Question 1

The AD curve shows the various amounts of real output that people are willing and able to

Accepted Answer

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

Question 2

There is a rise in labor productivity in the economy.As a result,in the short run Real GDP __________ and the price level __________.

Accepted Answer

A)  rises; falls 
B)  falls; rises 
C)  falls; falls 
D)  rises; rises 
E)  remains constant; remains constant 
A)  rises; falls 
B)  falls; rises 
C)  falls; falls 
D)  rises; rises 
E)  remains constant; remains constant

Question 3

One of the reasons why the AD curve slopes downward is that as the

Accepted Answer

A)  price level rises,purchasing power rises. 
B)  price level falls,purchasing power rises. 
C)  nation's income level rises,purchasing power rises. 
D)  nation's income level rises,purchasing power falls. 
E)  This is a trick question,because the AD curve is upward sloping. 
A)  price level rises,purchasing power rises. 
B)  price level falls,purchasing power rises. 
C)  nation's income level rises,purchasing power rises. 
D)  nation's income level rises,purchasing power falls. 
E)  This is a trick question,because the AD curve is upward sloping.

Question 4

If businesses buy fewer capital goods,and nothing else changes,then total expenditures on U.S.goods and services will decrease.And if total expenditures decrease,then __________ will decrease; consequently,the __________ curve will shift __________.

Accepted Answer

A)  aggregate demand (A
D) ; AD; rightward 
B)  short-run aggregate supply (SRAS); SRAS; leftward 
C)  aggregate demand (A
D) ; AD; leftward 
D)  interest rates; AD; leftward 
E)  prices; AD; rightward 
A)  aggregate demand (A
D) ; AD; rightward 
B)  short-run aggregate supply (SRAS); SRAS; leftward 
C)  aggregate demand (A
D) ; AD; leftward 
D)  interest rates; AD; leftward 
E)  prices; AD; rightward

Question 5

Which of the following will cause a movement from one point on an AD curve to another point on the same AD curve?

Accepted Answer

A)  a change in consumption 
B)  a change in government expenditures 
C)  a change in net exports 
D)  a change in the price level 
E)  all of the above 
A)  a change in consumption 
B)  a change in government expenditures 
C)  a change in net exports 
D)  a change in the price level 
E)  all of the above

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 Mexican goods __________ expensive for Americans.

Accepted Answer

A)  appreciated; less 
B)  appreciated; more 
C)  depreciated; less 
D)  depreciated; more 
A)  appreciated; less 
B)  appreciated; more 
C)  depreciated; less 
D)  depreciated; more

Question 7

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. 
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.

Question 8

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 above 
A)  wage rate 
B)  productivity 
C)  interest rate 
D)  structural 
E)  none of the above

Question 9

If consumption changes because of a change in the price level,then the

Accepted Answer

A)  economy moves from one point on an AD curve to another point on the same curve. 
B)  AD curve shifts. 
C)  economy moves from one point on a SRAS curve to another point on the same curve. 
D)  SRAS curve shifts. 
E)  none of the above 
A)  economy moves from one point on an AD curve to another point on the same curve. 
B)  AD curve shifts. 
C)  economy moves from one point on a SRAS curve to another point on the same curve. 
D)  SRAS curve shifts. 
E)  none of the above

Question 10

As the interest rate rises,the cost of a given investment project __________ and businesses invest __________.

Accepted Answer

A)  rises; more 
B)  rises; less 
C)  falls; more 
D)  falls; less 
A)  rises; more 
B)  rises; less 
C)  falls; more 
D)  falls; less

Question 11

Which set of changes will definitely shift the aggregate demand (AD)curve to the right?

Accepted Answer

A)  Business taxes decline and foreign real national income rises. 
B)  Businesses become pessimistic about future sales and the U.S.dollar depreciates. 
C)  Wealth increases and individuals expect higher (future)incomes. 
D)  a and b 
E)  a and c 
A)  Business taxes decline and foreign real national income rises. 
B)  Businesses become pessimistic about future sales and the U.S.dollar depreciates. 
C)  Wealth increases and individuals expect higher (future)incomes. 
D)  a and b 
E)  a and c

Question 12

The aggregate demand (AD)curve has shifted to the right.This is a result of

Accepted Answer

A)  total expenditures increasing at a given price level. 
B)  total expenditures decreasing at a given price level. 
C)  the real balance effect. 
D)  the interest rate effect 
E)  b and c 
A)  total expenditures increasing at a given price level. 
B)  total expenditures decreasing at a given price level. 
C)  the real balance effect. 
D)  the interest rate effect 
E)  b and c

Question 13

When wage rates rise the short-run aggregate supply curve shifts to the right.

Accepted Answer

A) True 
 B)False

Question 14

If the nominal wage is $24 per hour and the price level (as measured by a price index)is 8,it follows that the real wage is _________ per hour.

Accepted Answer

A)  $24.00 
B)  $6.00 
C)  $3.00 
D)  $16.00 
E)  $4.00 
A)  $24.00 
B)  $6.00 
C)  $3.00 
D)  $16.00 
E)  $4.00

Question 15

An increase in investment caused by a factor other than a change in the price level

Accepted Answer

A)  shifts the AD curve to the right. 
B)  shifts the AD curve to the left. 
C)  causes an upward movement along the existing AD curve. 
D)  causes a downward movement along the existing AD curve. 
E)  none of the above 
A)  shifts the AD curve to the right. 
B)  shifts the AD curve to the left. 
C)  causes an upward movement along the existing AD curve. 
D)  causes a downward movement along the existing AD curve. 
E)  none of the above

Question 16

Business taxes fall.This raises __________,which raises __________ and the __________ curve shifts rightward.

Accepted Answer

A)  consumption; aggregate demand (A
D) ; AD 
B)  investment; government purchases; AD 
C)  investment; aggregate demand (A
D) ; AD 
D)  net exports; aggregate demand (A
D) ; AD 
E)  none of the above 
A)  consumption; aggregate demand (A
D) ; AD 
B)  investment; government purchases; AD 
C)  investment; aggregate demand (A
D) ; AD 
D)  net exports; aggregate demand (A
D) ; AD 
E)  none of the above

Question 17

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 c 
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 c

Question 18

Business optimism about future sales tends to __________ investment expenditures,shifting the AD curve to the __________.

Accepted Answer

A)  increase; left 
B)  increase; right 
C)  decrease; left 
D)  decrease; right 
A)  increase; left 
B)  increase; right 
C)  decrease; left 
D)  decrease; right

Question 19

The product of ____________________ and _________________ is equal to the total amount of spending in an economy.

Accepted Answer

A)  the money supply; the price level 
B)  velocity; the price level 
C)  the money supply; velocity 
D)  velocity; the level of output 
A)  the money supply; the price level 
B)  velocity; the price level 
C)  the money supply; velocity 
D)  velocity; the level of output

Question 20

When the government lowers income taxes,consumption is ______________,causing a __________ the AD curve.

Accepted Answer

A)  stimulated; rightward shift of 
B)  stimulated; movement down along 
C)  reduced; leftward shift of 
D)  reduced; movement up along 
A)  stimulated; rightward shift of 
B)  stimulated; movement down along 
C)  reduced; leftward shift of 
D)  reduced; movement up along

Exam 8: Production and Costs

The AD curve shows the various amounts of real output that people are willing and able to

There is a rise in labor productivity in the economy.As a result,in the short run Real GDP __________ and the price level __________.

One of the reasons why the AD curve slopes downward is that as the

If businesses buy fewer capital goods,and nothing else changes,then total expenditures on U.S.goods and services will decrease.And if total expenditures decrease,then __________ will decrease; consequently,the __________ curve will shift __________.

Which of the following will cause a movement from one point on an AD curve to another point on the same AD curve?

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 Mexican goods __________ expensive for Americans.

The real balance effect is one of the

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

If consumption changes because of a change in the price level,then the

As the interest rate rises,the cost of a given investment project __________ and businesses invest __________.

Which set of changes will definitely shift the aggregate demand (AD)curve to the right?

The aggregate demand (AD)curve has shifted to the right.This is a result of

When wage rates rise the short-run aggregate supply curve shifts to the right.

If the nominal wage is $24 per hour and the price level (as measured by a price index)is 8,it follows that the real wage is _________ per hour.

An increase in investment caused by a factor other than a change in the price level

Business taxes fall.This raises __________,which raises __________ and the __________ curve shifts rightward.

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

Business optimism about future sales tends to __________ investment expenditures,shifting the AD curve to the __________.

The product of ____________________ and _________________ is equal to the total amount of spending in an economy.

When the government lowers income taxes,consumption is ______________,causing a __________ the AD curve.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Perfect Competition

Monopoly

Monopolistic Competition, oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,union,and Labor

The Distribution of Income and Poverty

Interest,rent,and Profit

Market Failure: Externalities, public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks,bonds,futures,and Options

Stocks,bonds,futures,and Options

Filters

There is a rise in labor productivity in the economy.As a result,in the short run Real GDP and the price level .

If businesses buy fewer capital goods,and nothing else changes,then total expenditures on U.S.goods and services will decrease.And if total expenditures decrease,then will decrease; consequently,the curve will shift __.

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 Mexican goods expensive for Americans.

As the interest rate rises,the cost of a given investment project and businesses invest .

Business taxes fall.This raises ,which raises and the __ curve shifts rightward.

Business optimism about future sales tends to investment expenditures,shifting the AD curve to the .

The product of ____ and _ is equal to the total amount of spending in an economy.

When the government lowers income taxes,consumption is ____,causing a the AD curve.