Question 1

The nominal wage is $40 an hour and the price level as measured by a price index is 2.00.If the nominal wage falls to $30 and the price index declines to 1.50,according to the worker misperception explanation of the upward-sloping SRAS curve,workers will initially perceive the

Accepted Answer

A)   real wage as something greater than $20.
B)   real wage as something less than $20.
C)   real wage as $20.
D)   nominal wage as something more than $30.
E)   nominal wage as something less than $30.F) A) and E)
G) B) and D)

Question 2

Exhibit 8-2
 
-Refer to Exhibit 8-2. Based on the given change,what word (rises or falls) should go in blank (7) and blank (8) ,respectively,to summarize the resulting impact on short run equilibrium?

Accepted Answer

A)   rises; rises
B)   falls; falls
C)   rises; falls
D)   falls; risesE) B) and C)
F) A) and D)

Question 3

Exhibit 8-2
 
-Refer to Exhibit 8-2. Based on the given change,what word (rises or falls) should go in blank (1) and blank (2) ,respectively,to summarize the resulting impact on short run equilibrium?

Accepted Answer

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

Question 4

Exhibit 8-4
 
-Refer to Exhibit 8-4. A movement from point A to point B on SRAS? would 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.E) B) and C)
F) All of the above

Question 5

Part of the story of the interest rate effect is that a lower price level causes __________ in the supply of credit,which then causes the interest rate to __________.

Accepted Answer

A)   a decrease; fall
B)   a decrease; rise
C)   an increase; fall
D)   an increase; riseE) None of the above
F) A) and D)

Question 6

As the price level falls,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) All of the above
F) B) and D)

Question 7

An appreciation of the U.S.dollar tends to __________ U.S.net exports and shift the U.S.AD curve to the __________.

Accepted Answer

A)   raise; right
B)   raise; left
C)   lower; right
D)   lower; leftE) A) and B)
F) All of the above

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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 aboveF) A) and B)
G) B) and E)

Question 10

If wages are "sticky",a decline in the price level will

Accepted Answer

A)   raise the real wage and lower the quantity demanded of labor.
B)   lower the real wage and lower the quantity supplied of labor.
C)   raise the real wage and lower the quantity supplied of labor.
D)   a and b
E)   none of the aboveF) B) and C)
G) C) and D)

Question 11

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

Accepted Answer

A)   rises; rises
B)   falls; falls
C)   rises; falls
D)   falls; risesE) A) and D)
F) A) and C)

Question 12

Greater wealth makes people _____________ willing to spend,causing __________ the economy's AD curve.

Accepted Answer

A)   more; movement down along
B)   more; a rightward shift of
C)   less; movement up along
D)   less; a rightward shift ofE) None of the above
F) B) and C)

Question 13

Exhibit 8-3
 
-Refer to Exhibit 8-3. A movement from point A to point B on AD? would 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 income taxes.
D)   a decrease in income taxes.E) None of the above
F) A) and B)

Question 14

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.E) A) and C)
F) A) and B)

Question 15

Suppose Americans buy inputs from foreigners.When the price of foreign inputs falls,the U.S.SRAS curve __________,which tends to __________the U.S.price level.

Accepted Answer

A)   shifts rightward; reduce
B)   shifts leftward; increase
C)   shifts leftward; reduce
D)   remains constant; increaseE) B) and C)
F) A) and B)

Question 16

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.F) B) and E)
G) A) and B)

Question 17

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) A) and D)
F) A) and C)

Question 18

A business firm's profitability is based in part on the

Accepted Answer

A)   prices of their nonlabor inputs.
B)   productivity of their workers.
C)   wages they must pay their workers.
D)   business taxes they must pay.
E)   all of the aboveF) A) and B)
G) A) and C)

Question 19

Starting from short-run equilibrium,the following occurs: the money supply increases and labor productivity increases.What is the effect on the price level and Real GDP in the short run?

Accepted Answer

A)   Real GDP falls and the price level necessarily rises.
B)   Real GDP rises and the price level necessarily rises.
C)   Real GDP rises and the effect on the price level cannot be determined.
D)   Real GDP falls and the effect on the price level cannot be determined.
E)   none of the aboveF) C) and D)
G) A) and B)

Question 20

Exhibit 8-3
 
-Refer to Exhibit 8-3. A movement from point B to point A on AD? would 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 foreign real national income.
D)   a decrease in foreign real national income.E) A) and C)
F) B) and D)

Exam 8: Aggregate Demand and Aggregate Supply

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

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Exhibit 8-4 -Refer to Exhibit 8-4. A movement from point A to point B on SRAS? would have been the result of

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A short-run aggregate supply curve shows the

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

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Greater wealth makes people _____________ willing to spend,causing __________ the economy's AD curve.

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Part of the story of the interest rate effect is that a lower price level causes __________ in the supply of credit,which then causes the interest rate to __________.

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Starting from short-run equilibrium,the following occurs: the money supply increases and labor productivity increases.What is the effect on the price level and Real GDP in the short run?

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A business firm's profitability is based in part on the

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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?

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Exhibit 8-3 -Refer to Exhibit 8-3. A movement from point B to point A on AD? would have been the result of

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

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

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Suppose Americans buy inputs from foreigners.When the price of foreign inputs falls,the U.S.SRAS curve __________,which tends to __________the U.S.price level.

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An appreciation of the U.S.dollar tends to __________ U.S.net exports and shift the U.S.AD curve to the __________.

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Exhibit 8-3 -Refer to Exhibit 8-3. A movement from point A to point B on AD? would have been the result of

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Exhibit 8-2 -Refer to Exhibit 8-2. Based on the given change,what word (rises or falls) should go in blank (1) and blank (2) ,respectively,to summarize the resulting impact on short run equilibrium?

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Exhibit 8-2 -Refer to Exhibit 8-2. Based on the given change,what word (rises or falls) should go in blank (7) and blank (8) ,respectively,to summarize the resulting impact on short run equilibrium?

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

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If wages are "sticky",a decline in the price level will

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The nominal wage is $40 an hour and the price level as measured by a price index is 2.00.If the nominal wage falls to $30 and the price index declines to 1.50,according to the worker misperception explanation of the upward-sloping SRAS curve,workers will initially perceive the

Correct AnswerverifiedShow Answer

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Greater wealth makes people ___ willing to spend,causing the economy's AD curve.

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Part of the story of the interest rate effect is that a lower price level causes in the supply of credit,which then causes the interest rate to .

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Suppose Americans buy inputs from foreigners.When the price of foreign inputs falls,the U.S.SRAS curve ,which tends to the U.S.price level.

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An appreciation of the U.S.dollar tends to U.S.net exports and shift the U.S.AD curve to the .

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