Question 1

Steadily improving improvements in technology, other things being equal, will result in

Accepted Answer

A)  no change in the price level and steadily increasing output. 
B)  persistent deflation 
C)  steadily rising price level (inflation) and steadily increasing output. 
D)  a steadily falling price level with no change in output. 
A)  no change in the price level and steadily increasing output. 
B)  persistent deflation 
C)  steadily rising price level (inflation) and steadily increasing output. 
D)  a steadily falling price level with no change in output.

Question 2

A fall 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 total planned real expenditures. 
B)  causes exports to rise and imports to fall, leading to an increase in total planned real expenditures. 
C)  leads to an increase in total planned real expenditures because of the indirect effect. 
D)  causes total planned real expenditures 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 total planned real expenditures. 
B)  causes exports to rise and imports to fall, leading to an increase in total planned real expenditures. 
C)  leads to an increase in total planned real expenditures because of the indirect effect. 
D)  causes total planned real expenditures to increase as long as the fall is less than the fall in the price level in other countries.

Question 3

Long-run equilibrium will occur at the price level at which

Accepted Answer

A)  the long-run aggregate demand and short-run aggregate supply curves intersect. 
B)  the aggregate demand and short-run aggregate supply curves intersect. 
C)  the aggregate demand and long-run aggregate supply curves intersect. 
D)  the short-run aggregate supply and long-run aggregate supply curves intersect. 
A)  the long-run aggregate demand and short-run aggregate supply curves intersect. 
B)  the aggregate demand and short-run aggregate supply curves intersect. 
C)  the aggregate demand and long-run aggregate supply curves intersect. 
D)  the short-run aggregate supply and long-run aggregate supply curves intersect.

Question 4

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 5

What is measured on the vertical axis of the aggregate demand graph?

Accepted Answer

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

Question 6

If a nation's production possibilities curve shifts outward, we should expect its long-run aggregate supply curve to

Accepted Answer

A)  have an upward movement along the curve. 
B)  have a downward movement along the curve. 
C)  have a rightward shift. 
D)  have a leftward shift. 
A)  have an upward movement along the curve. 
B)  have a downward movement along the curve. 
C)  have a rightward shift. 
D)  have a leftward shift.

Question 7

When the price level falls

Accepted Answer

A)  imports increase, and exports decrease, which causes a movement up along the aggregate demand curve. 
B)  there is no impact on imports or exports, so there is no associated movement along the aggregate demand curve. 
C)  imports decrease and exports increase, which cause a movement down along the aggregate demand curve. 
D)  imports decrease and exports increase, which cause a movement up along the aggregate demand curve. 
A)  imports increase, and exports decrease, which causes a movement up along the aggregate demand curve. 
B)  there is no impact on imports or exports, so there is no associated movement along the aggregate demand curve. 
C)  imports decrease and exports increase, which cause a movement down along the aggregate demand curve. 
D)  imports decrease and exports increase, which cause a movement up along the aggregate demand curve.

Question 8

The aggregate demand curve plots

Accepted Answer

A)  desired expenditures against production. 
B)  total expenditures against the level of employment. 
C)  planned expenditures against the price level. 
D)  employment against the price level. 
A)  desired expenditures against production. 
B)  total expenditures against the level of employment. 
C)  planned expenditures against the price level. 
D)  employment against the price level.

Question 9

Another term for the real-balance effect is

Accepted Answer

A)  the substitution effect. 
B)  the wealth effect. 
C)  the indirect effect. 
D)  the interest rate effect. 
A)  the substitution effect. 
B)  the wealth effect. 
C)  the indirect effect. 
D)  the interest rate effect.

Question 10

When the economy is in long-run equilibrium, the price level adjusts so as to equate which two values with one another?

Accepted Answer

A)  import and export spending 
B)  the inflation rate and the unemployment rate 
C)  government spending and tax revenues 
D)  total planned real expenditures and total planned production 
A)  import and export spending 
B)  the inflation rate and the unemployment rate 
C)  government spending and tax revenues 
D)  total planned real expenditures and total planned production

Question 11

A higher domestic price level should

Accepted Answer

A)  decrease net exports. 
B)  increase desired investment. 
C)  increase real wealth and consumption. 
D)  none of these. 
A)  decrease net exports. 
B)  increase desired investment. 
C)  increase real wealth and consumption. 
D)  none of these.

Question 12

If the price level increases, then

Accepted Answer

A)  the exchange rate will increase, causing U.S. goods to become cheaper and increasing total planned real expenditures. 
B)  imports increase but exports do not change. Therefore, there is no effect on total planned real expenditures. 
C)  foreign residents buy fewer U.S. goods, leaving more goods for U.S. residents and an increase in total planned real production by firms. 
D)  domestic goods are more expensive relative to foreign goods, which reduces total planed real expenditures. 
A)  the exchange rate will increase, causing U.S. goods to become cheaper and increasing total planned real expenditures. 
B)  imports increase but exports do not change. Therefore, there is no effect on total planned real expenditures. 
C)  foreign residents buy fewer U.S. goods, leaving more goods for U.S. residents and an increase in total planned real production by firms. 
D)  domestic goods are more expensive relative to foreign goods, which reduces total planed real expenditures.

Question 13

The interest rate effect operates through

Accepted Answer

A)  credit markets by changing borrowing costs. 
B)  the purchasing power of individuals' checking accounts. 
C)  government spending levels. 
D)  labor supply. 
A)  credit markets by changing borrowing costs. 
B)  the purchasing power of individuals' checking accounts. 
C)  government spending levels. 
D)  labor supply.

Question 14

The long-run aggregate supply curve is

Accepted Answer

A)  horizontal at the full-employment level of real Gross Domestic Product (GDP). 
B)  vertical at the full-employment level of real Gross Domestic Product (GDP). 
C)  sloping upward due to the effects of price level changes on real Gross Domestic Product (GDP). 
D)  the same as the short run aggregate supply (SRAS) curve. 
A)  horizontal at the full-employment level of real Gross Domestic Product (GDP). 
B)  vertical at the full-employment level of real Gross Domestic Product (GDP). 
C)  sloping upward due to the effects of price level changes on real Gross Domestic Product (GDP). 
D)  the same as the short run aggregate supply (SRAS) curve.

Question 15

If aggregate demand is stable and there is economic growth, the economy will experience

Accepted Answer

A)  secular degeneration. 
B)  secular deflation. 
C)  secular decline. 
D)  secular depreciation. 
A)  secular degeneration. 
B)  secular deflation. 
C)  secular decline. 
D)  secular depreciation.

Question 16

An increase in total planned real expenditures that is caused by a factor other than the price level will lead to the

Accepted Answer

A)  aggregate supply curve shifting to the right. 
B)  aggregate demand curve shifting to the right. 
C)  aggregate supply curve shifting to the left. 
D)  aggregate demand curve shifting to the left. 
A)  aggregate supply curve shifting to the right. 
B)  aggregate demand curve shifting to the right. 
C)  aggregate supply curve shifting to the left. 
D)  aggregate demand curve shifting to the left.

Question 17

The aggregate demand curve is

Accepted Answer

A)  horizontal if full employment exists in the economy. 
B)  vertical if full employment exists in the economy. 
C)  downward sloping because of the real-balance, interest rate, and open economy effects. 
D)  downward sloping because more goods are produced as per unit cost of producing each item falls. 
A)  horizontal if full employment exists in the economy. 
B)  vertical if full employment exists in the economy. 
C)  downward sloping because of the real-balance, interest rate, and open economy effects. 
D)  downward sloping because more goods are produced as per unit cost of producing each item falls.

Question 18

An increase in U.S. prices relative to Japanese prices will

Accepted Answer

A)  increase total planned spending on U.S. goods and services. 
B)  increase U.S. imports and decrease U.S. exports. 
C)  decrease U.S. imports and increase U.S. exports. 
D)  decrease both U.S. exports and imports. 
A)  increase total planned spending on U.S. goods and services. 
B)  increase U.S. imports and decrease U.S. exports. 
C)  decrease U.S. imports and increase U.S. exports. 
D)  decrease both U.S. exports and imports.

Question 19

If the economy grows steadily over several years and at the same time maintains the aggregate demand curve in its present position, then the economy will experience which of the following?

Accepted Answer

A)  inflation 
B)  a stable price level 
C)  secular deflation 
D)  The price level cannot be determined without more information. 
A)  inflation 
B)  a stable price level 
C)  secular deflation 
D)  The price level cannot be determined without more information.

Question 20

Which of the following would likely result in a shift of the aggregate demand curve to the right?

Accepted Answer

A)  a tax cut 
B)  a decrease in job security 
C)  a rise in the real interest rate 
D)  a decrease in the quantity of money in circulation 
A)  a tax cut 
B)  a decrease in job security 
C)  a rise in the real interest rate 
D)  a decrease in the quantity of money in circulation

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

Steadily improving improvements in technology, other things being equal, will result in

A fall in the price level

Long-run equilibrium will occur at the price level at which

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

What is measured on the vertical axis of the aggregate demand graph?

If a nation's production possibilities curve shifts outward, we should expect its long-run aggregate supply curve to

When the price level falls

The aggregate demand curve plots

Another term for the real-balance effect is

When the economy is in long-run equilibrium, the price level adjusts so as to equate which two values with one another?

A higher domestic price level should

If the price level increases, then

The interest rate effect operates through

The long-run aggregate supply curve is

If aggregate demand is stable and there is economic growth, the economy will experience

An increase in total planned real expenditures that is caused by a factor other than the price level will lead to the

The aggregate demand curve is

An increase in U.S. prices relative to Japanese prices will

If the economy grows steadily over several years and at the same time maintains the aggregate demand curve in its present position, then the economy will experience which of the following?

Which of the following would likely result in a shift of the aggregate demand curve to the right?

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

Filters