) will decrease and the aggregate demand for goods and services will decrease. 
D) will not be affected.

Question 6

An increase 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 the quantity demanded of aggregate output. 
B) causes exports to fall and imports to rise,leading to an decrease in quantity demanded of aggregate output. 
C) leads to an increase in the quantity of aggregate output because of the open economy effect. 
D) causes the quantity demanded of aggregate output 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 the quantity demanded of aggregate output. 
B) causes exports to fall and imports to rise,leading to an decrease in quantity demanded of aggregate output. 
C) leads to an increase in the quantity of aggregate output because of the open economy effect. 
D) causes the quantity demanded of aggregate output to increase as long as the fall is less than the fall in the price level in other countries.

Question 7

The real-balance effect implies that when

Accepted Answer

A) the price level decreases,the value of money balances held by individuals,firms,government,and foreigners increases and spending decreases. 
B) the price level increases,the value of money balances held by individuals,firms,government,and foreigners increases,and spending increases. 
C) the price level increases,the value of money balances held by individuals,firms,government,and foreigners decreases,and spending decreases. 
D) the price level decreases,the value of money balances held by individuals,firms,government,and foreigners decreases,and spending decreases. 
A) the price level decreases,the value of money balances held by individuals,firms,government,and foreigners increases and spending decreases. 
B) the price level increases,the value of money balances held by individuals,firms,government,and foreigners increases,and spending increases. 
C) the price level increases,the value of money balances held by individuals,firms,government,and foreigners decreases,and spending decreases. 
D) the price level decreases,the value of money balances held by individuals,firms,government,and foreigners decreases,and spending decreases.

Question 8

The long-run aggregate supply will increase when

Accepted Answer

A) labour supply decreases. 
B) increased labour productivity. 
C) the price level increases. 
D) taxes increase. 
A) labour supply decreases. 
B) increased labour productivity. 
C) the price level increases. 
D) taxes increase.

Question 9

Is it possible for economic growth to be zero? If so,what would the sample long run growth path for real GDP look like?

Accepted Answer

Yes it is possible but usually occurs du

Question 10

If exports were to fall and imports to rise,leading to an decrease in quantity demanded of aggregate output,we would expect as a result,

Accepted Answer

A) A decrease in the price level 
B) A fall in the price level. 
C) the open economy effect to lessen. 
D) No change in the price level. 
A) A decrease in the price level 
B) A fall in the price level. 
C) the open economy effect to lessen. 
D) No change in the price level.

Question 11

Higher interest rates tend to

Accepted Answer

A) reduce the quantity demanded of 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 quantity demanded of 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 12

The sum of all planned expenditures for the entire economy 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 13

An individual holds $10 000 in an interest-earning checking account,and the overall price level rises significantly.Other things constant,we would expect

Accepted Answer

A) the individual's real wealth to decrease and consumption to diminish. 
B) the individual's stock of real wealth to decrease but real national income to increase. 
C) no change in the individual's real wealth but a decline in real national product. 
D) we cannot be sure since we do not know the magnitude of the interest earned relative to the increase in price level. 
A) the individual's real wealth to decrease and consumption to diminish. 
B) the individual's stock of real wealth to decrease but real national income to increase. 
C) no change in the individual's real wealth but a decline in real national product. 
D) we cannot be sure since we do not know the magnitude of the interest earned relative to the increase in price level.

Question 14

The aggregate demand curve would shift to the right as a result of

Accepted Answer

A) a drop in the price level. 
B) tax increases. 
C) a drop in the foreign exchange value of the dollar. 
D) a decrease in the amount of money in circulation. 
A) a drop in the price level. 
B) tax increases. 
C) a drop in the foreign exchange value of the dollar. 
D) a decrease in the amount of money in circulation.

Question 15

Holding nominal money balances constant,an increase in the price level

Accepted Answer

A) causes the real value of the money balances to increase,in turn increasing the quantity of goods and services demanded. 
B) causes the real value of the money balances to decrease,in turn decreasing the quantity of goods and services demanded. 
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 the quantity of goods and services demanded. 
A) causes the real value of the money balances to increase,in turn increasing the quantity of goods and services demanded. 
B) causes the real value of the money balances to decrease,in turn decreasing the quantity of goods and services demanded. 
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 the quantity of goods and services demanded.

Question 16

Which of the following statements is FALSE?

Accepted Answer

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

Question 17

If all factors that affect total planned real expenditures are unchanged so that the AD curve does not noticeably move during a 10 year period of real GDP growth,the growing economy would experience

Accepted Answer

A) secular inflation. 
B) secular deflation. 
C) demand-pull deflation. 
D) cost-push deflation. 
A) secular inflation. 
B) secular deflation. 
C) demand-pull deflation. 
D) cost-push deflation.

Question 18

Suppose a country has no trade with other countries and people can borrow as much money as they want at the current interest rate.A decrease in the price level will generate

Accepted Answer

A) an increase in quantity demanded because of the real-balance effect. 
B) an increase in quantity demanded because of the open-economy effect and the indirect effect. 
C) an increase in quantity demanded because the real-balance effect will be stronger than the indirect effect and the open-economy effect. 
D) an increase in quantity demanded because the indirect effect will be stronger than the real-balance effect. 
A) an increase in quantity demanded because of the real-balance effect. 
B) an increase in quantity demanded because of the open-economy effect and the indirect effect. 
C) an increase in quantity demanded because the real-balance effect will be stronger than the indirect effect and the open-economy effect. 
D) an increase in quantity demanded because the indirect effect will be stronger than the real-balance effect.

Question 19

Explain with the aid of diagrams and explanations how price level changes effect the long run equilibrium

Accepted Answer

Here you should provide a deta

Question 20

The real-balance effect refers to

Accepted Answer

A) the real interest rate. 
B) the production of real goods and services as opposed to financial instruments. 
C) the prices of goods and services. 
D) the real value of cash balances that a person is holding. 
A) the real interest rate. 
B) the production of real goods and services as opposed to financial instruments. 
C) the prices of goods and services. 
D) the real value of cash balances that a person is holding.

The vertical axis for an aggregate demand curve measures

What is the shape of the long-run aggregate supply curve? Why?

If the price level increases,the value of money balances held by individuals,firms,government,and foreigners decreases,and spending decreases.This is an example of

What are the three forces that cause the aggregate demand curve to slope down? Explain.

When prices increase the interest rate effect

An increase in the price level

The real-balance effect implies that when

The long-run aggregate supply will increase when

Is it possible for economic growth to be zero? If so,what would the sample long run growth path for real GDP look like?

If exports were to fall and imports to rise,leading to an decrease in quantity demanded of aggregate output,we would expect as a result,

Higher interest rates tend to

The sum of all planned expenditures for the entire economy is

An individual holds $10 000 in an interest-earning checking account,and the overall price level rises significantly.Other things constant,we would expect

The aggregate demand curve would shift to the right as a result of

Holding nominal money balances constant,an increase in the price level

Which of the following statements is FALSE?

If all factors that affect total planned real expenditures are unchanged so that the AD curve does not noticeably move during a 10 year period of real GDP growth,the growing economy would experience

Suppose a country has no trade with other countries and people can borrow as much money as they want at the current interest rate.A decrease in the price level will generate

Explain with the aid of diagrams and explanations how price level changes effect the long run equilibrium

The real-balance effect refers to

The Nature of Economics

Production Possibilities and Economic Systems

Demand and Supply

Introduction to Macroeconomics

Measuring the Economys Performance

Economic Growth and Development

Modelling Real Gdp and the Price Level in the Short Run

Consumption, investment, and the Multiplier

The Public Sector

Fiscal Policy and the Public Debt

Money and the Banking System

Money Creation and Deposit Insurance

The Bank of Canada and Monetary Policy

Issues in Stabilization Policy

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 6: Modelling Real Gdp and the Price Level in the Long Run

The vertical axis for an aggregate demand curve measures

What is the shape of the long-run aggregate supply curve? Why?

If the price level increases,the value of money balances held by individuals,firms,government,and foreigners decreases,and spending decreases.This is an example of

What are the three forces that cause the aggregate demand curve to slope down? Explain.

When prices increase the interest rate effect

An increase in the price level

The real-balance effect implies that when

The long-run aggregate supply will increase when

Is it possible for economic growth to be zero? If so,what would the sample long run growth path for real GDP look like?

If exports were to fall and imports to rise,leading to an decrease in quantity demanded of aggregate output,we would expect as a result,

Higher interest rates tend to

The sum of all planned expenditures for the entire economy is

An individual holds $10 000 in an interest-earning checking account,and the overall price level rises significantly.Other things constant,we would expect

The aggregate demand curve would shift to the right as a result of

Holding nominal money balances constant,an increase in the price level

Which of the following statements is FALSE?

If all factors that affect total planned real expenditures are unchanged so that the AD curve does not noticeably move during a 10 year period of real GDP growth,the growing economy would experience

Suppose a country has no trade with other countries and people can borrow as much money as they want at the current interest rate.A decrease in the price level will generate

Explain with the aid of diagrams and explanations how price level changes effect the long run equilibrium

The real-balance effect refers to

The Nature of Economics

Production Possibilities and Economic Systems

Demand and Supply

Introduction to Macroeconomics

Measuring the Economys Performance

Economic Growth and Development

Modelling Real Gdp and the Price Level in the Short Run

Consumption, investment, and the Multiplier

The Public Sector

Fiscal Policy and the Public Debt

Money and the Banking System

Money Creation and Deposit Insurance

The Bank of Canada and Monetary Policy

Issues in Stabilization Policy

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters