Question 1

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

Question 2

Which of the following statements represents a correct and sequentially accurate economic explanation?

Accepted Answer

A) If government purchases rise, total expenditures on goods and services rises, and the AD curve shifts leftward. 
B) If government purchases rise, total expenditures on goods and services rises, and the AD curve shifts rightward. 
C) If consumption rises, total expenditures on goods and services rises, and the AD curve shifts rightward. 
D) If consumption rises, total expenditures on goods and services rises, and the quantity demanded of Real GDP rises. 
E) b and c

Question 3

Some of the factors that can shift the short-run aggregate supply curve can also cause a shift in the long-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following best describes how the real balance effect works?

Accepted Answer

A) The price level falls, purchasing power rises, a person's monetary wealth rises, and the person buys fewer goods and services. 
B) The price level rises, purchasing power rises, a person's monetary wealth decreases, and the person buys more goods and services. 
C) The price level rises, purchasing power falls, a person's monetary wealth falls, and the person buys fewer goods and services. 
D) The price level falls, purchasing power rises, a person's monetary wealth falls, and the person buys fewer goods and services. 
E) none of the above

Question 5

As interest rates drop, households tend to borrow more and businesses tend to borrow less.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 8-4
 
-Refer to Exhibit 8-4. A movement from point A to point B on SRAS1 could have been the result of

Accepted Answer

A) a decrease in the price level. 
B) an increase in the price level. 
C) an adverse supply shock. 
D) a beneficial supply shock.

Question 7

The level of Real GDP that the economy produces in long-run equilibrium is Natural Real GDP.

Accepted Answer

A) True 
 B)False

Question 8

Starting from short-run equilibrium, the following occurs: personal income taxes are cut, business taxes are cut, and labor productivity rises. What is the effect on the price level and Real GDP in the short run?

Accepted Answer

A) Real GDP rises and the price level necessarily falls. 
B) Real GDP rises and the price level necessarily rises. 
C) Real GDP falls and the price level necessarily remains the same. 
D) Real GDP rises and the effect on the price level cannot be determined. 
E) Real GDP rises and the price level necessarily remains the same.

Question 9

Which of the following statements is false?

Accepted Answer

A) Real GDP is the quantity of goods and services valued in base-year prices or base-year dollars. 
B) "Aggregate demand" and the "quantity demanded of Real GDP" are the same. 
C) According to the aggregate demand (A
D)  curve, the quantity demanded of Real GDP and the price level are inversely related. 
D) Real GDP is denominated in current-year prices. 
E) b and d

Question 10

Starting from short-run equilibrium, the following occurs: the U.S. dollar depreciates and wage rates rise. Moreover, the effect on the economy from the dollar depreciating is stronger than the effect on the economy from rising wage rates.What is the effect on the price level and Real GDP in the short run?

Accepted Answer

A) The price level falls and Real GDP falls. 
B) The price level rises and Real GDP falls. 
C) The price level falls and Real GDP rises. 
D) The price level rises and Real GDP rises. 
E) none of the above

Question 11

In a two-country world, a decrease in foreign input prices, ceteris paribus,

Accepted Answer

A) shifts the SRAS curve leftward, causing the price level to increase. 
B) shifts the SRAS curve leftward, causing the price level to decrease. 
C) shifts the SRAS curve rightward, causing the price level to increase. 
D) shifts the SRAS curve rightward, causing the price level to decrease. 
E) does not affect the SRAS curve or the price level.

Question 12

Which of the following statements represents a correct and sequentially accurate economic explanation?

Accepted Answer

A) The (U.S.) dollar appreciates, net exports rise, total expenditures on goods and services rises, AD rises, and the AD curve shifts rightward. 
B) The interest rate falls, investment rises, total expenditures on goods and services rises, AD falls, and the AD curve shifts leftward. 
C) Wealth increases, consumption rises, total expenditures on goods and services rises, AD falls, and the AD curve shifts rightward. 
D) (Business) expectations about future sales become more positive, investment rises, total expenditures on goods and services rises, AD rises, and the AD curve shifts rightward. 
E) Foreign real national income rises, net exports rise, total expenditures on goods and services falls, AD rises, and the AD curve shifts rightward.

Question 13

Starting from short-run equilibrium, 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 falls. 
B) The price level falls and Real GDP rises. 
C) The price level rises and Real GDP rises. 
D) The price level falls Real GDP falls.

Question 14

Exhibit 8-4
 
-Refer to Exhibit 8-4. A shift in short-run aggregate supply from SRAS2 to SRAS1 could have been the result of

Accepted Answer

A) a decrease in the price level. 
B) an increase in the price level. 
C) an increase in wage rates. 
D) a decrease in wage rates.

Question 15

Changes in which of the following factors can shift the AD curve?

Accepted Answer

A) net exports 
B) government purchases 
C) the money supply 
D) b and c 
E) a, b, and c

Question 16

If some of a person's wealth is in cash, it follows that

Accepted Answer

A) this person's monetary wealth will change as the price level changes. 
B) this person's monetary wealth will not change as the price level changes. 
C) this person is wealthier than a person who holds all his wealth in nonmonetary form. 
D) a and c 
E) b and c

Question 17

A decrease in consumption 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.

Question 18

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

Question 19

An adverse supply shock results in an increase in the price level and an increase in Real GDP.

Accepted Answer

A) True 
 B)False

Question 20

The purchases made by the foreign sector are called __________; the purchases made by the household sector are called __________; the purchases made by the government sector are called __________; and the purchases made by the business sector are called investment.

Accepted Answer

A) net exports; consumption; net interest 
B) net exports; domestic spending; government purchases 
C) net exports; consumption; government purchases 
D) exports; domestic spending; government product 
E) imports; consumption; government expenditures

Exam 8: Aggregate Demand and Aggregate Supply

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

Which of the following statements represents a correct and sequentially accurate economic explanation?

Some of the factors that can shift the short-run aggregate supply curve can also cause a shift in the long-run aggregate supply curve.

Which of the following best describes how the real balance effect works?

As interest rates drop, households tend to borrow more and businesses tend to borrow less.

Exhibit 8-4 -Refer to Exhibit 8-4. A movement from point A to point B on SRAS₁ could have been the result of

The level of Real GDP that the economy produces in long-run equilibrium is Natural Real GDP.

Starting from short-run equilibrium, the following occurs: personal income taxes are cut, business taxes are cut, and labor productivity rises. What is the effect on the price level and Real GDP in the short run?

Which of the following statements is false?

In a two-country world, a decrease in foreign input prices, ceteris paribus,

Which of the following statements represents a correct and sequentially accurate economic explanation?

Starting from short-run equilibrium, wage rates rise. What is the effect on the price level and Real GDP in the short run?

Exhibit 8-4 -Refer to Exhibit 8-4. A shift in short-run aggregate supply from SRAS₂ to SRAS₁ could have been the result of

Changes in which of the following factors can shift the AD curve?

If some of a person's wealth is in cash, it follows that

A decrease in consumption caused by a factor other than a change in the price level

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 adverse supply shock results in an increase in the price level and an increase in Real GDP.

The purchases made by the foreign sector are called ; the purchases made by the household sector are called ; the purchases made by the government sector are called __; and the purchases made by the business sector are called investment.

Exam 8: Aggregate Demand and Aggregate Supply

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

Which of the following statements represents a correct and sequentially accurate economic explanation?

Some of the factors that can shift the short-run aggregate supply curve can also cause a shift in the long-run aggregate supply curve.

Which of the following best describes how the real balance effect works?

As interest rates drop, households tend to borrow more and businesses tend to borrow less.

Exhibit 8-4 -Refer to Exhibit 8-4. A movement from point A to point B on SRAS1 could have been the result of

The level of Real GDP that the economy produces in long-run equilibrium is Natural Real GDP.

Starting from short-run equilibrium, the following occurs: personal income taxes are cut, business taxes are cut, and labor productivity rises. What is the effect on the price level and Real GDP in the short run?

Which of the following statements is false?

In a two-country world, a decrease in foreign input prices, ceteris paribus,

Which of the following statements represents a correct and sequentially accurate economic explanation?

Starting from short-run equilibrium, wage rates rise. What is the effect on the price level and Real GDP in the short run?

Exhibit 8-4 -Refer to Exhibit 8-4. A shift in short-run aggregate supply from SRAS2 to SRAS1 could have been the result of

Changes in which of the following factors can shift the AD curve?

If some of a person's wealth is in cash, it follows that

A decrease in consumption caused by a factor other than a change in the price level

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 adverse supply shock results in an increase in the price level and an increase in Real GDP.

The purchases made by the foreign sector are called __________; the purchases made by the household sector are called __________; the purchases made by the government sector are called __________; and the purchases made by the business sector are called investment.

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

Exhibit 8-4 -Refer to Exhibit 8-4. A movement from point A to point B on SRAS₁ could have been the result of

Exhibit 8-4 -Refer to Exhibit 8-4. A shift in short-run aggregate supply from SRAS₂ to SRAS₁ could have been the result of

The purchases made by the foreign sector are called ; the purchases made by the household sector are called ; the purchases made by the government sector are called __; and the purchases made by the business sector are called investment.