Question 1

Exhibit 8-2
 
-Refer to Exhibit 8-2. What word (rises or falls)  should go in blank (5)  and blank (6) , respectively, to summarize the resulting impact on short run equilibrium of the given change in the economy?

Accepted Answer

A)  rises; rises
B)  falls; falls
C)  rises; falls
D)  falls; risesE) C) and D)
F) None of the above

Question 2

Individuals' expectations of lower future prices is a

Accepted Answer

A)  rightward shifter of the AD curve.
B)  leftward shifter of the AD curve.
C)  reason for moving up along a given AD curve.
D)  reason for moving down along a given AD curve.E) A) and B)
F) B) and C)

Question 3

The real balance effect is the change in

Accepted Answer

A)  purchasing power that results from a change in income.
B)  the amount of money one has that results from a change in income.
C)  purchasing power that results from a change in the price level.
D)  the amount of money one has that results from a change in the price level.
E)  none of the aboveF) C) and D)
G) A) and C)

Question 4

Starting from short-run equilibrium, the following occurs: individuals expect higher (future)  incomes and wage rates rise. What is the effect on the price level and Real GDP in the short run?

Accepted Answer

A)  The price level rises and Real GDP rises.
B)  The price level falls and Real GDP falls.
C)  The price level rises, but the effect on Real GDP cannot be determined.
D)  Real GDP rises, but the effect on the price level cannot be determined.
E)  Real GDP falls, but the effect on the price level cannot be determined.F) D) and E)
G) All of the above

Question 5

A short-run aggregate supply curve shows the

Accepted Answer

A)  amount of a particular good producers are willing and able to buy at a particular price, ceteris paribus.
B)  real output (Real GDP)  producers are willing and able to sell at different price levels, ceteris paribus.
C)  real output (Real GDP)  people are willing and able to buy and to sell at different price levels, ceteris paribus.
D)  real output (Real GDP)  people are willing and able to buy at different price levels, ceteris paribus.E) C) and D)
F) A) and B)

Question 6

Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar. In this situation, the dollar has __________________, making American goods __________ expensive for Mexicans.

Accepted Answer

A)  appreciated; less
B)  appreciated; more
C)  depreciated; less
D)  depreciated; moreE) B) and C)
F) All of the above

Question 7

Which of the following best describes how the international trade effect works?

Accepted Answer

A)  The price level in the U.S.falls relative to foreign price levels, U.S.goods become relatively less expensive than foreign goods, and both Americans and foreigners buy more U.S.goods.
B)  The price level in the U.S.falls relative to foreign price levels, U.S.goods become relatively more expensive than foreign goods, and both Americans and foreigners buy more U.S.goods.
C)  The price level in the U.S.rises relative to foreign price levels, U.S.goods become relatively more expensive than foreign goods, and both Americans and foreigners buy fewer U.S.goods.
D)  The price level in the U.S.rises relative to foreign price levels, U.S.goods become relatively more expensive than foreign goods, and both Americans and foreigners buy more U.S.goods.
E)  a and cF) B) and C)
G) None of the above

Question 8

Explain why the short-run aggregate supply curve (SRAS) is upward sloping, while the long-run aggregate supply (LRAS) curve is a vertical line.

Accepted Answer

The SRAS curve slopes upward because of ...

Question 9

Aggregate demand refers to the

Accepted Answer

A)  quantity demanded of all goods and services at various price levels, ceteris paribus.
B)  quantity demanded of all goods and services at a particular price level, ceteris paribus.
C)  quantity demanded of Real GDP at various price levels, ceteris paribus.
D)  various amounts of GDP that are demanded at various price levels, ceteris paribus.
E)  a and cF) C) and E)
G) All of the above

Question 10

One reason the AD curve is downward sloping is the __________ effect.

Accepted Answer

A)  wage rate
B)  productivity
C)  interest rate
D)  structural
E)  none of the aboveF) A) and B)
G) A) and C)

Question 11

Which set of changes is definitely predicted to lower Real GDP in the short run?

Accepted Answer

A)  Interest rates rise and wage rates fall.
B)  Interest rates rise and there is a beneficial supply shock.
C)  Interest rates rise and labor productivity increases.
D)  Interest rates rise and individuals expect lower (future)  incomes.
E)  c and dF) A) and D)
G) C) and D)

Question 12

Which of the following would cause a rightward shift of the AD curve?

Accepted Answer

A)  an increase in the price level
B)  a decrease in the price level
C)  an increase in imports
D)  a decrease in the quantity of money available in the economy
E)  an increase in government purchases of goods and servicesF) A) and E)
G) C) and D)

Question 13

Unusually good weather that improves crop production and a major oil discovery are both examples of a beneficial supply shock.

Accepted Answer

A) True 
 B)False

Question 14

The real balance effect is one of the

Accepted Answer

A)  reasons why an AD curve is downward-sloping.
B)  shifters of an AD curve.
C)  reasons why a short-run aggregate supply curve can be derived.
D)  shifters of a short-run aggregate supply curve.E) B) and D)
F) B) and C)

Question 15

As interest rates rise, the ____________ curve shifts _____________ resulting in a(n)  _________________ in the price level and a(n)  ________________ in Real GDP.

Accepted Answer

A)  AD; leftward; decrease; decrease
B)  AD; rightward; increase; increase
C)  SRAS; rightward; decrease; increase
D)  SRAS; leftward; increase; decreaseE) A) and B)
F) None of the above

Question 16

As the price level rises, ceteris paribus, people holding some of their wealth in monetary form become

Accepted Answer

A)  less wealthy and they buy less.
B)  more wealthy and they buy more.
C)  less wealthy and they buy more.
D)  more wealthy and they buy less.E) C) and D)
F) B) and D)

Question 17

If velocity is rising, an increase in one spending component can occur without requiring other spending components to decline.

Accepted Answer

A) True 
 B)False

Question 18

Exhibit 8-2
 
-Refer to Exhibit 8-2. What word (rises or falls)  should go in blank (3)  and blank (4) , respectively, to summarize the resulting impact on short run equilibrium of the given change in the economy?

Accepted Answer

A)  rises; rises
B)  falls; falls
C)  rises; falls
D)  falls; risesE) C) and D)
F) All of the above

Question 19

The short-run aggregate supply curve shows the various amounts of real output that producers are willing to

Accepted Answer

A)  sell at different profit levels.
B)  sell at different price levels.
C)  buy at different income levels.
D)  buy at different price levels.E) None of the above
F) B) and C)

Question 20

Suppose the real exchange rate of 105 Japanese yen to the dollar changes to 115 yen to the dollar. In this situation, the dollar has _________________, making Japanese goods __________ expensive for Americans.

Accepted Answer

A)  appreciated; less
B)  appreciated; more
C)  depreciated; less
D)  depreciated; moreE) A) and B)
F) A) and C)

Exam 8: Aggregate Demand and Aggregate Supply

Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar. In this situation, the dollar has __________________, making American goods __________ expensive for Mexicans.

Correct AnswerverifiedShow Answer

As interest rates rise, the ____________ curve shifts _____________ resulting in a(n) _________________ in the price level and a(n) ________________ in Real GDP.

Correct AnswerverifiedShow Answer

Which of the following would cause a rightward shift of the AD curve?

Correct AnswerverifiedShow Answer

Aggregate demand refers to the

Correct AnswerverifiedShow Answer

A short-run aggregate supply curve shows the

Correct AnswerverifiedShow Answer

Unusually good weather that improves crop production and a major oil discovery are both examples of a beneficial supply shock.

Correct AnswerverifiedShow Answer

One reason the AD curve is downward sloping is the __________ effect.

Correct AnswerverifiedShow Answer

If velocity is rising, an increase in one spending component can occur without requiring other spending components to decline.

Correct AnswerverifiedShow Answer

As the price level rises, ceteris paribus, people holding some of their wealth in monetary form become

Correct AnswerverifiedShow Answer

Suppose the real exchange rate of 105 Japanese yen to the dollar changes to 115 yen to the dollar. In this situation, the dollar has _________________, making Japanese goods __________ expensive for Americans.

Correct AnswerverifiedShow Answer

The real balance effect is the change in

Correct AnswerverifiedShow Answer

The short-run aggregate supply curve shows the various amounts of real output that producers are willing to

Correct AnswerverifiedShow Answer

Explain why the short-run aggregate supply curve (SRAS) is upward sloping, while the long-run aggregate supply (LRAS) curve is a vertical line.

Correct AnswerverifiedThe SRAS curve slopes upward because of ...View AnswerShow Answer

The real balance effect is one of the

Correct AnswerverifiedShow Answer

Individuals' expectations of lower future prices is a

Correct AnswerverifiedShow Answer

Exhibit 8-2 -Refer to Exhibit 8-2. What word (rises or falls) should go in blank (5) and blank (6) , respectively, to summarize the resulting impact on short run equilibrium of the given change in the economy?

Correct AnswerverifiedShow Answer

Exhibit 8-2 -Refer to Exhibit 8-2. What word (rises or falls) should go in blank (3) and blank (4) , respectively, to summarize the resulting impact on short run equilibrium of the given change in the economy?

Correct AnswerverifiedShow Answer

Which set of changes is definitely predicted to lower Real GDP in the short run?

Correct AnswerverifiedShow Answer

Starting from short-run equilibrium, the following occurs: individuals expect higher (future) incomes and wage rates rise. What is the effect on the price level and Real GDP in the short run?

Correct AnswerverifiedShow Answer

Which of the following best describes how the international trade effect works?

Correct AnswerverifiedShow Answer

Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar. In this situation, the dollar has ________, making American goods expensive for Mexicans.

Correct Answer
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As interest rates rise, the ______ curve shifts _ resulting in a(n) _ in the price level and a(n) ______ in Real GDP.

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Suppose the real exchange rate of 105 Japanese yen to the dollar changes to 115 yen to the dollar. In this situation, the dollar has _______, making Japanese goods expensive for Americans.

Correct Answer
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The SRAS curve slopes upward because of ...
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