Question 1

When the U.S. price level falls, the open economy effect indicates that

Accepted Answer

A) U.S. imports will rise. 
B) U.S. residents will move away from domestic goods and buy more foreign goods. 
C) U.S. exports will increase. 
D) foreigners will buy fewer U.S. goods. 
A) U.S. imports will rise. 
B) U.S. residents will move away from domestic goods and buy more foreign goods. 
C) U.S. exports will increase. 
D) foreigners will buy fewer U.S. goods.

Question 2

What would likely happen to the long-run aggregate supply curve if the U.S. federal government increases marginal tax rates on wages?

Accepted Answer

A) The LRAS curve would shift rightward. 
B) The LRAS curve would shift leftward. 
C) The LRAS curve would remain stable while the AD curve would shift leftward. 
D) The LRAS curve would remain stable while the AD curve would shift rightward. 
A) The LRAS curve would shift rightward. 
B) The LRAS curve would shift leftward. 
C) The LRAS curve would remain stable while the AD curve would shift leftward. 
D) The LRAS curve would remain stable while the AD curve would shift rightward.

Question 3

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 4

The aggregate demand curve would shift to the right as a result of

Accepted Answer

A) a drop in the price level. 
B) tax increases. 
C) a decrease in the U.S. real interest rate. 
D) a decrease in the amount of money in circulation. 
A) a drop in the price level. 
B) tax increases. 
C) a decrease in the U.S. real interest rate. 
D) a decrease in the amount of money in circulation.

Question 5

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 6

If the dollar appreciates and foreign goods become less expensive, the total planned expenditures on domestic goods and services will

Accepted Answer

A) fall due to the open economy effect. 
B) fall due to the interest rate effect. 
C) increase due to the open economy effect. 
D) increase due to the interest rate effect. 
A) fall due to the open economy effect. 
B) fall due to the interest rate effect. 
C) increase due to the open economy effect. 
D) increase due to the interest rate effect.

Question 7

When the price level is below the level at which the aggregate demand curve crosses the long run aggregate supply curve,

Accepted Answer

A) there will be no price level change. 
B) there will be pressures that will lead to a shift of either the aggregate demand or the long run aggregate supply curves. 
C) actual real GDP would be less than total planned real expenditures, and the price level will rise. 
D) actual real GDP would exceed total planned real expenditures, and the price level will fall. 
A) there will be no price level change. 
B) there will be pressures that will lead to a shift of either the aggregate demand or the long run aggregate supply curves. 
C) actual real GDP would be less than total planned real expenditures, and the price level will rise. 
D) actual real GDP would exceed total planned real expenditures, and the price level will fall.

Question 8

A weakening in consumer confidence causes 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 along the aggregate demand curve. 
D) movement down along 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 along the aggregate demand curve. 
D) movement down along the aggregate demand curve.

Question 9

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 10

The aggregate demand curve is usually

Accepted Answer

A) vertical. 
B) upward sloping. 
C) downward sloping. 
D) horizontal. 
A) vertical. 
B) upward sloping. 
C) downward sloping. 
D) horizontal.

Question 11

Economic growth causes the

Accepted Answer

A) production possibilities curve to shift rightward and the long-run aggregate supply curve to shift rightward. 
B) production possibilities curve to shift leftward and the long-run aggregate supply curve to shift rightward. 
C) production possibilities curve to shift rightward and the long-run aggregate supply curve to shift leftward. 
D) production possibilities curve to shift leftward and the long-run aggregate supply curve to shift leftward. 
A) production possibilities curve to shift rightward and the long-run aggregate supply curve to shift rightward. 
B) production possibilities curve to shift leftward and the long-run aggregate supply curve to shift rightward. 
C) production possibilities curve to shift rightward and the long-run aggregate supply curve to shift leftward. 
D) production possibilities curve to shift leftward and the long-run aggregate supply curve to shift leftward.

Question 12

What is measured on the horizontal axis when we draw a graph of the long-run aggregate supply curve?

Accepted Answer

A) production of capital goods 
B) production of consumer goods 
C) the price level 
D) real GDP 
A) production of capital goods 
B) production of consumer goods 
C) the price level 
D) real GDP

Question 13

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 14

Long-run aggregate supply and a country's production possibility curve (PPC)

Accepted Answer

A) are closely related. 
B) are inversely related. 
C) have no relationship. 
D) are examples of microeconomic models. 
A) are closely related. 
B) are inversely related. 
C) have no relationship. 
D) are examples of microeconomic models.

Question 15

What is the aggregate demand curve and what does it represent?

Accepted Answer

The aggregate demand curve shows total p

Question 16

"The aggregate demand curve slopes down for the same reason that the individual demand curve for a good slopes down." Do you agree or disagree with this statement?
 Why?

Accepted Answer

Disagree. The aggregate demand curve doe

Question 17

When the price level is below the level at which the aggregate demand curve crosses the long run aggregate supply curve

Accepted Answer

A) there will be no price level change. 
B) there will be pressures that will lead to a shift of either the aggregate demand or the long run aggregate supply curves. 
C) total planned real expenditures will exceed actual real GDP, and the price level will increase. 
D) total planned real expenditure will be lower than actual real GDP, and the price level will increase. 
A) there will be no price level change. 
B) there will be pressures that will lead to a shift of either the aggregate demand or the long run aggregate supply curves. 
C) total planned real expenditures will exceed actual real GDP, and the price level will increase. 
D) total planned real expenditure will be lower than actual real GDP, and the price level will increase.

Question 18

The real-balance effect shows that

Accepted Answer

A) aggregate demand is upward sloping. 
B) a higher price level leads to higher interest rates. 
C) a lower price level will increase the purchasing power of currency and increase personal consumption. 
D) consumption and the price level are positively correlated. 
A) aggregate demand is upward sloping. 
B) a higher price level leads to higher interest rates. 
C) a lower price level will increase the purchasing power of currency and increase personal consumption. 
D) consumption and the price level are positively correlated.

Question 19

Total planned real expenditures measured along the aggregate demand curve are made up of

Accepted Answer

A) consumption spending, investment spending, government spending, and net export spending. 
B) consumption spending, income, government spending, and net export spending. 
C) consumption spending, saving, investment spending, and government spending. 
D) consumption spending, factor payments, investment spending, and net export spending. 
A) consumption spending, investment spending, government spending, and net export spending. 
B) consumption spending, income, government spending, and net export spending. 
C) consumption spending, saving, investment spending, and government spending. 
D) consumption spending, factor payments, investment spending, and net export spending.

Question 20

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

Accepted Answer

If aggregate demand remains relatively c

When the U.S. price level falls, the open economy effect indicates that

What would likely happen to the long-run aggregate supply curve if the U.S. federal government increases marginal tax rates on wages?

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

The aggregate demand curve would shift to the right as a result of

The interest rate effect operates through

If the dollar appreciates and foreign goods become less expensive, the total planned expenditures on domestic goods and services will

When the price level is below the level at which the aggregate demand curve crosses the long run aggregate supply curve,

A weakening in consumer confidence causes a

The horizontal axis for an aggregate demand curve measures

The aggregate demand curve is usually

Economic growth causes the

What is measured on the horizontal axis when we draw a graph of the long-run aggregate supply curve?

The aggregate demand curve

Long-run aggregate supply and a country's production possibility curve (PPC)

What is the aggregate demand curve and what does it represent?

"The aggregate demand curve slopes down for the same reason that the individual demand curve for a good slopes down." Do you agree or disagree with this statement? Why?

When the price level is below the level at which the aggregate demand curve crosses the long run aggregate supply curve

The real-balance effect shows that

Total planned real expenditures measured along the aggregate demand curve are made up of

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

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

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

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Exam 9: Real GDP and the Price Level in the Long Run

When the U.S. price level falls, the open economy effect indicates that

What would likely happen to the long-run aggregate supply curve if the U.S. federal government increases marginal tax rates on wages?

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

The aggregate demand curve would shift to the right as a result of

The interest rate effect operates through

If the dollar appreciates and foreign goods become less expensive, the total planned expenditures on domestic goods and services will

When the price level is below the level at which the aggregate demand curve crosses the long run aggregate supply curve,

A weakening in consumer confidence causes a

The horizontal axis for an aggregate demand curve measures

The aggregate demand curve is usually

Economic growth causes the

What is measured on the horizontal axis when we draw a graph of the long-run aggregate supply curve?

The aggregate demand curve

Long-run aggregate supply and a country's production possibility curve (PPC)

What is the aggregate demand curve and what does it represent?

"The aggregate demand curve slopes down for the same reason that the individual demand curve for a good slopes down." Do you agree or disagree with this statement? Why?

When the price level is below the level at which the aggregate demand curve crosses the long run aggregate supply curve

The real-balance effect shows that

Total planned real expenditures measured along the aggregate demand curve are made up of

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

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

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