Question 1

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) B) and D)
F) B) and C)

Question 2

Figure 6-1 
-In Figure 6-1,a movement from point B to point A can be explained by

Accepted Answer

A)  an increase in the real value of cash balances.
B)  a decrease in the real value of cash balances.
C)  the decrease in interest rates.
D)  the increase in exports to the foreign sector.E) C) and D)
F) A) and D)

Question 3

If other factors are held constant,an increase in the price level

Accepted Answer

A)  causes the quantity of goods and services demanded to increase.
B)  causes the quantity of goods and services demanded to fall.
C)  causes the real value of the money to increase.
D)  induces people to spend their money faster.E) All of the above
F) B) and D)

Question 4

What is secular deflation? Explain fully.

Accepted Answer

If all factors affecting demand remain r...

Question 5

In the long run,the level of production in the economy

Accepted Answer

A)  is independent of the price level.
B)  determines how much money is in the economy.
C)  depends on the price level in the economy
D)  does not determine the level level of potential outputE) A) and B)
F) C) and D)

Question 6

Compare and contrast the demand and supply side of inflation.Which is preferable?

Accepted Answer

The supply side inflation is from a decl...

Question 7

When the real interest rate rises,

Accepted Answer

A)  AD shifts left..
B)  the long-run aggregate supply curve shifts to the right.
C)  the multiplier stays the same.
D)  AD shifts right.E) A) and D)
F) All of the above

Question 8

The aggregate demand curve shows that,if other factors are held constant,

Accepted Answer

A)  higher price levels will result in lower real output demanded by the economy.
B)  higher price levels will result in higher real output demanded by the economy.
C)  higher price levels will result in lower interest rates.
D)  lower price levels will result in inflationary conditions.E) A) and D)
F) All of the above

Question 9

Because we have full employment at the level of potential output,

Accepted Answer

A)  aggregate demand is downward sloping.
B)  aggregate demand is upward sloping.
C)  the long-run aggregate supply curve is upward sloping at potential output.
D)  the long-run aggregate supply curve is vertical at potential output .E) None of the above
F) A) and B)

Question 10

Describe what happens in the economy when there is an increase in the level of the factors of production (the endowment)in the short run and long run.

Accepted Answer

When there is an increase in the endowme...

Question 11

The aggregate demand curve plots

Accepted Answer

A)  desired expenditures against production.
B)  total expenditures against the level of employment.
C)  desired expenditures against the price level.
D)  employment against the price level.E) C) and D)
F) B) and C)

Question 12

Figure 6-1 
-In Figure 6-1,a movement from point B to point C could be explained by

Accepted Answer

A)  an increase in the price level.
B)  a decrease in the price level.
C)  the start of a short-term war.
D)  the real-balance effect.E) None of the above
F) A) and B)

Question 13

Figure 6-1 
-In Figure 6-1,a movement from point C to point B could be explained by

Accepted Answer

A)  an increase in the price level.
B)  a decrease in the price level.
C)  the end of a short-term war.
D)  the real-balance effect.E) B) and C)
F) C) and D)

Question 14

An aggregate demand curve

Accepted Answer

A)  shifts to the right when the price level increases and to the left when the price level falls.
B)  shifts to the right when any non-price-level change that increases aggregate spending occurs.
C)  shifts to the right when population decreases and shifts to the left when population increases.
D)  does not shift,unlike individual or market demand curves.E) B) and C)
F) All of the above

Question 15

An indirect effect because price level increases cause borrowing to increase,which raises interest rates and reduces quantity demanded for goods and services is known as:

Accepted Answer

A)  the interest rate effect..
B)  the real balance effect.
C)  the open economy effect.
D)  the Fisher effect.E) All of the above
F) A) and B)

Question 16

The full-employment and full adjustment level of real output of goods and services in the economy is represented by

Accepted Answer

A)  the LRAS curve.
B)  the SRAS curve.
C)  the AD curve.
D)  the distance between the LRAS curve and the SRAS curve.E) B) and D)
F) None of the above

Question 17

The aggregate production function

Accepted Answer

A)  measure aggregate demand.
B)  measure aggregate supply.
C)  models the relationship between the inputs to production available in the economy and the total output of an economy.
D)  assists us in determining the level of full employmentE) All of the above
F) B) and D)

Question 18

The aggregate demand curve shifts to the left when

Accepted Answer

A)  aggregate prices rise.
B)  there is a drop in the foreign exchange value.
C)  taxes decrease.
D)  when the amount of money in the economy falls.E) All of the above
F) None of the above

Question 19

An individual holds $20 000 in an interest-earning checking account earning 10% interest,and the overall price level rises by 12%.Other things constant,we would expect

Accepted Answer

A)  the individual's real wealth to decrease and consumption to diminish.
B)  the individual's stock of real wealth to decrease but real national income to increase.
C)  no change in the individual's real wealth but a decline in real national product.
D)  real wealth has gone down by 12%.E) All of the above
F) A) and C)

Question 20

Holding nominal money balances constant,a decrease in the price level

Accepted Answer

A)  causes the real value of the money balances to increase,in turn increasing the quantity of goods and services demanded.
B)  causes the real value of the money balances to decrease,in turn decreasing the quantity of goods and services demanded.
C)  causes the real value of the money balances to increase,thereby increasing the interest rate.
D)  generates a reduction in the value of the money balances,leading to higher interest rates and a decrease in the quantity of goods and services demanded.E) A) and C)
F) A) and B)

Exam 6: Modelling Real Gdp and the Price Level in the Long Run

When the real interest rate rises,

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The full-employment and full adjustment level of real output of goods and services in the economy is represented by

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An aggregate demand curve

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Because we have full employment at the level of potential output,

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An individual holds $20 000 in an interest-earning checking account earning 10% interest,and the overall price level rises by 12%.Other things constant,we would expect

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The aggregate demand curve shows that,if other factors are held constant,

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Describe what happens in the economy when there is an increase in the level of the factors of production (the endowment)in the short run and long run.

Correct AnswerverifiedWhen there is an increase in the endowme...View AnswerShow Answer

The aggregate demand curve plots

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What is secular deflation? Explain fully.

Correct AnswerverifiedIf all factors affecting demand remain r...View AnswerShow Answer

The aggregate production function

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Figure 6-1 -In Figure 6-1,a movement from point B to point C could be explained by

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If other factors are held constant,an increase in the price level

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Figure 6-1 -In Figure 6-1,a movement from point C to point B could be explained by

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In the long run,the level of production in the economy

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A higher domestic price level should

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Holding nominal money balances constant,a decrease in the price level

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Figure 6-1 -In Figure 6-1,a movement from point B to point A can be explained by

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Compare and contrast the demand and supply side of inflation.Which is preferable?

Correct AnswerverifiedThe supply side inflation is from a decl...View AnswerShow Answer

An indirect effect because price level increases cause borrowing to increase,which raises interest rates and reduces quantity demanded for goods and services is known as:

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The aggregate demand curve shifts to the left when

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When there is an increase in the endowme...
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If all factors affecting demand remain r...
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The supply side inflation is from a decl...
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