Question 1

Steadily improving improvements in technology, other things being equal, will result in

Accepted Answer

A)   no change in the price level and steadily increasing output.
B)   persistent deflation
C)   steadily rising price level (inflation)  and steadily increasing output.
D)   a steadily falling price level with no change in output.E) None of the above
F) All of the above

Question 2

When the economy is in long-run equilibrium, the price level adjusts so as to equate which two values with one another?

Accepted Answer

A)   import and export spending
B)   the inflation rate and the unemployment rate
C)   government spending and tax revenues
D)   total planned real expenditures and total planned productionE) B) and D)
F) C) and D)

Question 3

The aggregate demand curve plots

Accepted Answer

A)   desired expenditures against production.
B)   total expenditures against the level of employment.
C)   planned expenditures against the price level.
D)   employment against the price level.E) None of the above
F) B) and C)

Question 4

If a nation's production possibilities curve shifts outward, we should expect its long-run aggregate supply curve to

Accepted Answer

A)   have an upward movement along the curve.
B)   have a downward movement along the curve.
C)   have a rightward shift.
D)   have a leftward shift.E) A) and C)
F) None of the above

Question 5

Another term for the real-balance effect is

Accepted Answer

A)   the substitution effect.
B)   the wealth effect.
C)   the indirect effect.
D)   the interest rate effect.E) B) and C)
F) B) and D)

Question 6

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.E) B) and D)
F) B) and C)

Question 7

An increase in U.S. prices relative to Japanese prices will

Accepted Answer

A)   increase total planned spending on U.S. goods and services.
B)   increase U.S. imports and decrease U.S. exports.
C)   decrease U.S. imports and increase U.S. exports.
D)   decrease both U.S. exports and imports.E) A) and C)
F) B) and C)

Question 8

A higher domestic price level should

Accepted Answer

A)   decrease net exports.
B)   increase desired investment.
C)   increase real wealth and consumption.
D)   none of these.E) All of the above
F) B) and C)

Question 9

Long-run equilibrium will occur at the price level at which

Accepted Answer

A)   the long-run aggregate demand and short-run aggregate supply curves intersect.
B)   the aggregate demand and short-run aggregate supply curves intersect.
C)   the aggregate demand and long-run aggregate supply curves intersect.
D)   the short-run aggregate supply and long-run aggregate supply curves intersect.E) A) and D)
F) None of the above

Question 10

If the price level increases, then

Accepted Answer

A)   the exchange rate will increase, causing U.S. goods to become cheaper and increasing total planned real expenditures.
B)   imports increase but exports do not change. Therefore, there is no effect on total planned real expenditures.
C)   foreign residents buy fewer U.S. goods, leaving more goods for U.S. residents and an increase in total planned real production by firms.
D)   domestic goods are more expensive relative to foreign goods, which reduces total planed real expenditures.E) A) and B)
F) A) and C)

Question 11

If aggregate demand is stable and there is economic growth, the economy will experience

Accepted Answer

A)   secular degeneration.
B)   secular deflation.
C)   secular decline.
D)   secular depreciation.E) None of the above
F) C) and D)

Question 12

The long-run aggregate supply curve is

Accepted Answer

A)   horizontal at the full-employment level of real Gross Domestic Product (GDP) .
B)   vertical at the full-employment level of real Gross Domestic Product (GDP) .
C)   sloping upward due to the effects of price level changes on real Gross Domestic Product (GDP) .
D)   the same as the short run aggregate supply (SRAS)  curve.E) A) and B)
F) None of the above

Question 13

What is measured on the vertical axis of the aggregate demand graph?

Accepted Answer

A)   nominal income
B)   real GDP per year
C)   the price level
D)   unemploymentE) A) and B)
F) All of the above

Question 14

The aggregate demand curve is

Accepted Answer

A)   horizontal if full employment exists in the economy.
B)   vertical if full employment exists in the economy.
C)   downward sloping because of the real-balance, interest rate, and open economy effects.
D)   downward sloping because more goods are produced as per unit cost of producing each item falls.E) B) and C)
F) None of the above

Question 15

If the economy grows steadily over several years and at the same time maintains the aggregate demand curve in its present position, then the economy will experience which of the following?

Accepted Answer

A)   inflation
B)   a stable price level
C)   secular deflation
D)   The price level cannot be determined without more information.E) B) and D)
F) None of the above

Question 16

An increase in total planned real expenditures that is caused by a factor other than the price level will lead to the

Accepted Answer

A)   aggregate supply curve shifting to the right.
B)   aggregate demand curve shifting to the right.
C)   aggregate supply curve shifting to the left.
D)   aggregate demand curve shifting to the left.E) None of the above
F) All of the above

Question 17

Which of the following would likely result in a shift of the aggregate demand curve to the right?

Accepted Answer

A)   a tax cut
B)   a decrease in job security
C)   a rise in the real interest rate
D)   a decrease in the quantity of money in circulationE) C) and D)
F) All of the above

Question 18

The long-run aggregate supply curve occurs at the level of real GDP consistent with

Accepted Answer

A)   individuals' tastes and preferences.
B)   the natural rate of unemployment.
C)   no inflation.
D)   low levels of inflation.E) A) and D)
F) B) and C)

Question 19

When the price level falls

Accepted Answer

A)   imports increase, and exports decrease, which causes a movement up along the aggregate demand curve.
B)   there is no impact on imports or exports, so there is no associated movement along the aggregate demand curve.
C)   imports decrease and exports increase, which cause a movement down along the aggregate demand curve.
D)   imports decrease and exports increase, which cause a movement up along the aggregate demand curve.E) A) and B)
F) C) and D)

Question 20

A fall in the price level

Accepted Answer

A)   increases the real value of money balances, which causes borrowing to decrease, leading to a decrease in investment and total planned real expenditures.
B)   causes exports to rise and imports to fall, leading to an increase in total planned real expenditures.
C)   leads to an increase in total planned real expenditures because of the indirect effect.
D)   causes total planned real expenditures to increase as long as the fall is less than the fall in the price level in other countries.E) All of the above
F) A) and D)

Exam 10: Real GDP and the Price Level in the Long Run

A fall in the price level

Correct AnswerverifiedShow Answer

If a nation's production possibilities curve shifts outward, we should expect its long-run aggregate supply curve to

Correct AnswerverifiedShow Answer

When the economy is in long-run equilibrium, the price level adjusts so as to equate which two values with one another?

Correct AnswerverifiedShow Answer

Long-run equilibrium will occur at the price level at which

Correct AnswerverifiedShow Answer

What is measured on the vertical axis of the aggregate demand graph?

Correct AnswerverifiedShow Answer

A higher domestic price level should

Correct AnswerverifiedShow Answer

An increase in total planned real expenditures that is caused by a factor other than the price level will lead to the

Correct AnswerverifiedShow Answer

The interest rate effect operates through

Correct AnswerverifiedShow Answer

If aggregate demand is stable and there is economic growth, the economy will experience

Correct AnswerverifiedShow Answer

Which of the following would likely result in a shift of the aggregate demand curve to the right?

Correct AnswerverifiedShow Answer

Another term for the real-balance effect is

Correct AnswerverifiedShow Answer

The aggregate demand curve is

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve is

Correct AnswerverifiedShow Answer

An increase in U.S. prices relative to Japanese prices will

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve occurs at the level of real GDP consistent with

Correct AnswerverifiedShow Answer

The aggregate demand curve plots

Correct AnswerverifiedShow Answer

If the price level increases, then

Correct AnswerverifiedShow Answer

Steadily improving improvements in technology, other things being equal, will result in

Correct AnswerverifiedShow Answer

If the economy grows steadily over several years and at the same time maintains the aggregate demand curve in its present position, then the economy will experience which of the following?

Correct AnswerverifiedShow Answer

When the price level falls

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified