Question 1

The open economy effect suggests that

Accepted Answer

A)  a decrease in domestic price level will cause foreign residents to buy fewer domestic goods, increasing net exports. 
B)  a decrease in domestic price level will cause foreign residents to buy more domestic goods, increasing net exports. 
C)  a rise in domestic price level will cause foreign residents to buy more domestic goods. 
D)  a rise in domestic price level will cause domestic residents to buy fewer imported goods. 
A)  a decrease in domestic price level will cause foreign residents to buy fewer domestic goods, increasing net exports. 
B)  a decrease in domestic price level will cause foreign residents to buy more domestic goods, increasing net exports. 
C)  a rise in domestic price level will cause foreign residents to buy more domestic goods. 
D)  a rise in domestic price level will cause domestic residents to buy fewer imported goods.

Question 2

Other things being equal, along an aggregate demand curve, a higher price level is associated with

Accepted Answer

A)  a higher real GDP. 
B)  a lower real GDP. 
C)  a lower nominal GDP. 
D)  higher income levels. 
A)  a higher real GDP. 
B)  a lower real GDP. 
C)  a lower nominal GDP. 
D)  higher income levels.

Question 3

According to the real-balance effect, the value of money balances held by individuals

Accepted Answer

A)  increases as the price level increases. 
B)  decreases as the price level increases. 
C)  does not change regardless of any change in the price level. 
D)  changes only when the price level remains constant. 
A)  increases as the price level increases. 
B)  decreases as the price level increases. 
C)  does not change regardless of any change in the price level. 
D)  changes only when the price level remains constant.

Question 4

-The above figure shows a

Accepted Answer

A)  short-run aggregate demand curve. 
B)  short-run aggregate supply curve. 
C)  long-run aggregate demand curve. 
D)  long-run aggregate supply curve. 
A)  short-run aggregate demand curve. 
B)  short-run aggregate supply curve. 
C)  long-run aggregate demand curve. 
D)  long-run aggregate supply curve.

Question 5

The total of all planned production for the economy is

Accepted Answer

A)  determined only by individuals and firms. 
B)  determined only by the government. 
C)  aggregate demand. 
D)  aggregate supply. 
A)  determined only by individuals and firms. 
B)  determined only by the government. 
C)  aggregate demand. 
D)  aggregate supply.

Question 6

A persistent decline in the price level resulting from economic growth in the presence of stable aggregate demand is known as

Accepted Answer

A)  demand-side deflation. 
B)  the interest rate effect. 
C)  secular deflation. 
D)  the real balance effect. 
A)  demand-side deflation. 
B)  the interest rate effect. 
C)  secular deflation. 
D)  the real balance effect.

Question 7

-Refer to the above figures. Which panel(s) represent economic growth?

Accepted Answer

A)  Panel A only 
B)  Panels A and C only 
C)  Panel D only 
D)  Panels B and D only 
A)  Panel A only 
B)  Panels A and C only 
C)  Panel D only 
D)  Panels B and D only

Question 8

Economic growth can be depicted as

Accepted Answer

A)  a shift of the LRAS curve to the left. 
B)  an inward shift of the production possibilities curve. 
C)  a shift of the LRAS curve to the right. 
D)  a movement along the production possibilities curve. 
A)  a shift of the LRAS curve to the left. 
B)  an inward shift of the production possibilities curve. 
C)  a shift of the LRAS curve to the right. 
D)  a movement along the production possibilities curve.

Question 9

Over the past 40 years, which of the following has the U.S. economy experienced?

Accepted Answer

A)  persistent deflation 
B)  stable prices and so zero inflation rate 
C)  persistent inflation 
D)  secular deflation 
A)  persistent deflation 
B)  stable prices and so zero inflation rate 
C)  persistent inflation 
D)  secular deflation

Question 10

We draw the long-run aggregate supply curve as a vertical line to reflect the fact that

Accepted Answer

A)  the productive capacity of the economy never changes after full adjustment has occurred. 
B)  changes in the price level do not alter the level of long-run real GDP after full adjustment has occurred. 
C)  technology and resource endowments do not affect long-run real GDP after full adjustment has occurred. 
D)  an accurate depiction of the production possibilities curve is vertical after full adjustment has occurred. 
A)  the productive capacity of the economy never changes after full adjustment has occurred. 
B)  changes in the price level do not alter the level of long-run real GDP after full adjustment has occurred. 
C)  technology and resource endowments do not affect long-run real GDP after full adjustment has occurred. 
D)  an accurate depiction of the production possibilities curve is vertical after full adjustment has occurred.

Question 11

Which of the following is a factor that determines the shape of the aggregate demand curve?

Accepted Answer

A)  the real-balance effect 
B)  the nominal-balance effect 
C)  the price level effect 
D)  the wage effect 
A)  the real-balance effect 
B)  the nominal-balance effect 
C)  the price level effect 
D)  the wage effect

Question 12

The long-run aggregate supply curve is determined by all of the following EXCEPT

Accepted Answer

A)  aggregate demand. 
B)  human capital. 
C)  technology. 
D)  the amount of resources that exist in the economy. 
A)  aggregate demand. 
B)  human capital. 
C)  technology. 
D)  the amount of resources that exist in the economy.

Question 13

An increase in the amount of money in circulation would cause a

Accepted Answer

A)  shift of the aggregate demand curve to the right. 
B)  shift of the aggregate demand curve to the left. 
C)  movement up the aggregate demand curve. 
D)  movement down the aggregate demand curve. 
A)  shift of the aggregate demand curve to the right. 
B)  shift of the aggregate demand curve to the left. 
C)  movement up the aggregate demand curve. 
D)  movement down the aggregate demand curve.

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

If you have $10,000 and the Gross Domestic Product (GDP) deflator increases from 100 to 110, then

Accepted Answer

A)  the $10,000 will buy 10 percent less of the goods and services produced by society. 
B)  the $10,000 will buy 10 percent more of the goods and services produced by society. 
C)  the value of the $10,000 increases. 
D)  you will be able to buy fewer goods, but the real value of those goods will increase. 
A)  the $10,000 will buy 10 percent less of the goods and services produced by society. 
B)  the $10,000 will buy 10 percent more of the goods and services produced by society. 
C)  the value of the $10,000 increases. 
D)  you will be able to buy fewer goods, but the real value of those goods will increase.

Question 16

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 17

In the above figure, a movement from point B to point A can be explained by

Accepted Answer

A)  an increase in spending due to a war. 
B)  an increase in spending due to increases in education expenditures. 
C)  an increase in the demand for manufacturing goods due to new technology. 
D)  a drop in the price level. 
A)  an increase in spending due to a war. 
B)  an increase in spending due to increases in education expenditures. 
C)  an increase in the demand for manufacturing goods due to new technology. 
D)  a drop in the price level.

Question 18

Which of the following will NOT shift the aggregate demand curve?

Accepted Answer

A)  a change in the price level 
B)  a change in tax rates 
C)  a change in the amount of money in circulation 
D)  a change in real interest rates 
A)  a change in the price level 
B)  a change in tax rates 
C)  a change in the amount of money in circulation 
D)  a change in real interest rates

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

The open economy effect suggests that

Other things being equal, along an aggregate demand curve, a higher price level is associated with

According to the real-balance effect, the value of money balances held by individuals

-The above figure shows a

The total of all planned production for the economy is

A persistent decline in the price level resulting from economic growth in the presence of stable aggregate demand is known as

-Refer to the above figures. Which panel(s) represent economic growth?

Economic growth can be depicted as

Over the past 40 years, which of the following has the U.S. economy experienced?

We draw the long-run aggregate supply curve as a vertical line to reflect the fact that

Which of the following is a factor that determines the shape of the aggregate demand curve?

The long-run aggregate supply curve is determined by all of the following EXCEPT

An increase in the amount of money in circulation would cause a

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

If you have $10,000 and the Gross Domestic Product (GDP) deflator increases from 100 to 110, then

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

In the above figure, a movement from point B to point A can be explained by

Which of the following will NOT shift the aggregate demand curve?

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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