Deck 19: Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Question 1

Output in the short run exceeds the natural level of output if expected prices

A)exceed actual prices
B)are lower than actual prices
C)are equal to actual prices
D)any of the above

Answer 1

A

Question 2

An increase in the money supply with constant prices leads to a

A)leftward shift in the LM curve
B)movement along a given aggregate demand curve
C)rightward shift in the aggregate demand curve
D)rightward shift in the IS curve

Answer 2

C

Question 3

An increase in government expenditures leads to

A)a rightward shift in the IS curve
B)a rightward shift in the AD curve
C)an increase in the level of national income
D)all of the above

Answer 3

D

Question 4

In general,as the economy expends or contracts over the business cycle

A)prices change
B)prices remain unchanged except in a recession
C)prices remain unchanged until the economy reaches full employment
D)all of the above

Question 5

A nation's output in the short-run can

A)exceed its natural level
B)fall short of its natural level
C)equal to its natural level
D)any of the above

Question 6

The aggregate demand curve for an open economy under fixed exchange rates is

A)less elastic than if the economy were closed
B)more elastic than in the economy were closed
C)more elastic than in the economy operated with flexible exchange rates
D)all of the above

Question 7

An autonomous short-term capital outflow under flexible exchange rates causes the nation's aggregate demand curve to

A)shift to the right
B)shift to the left
C)remain unchanged
D)any of the above

Question 8

Which of the following statements is false?

A)a nations' natural level of output can increase as a result of growth
B)imperfection in product markets can lead to temporary deviations in a nation's output from its long-run natural level
C)sticky wages cannot lead to temporary deviations in a nation's output from its long-run natural level
D)none of the above.

Question 9

The aggregate demand curve (AD)for an open economy is derived from the

A)IS curve
B)LM curve
C)BP curve
D)all of the above

Question 10

Which of the following statements is false?

A)expansionary fiscal or monetary policy can increase the nation's output temporarily above its natural level
B)expansionary fiscal or monetary policy can used to correct a recession but only at the expense of higher prices in the nation
C)a recession cannot be eliminated automatically even if domestic prices are flexible downward
D)when prices are not flexible downward inflation may be less costly that recession

Question 11

A reduction in the general price level with a constant money supply is shown by a

A)leftward shift in the LM curve
B)movement down along a given aggregate demand curve
C)rightward shift in the aggregate supply curve
D)a rightward shift in the IS curve

Question 12

Which of the following statements is false with regard to the effect of macroeconomic policies?

A)they generally cause shifts in the aggregate demand curve
B)they can possibly increase long-run growth
C)they can help correct supply shocks that increases production costs but only at the expense of even higher inflation
D)they always cause shifts in the long-run aggregate supply curve

Question 13

The aggregate demand curve (AD)for closed economy is derived from the

A)IS curve
B)LM curve
C)FE curve
D)IS and LM curves

Question 14

With high short-term international capital flows,fixed exchange rates,and flexible prices

A)monetary policy is effective
B)fiscal policy is effective
C)both fiscal and monetary policies are effective
D)neither fiscal policy nor monetary policies are effective

Question 15

An autonomous improvement in the nation's trade balance under fixed exchange rates will cause the nation's aggregate demand curve to

A)shift to the right
B)shift to the left
C)remain unchanged
D)any of the above