Question 1

The interest rate effect shows that if the price level increases,

Accepted Answer

A) consumers and businesses will increase their spending to buy the same amount of goods as before to make up for the higher interest rates. 
B) consumers and businesses will decrease their spending as the interest rate increases,thereby pushing up the cost of acquiring funds. 
C) U.S.exports and imports will both decrease. 
D) the real value of financial assets will increase. 
A) consumers and businesses will increase their spending to buy the same amount of goods as before to make up for the higher interest rates. 
B) consumers and businesses will decrease their spending as the interest rate increases,thereby pushing up the cost of acquiring funds. 
C) U.S.exports and imports will both decrease. 
D) the real value of financial assets will increase.

Question 2

A shift away from expenditures on domestic goods and a shift toward expenditures on foreign goods when the domestic price level increases is known as

Accepted Answer

A) the real-balance effect. 
B) the interest rate effect. 
C) the open economy effect. 
D) demand side inflation. 
A) the real-balance effect. 
B) the interest rate effect. 
C) the open economy effect. 
D) demand side inflation.

Question 3

The aggregate demand curve

Accepted Answer

A) is like individual demand curves in that prices of other goods are held constant. 
B) is like individual demand curves in that income is constant. 
C) differs from individual demand curves in that the aggregate demand curve is not downward sloping. 
D) differs from individual demand curves in that the aggregate demand curve looks at the entire circular flow of income and product while the individual demand curve looks at only one good. 
A) is like individual demand curves in that prices of other goods are held constant. 
B) is like individual demand curves in that income is constant. 
C) differs from individual demand curves in that the aggregate demand curve is not downward sloping. 
D) differs from individual demand curves in that the aggregate demand curve looks at the entire circular flow of income and product while the individual demand curve looks at only one good.

Question 4

To find an economy's long-run equilibrium price level,locate the point where ________ and ________ cross and look to the left.

Accepted Answer

A) demand;supply 
B) aggregate demand;short-run aggregate supply 
C) aggregate demand;price level 
D) long-run aggregate supply;aggregate demand 
A) demand;supply 
B) aggregate demand;short-run aggregate supply 
C) aggregate demand;price level 
D) long-run aggregate supply;aggregate demand

Question 5

The aggregate demand curve gives the

Accepted Answer

A) planned purchases for all goods and services in the economy,holding other things such as the price level constant. 
B) planned purchase rates for all goods and services in the economy at various price levels. 
C) demand for goods and services by the government at various price levels. 
D) amount of all goods everyone wants to buy at various income levels. 
A) planned purchases for all goods and services in the economy,holding other things such as the price level constant. 
B) planned purchase rates for all goods and services in the economy at various price levels. 
C) demand for goods and services by the government at various price levels. 
D) amount of all goods everyone wants to buy at various income levels.

Question 6

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 7

The long run aggregate supply curve is vertical because

Accepted Answer

A) the production possibilities curve is vertical. 
B) the aggregate demand curve is downward sloping. 
C) technology increases at a constant rate. 
D) a change in the level of prices will have no effect on real output in the long-run. 
A) the production possibilities curve is vertical. 
B) the aggregate demand curve is downward sloping. 
C) technology increases at a constant rate. 
D) a change in the level of prices will have no effect on real output in the long-run.

Question 8

Explain how an economy can experience long-run economic growth and deflation at the same time.

Accepted Answer

If aggregate demand remains relatively c

Question 9

The real-balance effect indicates that at higher price levels

Accepted Answer

A) the real value of money holdings fall,resulting in decreased spending. 
B) the real value of money holdings increase,resulting in increased saving. 
C) the purchasing power of money will increase. 
D) the value of the dollar will increase. 
A) the real value of money holdings fall,resulting in decreased spending. 
B) the real value of money holdings increase,resulting in increased saving. 
C) the purchasing power of money will increase. 
D) the value of the dollar will increase.

Question 10

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

Accepted Answer

The long-run aggregate supply curve is v

Question 11

Economic growth can be shown by

Accepted Answer

A) a leftward shift in the aggregate supply curve. 
B) no change in the aggregate supply curve. 
C) a rightward shift in the aggregate supply curve. 
D) a leftward shift in the production possibilities curve. 
A) a leftward shift in the aggregate supply curve. 
B) no change in the aggregate supply curve. 
C) a rightward shift in the aggregate supply curve. 
D) a leftward shift in the production possibilities curve.

Question 12

Which of the following statements is TRUE?

Accepted Answer

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

Question 13

The total of all planned expenditures in the entire economy is

Accepted Answer

A) the open economy effect. 
B) LRAS. 
C) aggregate supply. 
D) aggregate demand. 
A) the open economy effect. 
B) LRAS. 
C) aggregate supply. 
D) aggregate demand.

Question 14

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 15

An indirect effect of an increase in the price level works through

Accepted Answer

A) people substituting out of domestic goods and into foreign goods as exchange rates rise. 
B) changes in trade balances as domestic goods become more expensive,causing interest rates to move in the opposite direction from the change in the exchange rate. 
C) interest rates as people save more as the higher prices make their money balances less attractive. 
D) interest rates as people borrow to maintain their money balances,bidding up interest rates and reducing total planned real expenditures. 
A) people substituting out of domestic goods and into foreign goods as exchange rates rise. 
B) changes in trade balances as domestic goods become more expensive,causing interest rates to move in the opposite direction from the change in the exchange rate. 
C) interest rates as people save more as the higher prices make their money balances less attractive. 
D) interest rates as people borrow to maintain their money balances,bidding up interest rates and reducing total planned real expenditures.

Question 16

How can the long-run equilibrium level of real Gross Domestic Product (GDP)increase without the price level changing?

Accepted Answer

Since the long-run aggregate supply curv

Question 17

Which of the following cause the aggregate demand curve to slope downward and to the right?

Accepted Answer

A) the prices of key goods 
B) the interest rate effect 
C) military expenditures of the government 
D) the demand-shock effect 
A) the prices of key goods 
B) the interest rate effect 
C) military expenditures of the government 
D) the demand-shock effect

Question 18

The horizontal axis for an aggregate demand curve measures

Accepted Answer

A) quantity demanded of the representative good. 
B) real Gross Domestic Product (GDP). 
C) output of all goods and services measured as a quantity index. 
D) disposable personal income. 
A) quantity demanded of the representative good. 
B) real Gross Domestic Product (GDP). 
C) output of all goods and services measured as a quantity index. 
D) disposable personal income.

Question 19

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

Accepted Answer

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

Question 20

What will be the result in a growing economy if increases in aggregate demand outpace rightward shifts of the long-run aggregate supply curve?

Accepted Answer

A) secular deflation 
B) inflation accompanied by declines in real GDP 
C) inflation accompanied by increases in real GDP 
D) a decline in consumption spending 
A) secular deflation 
B) inflation accompanied by declines in real GDP 
C) inflation accompanied by increases in real GDP 
D) a decline in consumption spending

The interest rate effect shows that if the price level increases,

A shift away from expenditures on domestic goods and a shift toward expenditures on foreign goods when the domestic price level increases is known as

The aggregate demand curve

To find an economy's long-run equilibrium price level,locate the point where and cross and look to the left.

The aggregate demand curve gives the

The open economy effect suggests that

The long run aggregate supply curve is vertical because

Explain how an economy can experience long-run economic growth and deflation at the same time.

The real-balance effect indicates that at higher price levels

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

Economic growth can be shown by

Which of the following statements is TRUE?

The total of all planned expenditures in the entire economy is

Economic growth can be depicted as

An indirect effect of an increase in the price level works through

How can the long-run equilibrium level of real Gross Domestic Product (GDP)increase without the price level changing?

Which of the following cause the aggregate demand curve to slope downward and to the right?

The horizontal axis for an aggregate demand curve measures

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

What will be the result in a growing economy if increases in aggregate demand outpace rightward shifts of the long-run aggregate supply 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

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

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

The interest rate effect shows that if the price level increases,

A shift away from expenditures on domestic goods and a shift toward expenditures on foreign goods when the domestic price level increases is known as

The aggregate demand curve

To find an economy's long-run equilibrium price level,locate the point where ________ and ________ cross and look to the left.

The aggregate demand curve gives the

The open economy effect suggests that

The long run aggregate supply curve is vertical because

Explain how an economy can experience long-run economic growth and deflation at the same time.

The real-balance effect indicates that at higher price levels

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

Economic growth can be shown by

Which of the following statements is TRUE?

The total of all planned expenditures in the entire economy is

Economic growth can be depicted as

An indirect effect of an increase in the price level works through

How can the long-run equilibrium level of real Gross Domestic Product (GDP)increase without the price level changing?

Which of the following cause the aggregate demand curve to slope downward and to the right?

The horizontal axis for an aggregate demand curve measures

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

What will be the result in a growing economy if increases in aggregate demand outpace rightward shifts of the long-run aggregate supply 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

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

To find an economy's long-run equilibrium price level,locate the point where and cross and look to the left.