Question 1

Other things the same,an increase in the price level makes the dollars people hold worth

Accepted Answer

A) more,so they can buy more. 
B) more,so they can buy less. 
C) less,so they can buy more. 
D) less,so they can buy less. 
A) more,so they can buy more. 
B) more,so they can buy less. 
C) less,so they can buy more. 
D) less,so they can buy less.

Question 2

From 1995 to 1999 there was a dramatic rise in stock prices.If this rise made people feel wealthier,then it would have shifted

Accepted Answer

A) aggregate demand right. 
B) aggregate demand left. 
C) aggregate supply right. 
D) aggregate supply left. 
A) aggregate demand right. 
B) aggregate demand left. 
C) aggregate supply right. 
D) aggregate supply left.

Question 3

In the context of aggregate demand and aggregate supply,the wealth effect refers to the idea that,when the price level decreases,the real wealth of households

Accepted Answer

A) increases and as a result consumption spending increases.This effect contributes to the downward slope of the aggregate-demand curve. 
B) decreases and as a result consumption spending increases.This effect contributes to the upward slope of the aggregate-supply curve. 
C) increases and as a result households increase their money holdings;in turn,interest rates increase and investment spending decreases.This effect contributes to the downward slope of the aggregate-demand curve. 
D) decreases and as a result households increase their money holdings;in turn,interest rates increase and investment spending decreases.This effect contributes to the upward slope of the aggregate-supply curve. 
A) increases and as a result consumption spending increases.This effect contributes to the downward slope of the aggregate-demand curve. 
B) decreases and as a result consumption spending increases.This effect contributes to the upward slope of the aggregate-supply curve. 
C) increases and as a result households increase their money holdings;in turn,interest rates increase and investment spending decreases.This effect contributes to the downward slope of the aggregate-demand curve. 
D) decreases and as a result households increase their money holdings;in turn,interest rates increase and investment spending decreases.This effect contributes to the upward slope of the aggregate-supply curve.

Question 4

Other things the same,if the price level falls,people

Accepted Answer

A) increase foreign bond purchases,so the dollar appreciates. 
B) increase foreign bond purchases,so the dollar depreciates. 
C) increase domestic bond purchases,so the dollar appreciates. 
D) increase domestic bond purchases,so the dollar depreciates. 
A) increase foreign bond purchases,so the dollar appreciates. 
B) increase foreign bond purchases,so the dollar depreciates. 
C) increase domestic bond purchases,so the dollar appreciates. 
D) increase domestic bond purchases,so the dollar depreciates.

Question 5

Other things the same,as the price level rises,the real value of a dollar

Accepted Answer

A) rises,and interest rates rise. 
B) rises,and interest rates fall. 
C) falls,and interest rates rise. 
D) falls,and interest rates fall. 
A) rises,and interest rates rise. 
B) rises,and interest rates fall. 
C) falls,and interest rates rise. 
D) falls,and interest rates fall.

Question 6

Which of the following shifts aggregate demand to the right?

Accepted Answer

A) Congress reduces purchases of new weapons systems. 
B) The Fed buys bonds in the open market. 
C) The price level falls. 
D) Net exports fall. 
A) Congress reduces purchases of new weapons systems. 
B) The Fed buys bonds in the open market. 
C) The price level falls. 
D) Net exports fall.

Question 7

If speculators lost confidence in foreign economies and so wanted to buy more U.S.bonds

Accepted Answer

A) the dollar would appreciate which would cause aggregate demand to shift right. 
B) the dollar would appreciate which would cause aggregate demand to shift left. 
C) the dollar would depreciate which would cause aggregate demand to shift right. 
D) the dollar would depreciate which would cause aggregate demand to shift left. 
A) the dollar would appreciate which would cause aggregate demand to shift right. 
B) the dollar would appreciate which would cause aggregate demand to shift left. 
C) the dollar would depreciate which would cause aggregate demand to shift right. 
D) the dollar would depreciate which would cause aggregate demand to shift left.

Question 8

Other things the same,if the U.S.price level rises,then

Accepted Answer

A) the supply of dollars in the market for foreign-currency exchange increases,so the exchange rate rises. 
B) the supply of dollars in the market for foreign-currency exchange increases,so the exchange rate falls. 
C) the supply of dollars in the market for foreign-currency exchange decreases,so the exchange rate rises. 
D) the supply of dollars in the market for foreign-currency exchange decreases,so the exchange rate falls. 
A) the supply of dollars in the market for foreign-currency exchange increases,so the exchange rate rises. 
B) the supply of dollars in the market for foreign-currency exchange increases,so the exchange rate falls. 
C) the supply of dollars in the market for foreign-currency exchange decreases,so the exchange rate rises. 
D) the supply of dollars in the market for foreign-currency exchange decreases,so the exchange rate falls.

Question 9

When the price level falls,people want to

Accepted Answer

A) hold more money and the quantity of aggregate goods and services demanded increases. 
B) hold more money and the quantity of aggregate goods and services demanded decreases. 
C) hold less money and the quantity of aggregate goods and services demanded increases. 
D) hold less money and the quantity of aggregate goods and services demanded decreases. 
A) hold more money and the quantity of aggregate goods and services demanded increases. 
B) hold more money and the quantity of aggregate goods and services demanded decreases. 
C) hold less money and the quantity of aggregate goods and services demanded increases. 
D) hold less money and the quantity of aggregate goods and services demanded decreases.

Question 10

An increase in the interest rate causes investment to

Accepted Answer

A) rise and the exchange rate to appreciate. 
B) fall and the exchange rate to depreciate. 
C) rise and the exchange rate to depreciate. 
D) fall and the exchange rate to appreciate. 
A) rise and the exchange rate to appreciate. 
B) fall and the exchange rate to depreciate. 
C) rise and the exchange rate to depreciate. 
D) fall and the exchange rate to appreciate.

Question 11

When the price level changes,which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

Accepted Answer

A) the real value of wealth 
B) the interest rate 
C) the value of currency in the market for foreign exchange 
D) All of the above are correct. 
A) the real value of wealth 
B) the interest rate 
C) the value of currency in the market for foreign exchange 
D) All of the above are correct.

Question 12

In 2009 Congress passed legislation providing states with funds to build roads and bridges.It also instituted tax cuts.Which of these shifts aggregate demand right?

Accepted Answer

A) only the increased funding for states 
B) only the tax cuts 
C) both the increased funding for states and the tax cuts 
D) neither the increased funding for states nor the tax cuts 
A) only the increased funding for states 
B) only the tax cuts 
C) both the increased funding for states and the tax cuts 
D) neither the increased funding for states nor the tax cuts

Question 13

Other things the same,if the U.S.price level falls,then

Accepted Answer

A) U.S.residents want to buy more foreign bonds.The real exchange rate rises. 
B) U.S.residents want to buy more foreign bonds.The real exchange rate falls. 
C) U.S.residents want to buy fewer foreign bonds.The real exchange rate rises. 
D) U.S.residents want to buy fewer foreign bonds.The real exchange rate falls. 
A) U.S.residents want to buy more foreign bonds.The real exchange rate rises. 
B) U.S.residents want to buy more foreign bonds.The real exchange rate falls. 
C) U.S.residents want to buy fewer foreign bonds.The real exchange rate rises. 
D) U.S.residents want to buy fewer foreign bonds.The real exchange rate falls.

Question 14

Which of the following rises when the U.S.price level falls?

Accepted Answer

A) interest rates 
B) the value of the dollar in the market for foreign-currency exchange 
C) real wealth 
D) All of the above are correct. 
A) interest rates 
B) the value of the dollar in the market for foreign-currency exchange 
C) real wealth 
D) All of the above are correct.

Question 15

Which of the following is correct?

Accepted Answer

A) An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left. 
B) An increase in stock prices reduces consumption spending so that aggregate demand shifts left. 
C) An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left. 
D) A recession in other countries reduces U.S.net exports so that U.S.aggregate demand shifts left. 
A) An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left. 
B) An increase in stock prices reduces consumption spending so that aggregate demand shifts left. 
C) An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left. 
D) A recession in other countries reduces U.S.net exports so that U.S.aggregate demand shifts left.

Question 16

As the price level rises

Accepted Answer

A) people will want to buy more bonds,so the interest rate rises. 
B) people will want to buy fewer bonds,so the interest rate falls. 
C) people will want to buy more bonds,so the interest rate falls. 
D) people will want to buy fewer bonds,so the interest rate rises. 
A) people will want to buy more bonds,so the interest rate rises. 
B) people will want to buy fewer bonds,so the interest rate falls. 
C) people will want to buy more bonds,so the interest rate falls. 
D) people will want to buy fewer bonds,so the interest rate rises.

Question 17

Which of the following decreases in response to the interest-rate effect from an increase in the price level?

Accepted Answer

A) both investment and consumption 
B) consumption but not investment 
C) investment but not consumption 
D) neither investment nor consumption 
A) both investment and consumption 
B) consumption but not investment 
C) investment but not consumption 
D) neither investment nor consumption

Question 18

Other things the same,a fall in an economy's overall level of prices tends to

Accepted Answer

A) raise both the quantity demanded and supplied of goods and services. 
B) raise the quantity demanded of goods and services,but lower the quantity supplied. 
C) lower the quantity demanded of goods and services,but raise the quantity supplied. 
D) lower both the quantity demanded and the quantity supplied of goods and services. 
A) raise both the quantity demanded and supplied of goods and services. 
B) raise the quantity demanded of goods and services,but lower the quantity supplied. 
C) lower the quantity demanded of goods and services,but raise the quantity supplied. 
D) lower both the quantity demanded and the quantity supplied of goods and services.

Question 19

When the dollar appreciates,U.S.

Accepted Answer

A) net exports rise,which increases the aggregate quantity of goods and services demanded. 
B) net exports rise,which decreases the aggregate quantity of goods and services demanded. 
C) net exports fall,which increases the aggregate quantity of goods and services demanded. 
D) net exports fall,which decreases the aggregate quantity of goods and services demanded. 
A) net exports rise,which increases the aggregate quantity of goods and services demanded. 
B) net exports rise,which decreases the aggregate quantity of goods and services demanded. 
C) net exports fall,which increases the aggregate quantity of goods and services demanded. 
D) net exports fall,which decreases the aggregate quantity of goods and services demanded.

Question 20

A decrease in the price level

Accepted Answer

A) increases the quantity of goods and services supplied in the short run. 
B) decreases the quantity of goods and services supplied in the long run. 
C) decreases the quantity of goods and services demanded. 
D) increases the quantity of goods and services demanded. 
A) increases the quantity of goods and services supplied in the short run. 
B) decreases the quantity of goods and services supplied in the long run. 
C) decreases the quantity of goods and services demanded. 
D) increases the quantity of goods and services demanded.

Exam 20: Aggregate Demand and Aggregate Supply: The Aggregate-Demand Curve

Other things the same,an increase in the price level makes the dollars people hold worth

From 1995 to 1999 there was a dramatic rise in stock prices.If this rise made people feel wealthier,then it would have shifted

In the context of aggregate demand and aggregate supply,the wealth effect refers to the idea that,when the price level decreases,the real wealth of households

Other things the same,if the price level falls,people

Other things the same,as the price level rises,the real value of a dollar

Which of the following shifts aggregate demand to the right?

If speculators lost confidence in foreign economies and so wanted to buy more U.S.bonds

Other things the same,if the U.S.price level rises,then

When the price level falls,people want to

An increase in the interest rate causes investment to

When the price level changes,which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

In 2009 Congress passed legislation providing states with funds to build roads and bridges.It also instituted tax cuts.Which of these shifts aggregate demand right?

Other things the same,if the U.S.price level falls,then

Which of the following rises when the U.S.price level falls?

Which of the following is correct?

As the price level rises

Which of the following decreases in response to the interest-rate effect from an increase in the price level?

Other things the same,a fall in an economy's overall level of prices tends to

When the dollar appreciates,U.S.

A decrease in the price level

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion