Question 1

Suppose the real exchange rate of 10 Mexican pesos to the dollar moves to 9 pesos to the dollar.The dollar has ________________,making Mexican goods __________ expensive for Americans.

Accepted Answer

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

Question 2

The interest rate effect occurs because a change in interest rates causes a change in the price level.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Exhibit 8-1 
-Refer to Exhibit 8-1.Assume that the economy is originally in equilibrium at point A.If businesses become more optimistic about future sales,at which point is the economy most likely to end up in the short run?

Accepted Answer

A)   A
B)   B
C)   C
D)   D

Question 5

A decrease in the price of electricity will cause

Accepted Answer

A)   a movement down the SRAS curve.
B)   a movement up the SRAS curve.
C)   a leftward shift in the SRAS curve.
D)   a rightward shift in the SRAS curve.
E)   no change regarding the SRAS curve.

Question 6

The aggregate demand (AD) curve shifts 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

Question 7

The wage rate rises.As a result,in the short run Real GDP will __________ and the price level will __________.

Accepted Answer

A)   rise;rise
B)   fall;fall
C)   remain constant;fall
D)   fall;rise
E)   rise;fall

Question 8

If consumption increases,

Accepted Answer

A)   the SRAS curve will shift rightward,which will push the price level up.
B)   the SRAS curve will shift leftward,which will push the price level up.
C)   the AD curve will shift leftward,which will push the price level down.
D)   the AD curve will shift rightward,which will push the price level up.

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

Question 10

Suppose the following: (1) the wage rate falls, (2) business taxes decline, (3) any change in SRAS is greater than any change in AD.Based on this information,in the short run Real GDP will __________ and the price level will __________.

Accepted Answer

A)   rise;rise
B)   fall;rise
C)   fall;fall
D)   rise;fall
E)   none of the above

Question 11

Velocity is the average number of times a dollar is spent to buy

Accepted Answer

A)   final goods and services in a year.
B)   final and intermediate goods and services in a year.
C)   final goods,but not services,in a year.
D)   services in a year.

Question 12

The expectation 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.

Question 13

A change in labor productivity affects __________ and a change in the exchange rate affects __________.

Accepted Answer

A)   SRAS;SRAS
B)   AD;AD
C)   SRAS;AD
D)   AD;SRAS
E)   none of the above

Question 14

Exhibit 8-1 
-Refer to Exhibit 8-1.Assume that the economy is originally in equilibrium at point A.If foreign real national income rises,at which point is the economy most likely to end up in the short run?

Accepted Answer

A)   A
B)   B
C)   C
D)   D
E)   A change in foreign real national income would have no impact on the domestic economy.

Question 15

Which of the following would cause a rightward shift in 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 services

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Only a change in the price level can cause a movement from one point to another point along a given aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 18

The real balance effect describes the change in

Accepted Answer

A)   checking account balances that occur when the money supply increases or decreases.
B)   the value of physical assets (e.g. ,houses) that results from a change in the price level.
C)   the output producers produce as they attempt to balance their production in response to changes in consumers' demand.
D)   the value of cash holdings that results from a change in the price level.
E)   the balance of cash holdings that results from a change in the amount of income earned.

Question 19

A subprime loan is a term for a loan that poses less risk than the average loan.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 8-1 
-Refer to Exhibit 8-1.Assume the economy is originally in equilibrium at point A.If the price of oil rises,at which point is the economy most likely to end up in the short run?

Accepted Answer

A)   A
B)   B
C)   C
D)   D

Exam 8: Aggregate Demand and Aggregate Supply

If consumption increases,

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A subprime loan is a term for a loan that poses less risk than the average loan.

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The wage rate rises.As a result,in the short run Real GDP will __________ and the price level will __________.

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The expectation of lower future prices is a

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Suppose the following: (1) the wage rate falls, (2) business taxes decline, (3) any change in SRAS is greater than any change in AD.Based on this information,in the short run Real GDP will __________ and the price level will __________.

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Exhibit 8-1 -Refer to Exhibit 8-1.Assume that the economy is originally in equilibrium at point A.If businesses become more optimistic about future sales,at which point is the economy most likely to end up in the short run?

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The real balance effect describes the change in

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

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Velocity is the average number of times a dollar is spent to buy

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

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Exhibit 8-1 -Refer to Exhibit 8-1.Assume that the economy is originally in equilibrium at point A.If foreign real national income rises,at which point is the economy most likely to end up in the short run?

Correct AnswerverifiedShow Answer

Suppose the real exchange rate of 10 Mexican pesos to the dollar moves to 9 pesos to the dollar.The dollar has ________________,making Mexican goods __________ expensive for Americans.

Correct AnswerverifiedShow Answer

Exhibit 8-1 -Refer to Exhibit 8-1.Assume the economy is originally in equilibrium at point A.If the price of oil rises,at which point is the economy most likely to end up in the short run?

Correct AnswerverifiedShow Answer

The interest rate effect occurs because a change in interest rates causes a change in the price level.

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A change in labor productivity affects __________ and a change in the exchange rate affects __________.

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

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Only a change in the price level can cause a movement from one point to another point along a given aggregate demand curve.

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

Correct AnswerverifiedShow Answer

A decrease in the price of electricity will cause

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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The wage rate rises.As a result,in the short run Real GDP will and the price level will .

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Suppose the following: (1) the wage rate falls, (2) business taxes decline, (3) any change in SRAS is greater than any change in AD.Based on this information,in the short run Real GDP will and the price level will .

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Suppose the real exchange rate of 10 Mexican pesos to the dollar moves to 9 pesos to the dollar.The dollar has ______,making Mexican goods expensive for Americans.

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A change in labor productivity affects and a change in the exchange rate affects .

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