Question 1

The short-run aggregate supply curve slopes upward as a result of the real balance effect,the interest rate effect,and the international trade effect.

Accepted Answer

A) True 
 B)False

Question 2

Can a change in the price level cause the aggregate demand curve to shift?

Accepted Answer

A)   Yes,as the price level rises,aggregate demand shifts leftward.
B)   Yes,but only under the condition that the real balance effect is operational.
C)   No,only a change in a factor other than the price level can shift the aggregate demand curve.
D)   No,a change in the price level can only shift the aggregate supply curve.
E)   none of the above

Question 3

Short-run equilibrium exists

Accepted Answer

A)   where the AD curve intersects the short-run aggregate supply (SRAS) curve.
B)   where the AD curve intersects the long-run aggregate supply (LRAS) curve.
C)   on the AD curve only.
D)   on the SRAS curve only.

Question 4

1 to AD2? A)  a change in the price level B)  an increase in wealth C)  an increase in foreign real national income D)  a decrease in personal income taxes E)  a decrease in business taxes" class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 8-3.Which of the following could not have caused a shift in aggregate demand from AD1 to AD2?

Accepted Answer

A)   a change in the price level
B)   an increase in wealth
C)   an increase in foreign real national income
D)   a decrease in personal income taxes
E)   a decrease in business taxes

Question 5

Suppose the real exchange rate of 105 Japanese yen to the dollar changes to 115 yen to the dollar.In this situation,the dollar has _________________,making Japanese goods __________ expensive for Americans.

Accepted Answer

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

Question 6

Suppose consumption decreases at each price level.As a result,aggregate demand __________,and the AD curve shifts __________.

Accepted Answer

A)   increases; leftward
B)   decreases; leftward
C)   increases; rightward
D)   decreases; rightward

Question 7

-Refer to Exhibit 8-1.If we assume that Real GDP and the unemployment rate are inversely related,which of the points on this graph is most likely representative of the highest unemployment rate?

Accepted Answer

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

Question 8

List and describe the three effects that help to explain why the aggregate demand (AD)curve slopes downward.

Accepted Answer

If the AD curve slopes downward,it means...

Question 9

Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar.In this situation,the dollar has __________________,making American goods __________ expensive for Mexicans.

Accepted Answer

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

Question 10

Which of the following statements is false?

Accepted Answer

A)   Purchasing power and the price level are inversely related.
B)   The real balance effect refers to the change in the purchasing power of dollar-denominated assets as a result of a change in the price level.
C)   The aggregate demand curve slopes downward because of the real balance,interest rate,and international trade effects.
D)   A change in the quantity demanded of Real GDP is directly brought about by a change in interest rates.

Question 11

Personal income taxes rise.This lowers __________,which lowers __________ and the __________ curve shifts __________.

Accepted Answer

A)   net exports; aggregate demand (A
D)  ; AD; leftward
B)   consumption; short-run aggregate supply (SRAS) ; SRAS; rightward
C)   government revenue; net exports; AD; rightward
D)   consumption; aggregate demand (A
D)  ; AD; leftward
E)   none of the above

Question 12

A decrease in business taxes,causes the expected profitability of investment projects to __________,which then shifts the AD curve to the __________.

Accepted Answer

A)   rise; right
B)   rise; left
C)   decline; right
D)   decline; left

Question 13

After an adverse supply shock occurs,the ____________ curve shifts _____________ resulting in a(n) _________________ in the price level and a(n) ________________ in Real GDP.

Accepted Answer

A)   AD; leftward; decrease; decrease
B)   AD; rightward; increase; increase
C)   SRAS; rightward; decrease; increase
D)   SRAS; leftward; increase; decrease

Question 14

Real GDP and the unemployment rate are _________________,ceteris paribus.

Accepted Answer

A)   directly related
B)   inversely related
C)   unrelated
D)   directly related when GDP is below its natural level and inversely related when GDP is above its natural level

Question 15

A decrease in the price of a nonlabor input such as 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 16

As the interest rate rises,businesses invest __________ and the AD curve shifts to the __________.

Accepted Answer

A)   more; right
B)   more; left
C)   less; right
D)   less; left

Question 17

Explain why the short-run aggregate supply curve (SRAS)is upward sloping,while the long-run aggregate supply (LRAS)curve is a vertical line.

Accepted Answer

The SRAS curve slopes upward because of ...

Question 18

The level of Real GDP and the price level always have a direct relationship.

Accepted Answer

A) True 
 B)False

Question 19

Wage rates fall.This increases __________ and the __________ curve shifts rightward.

Accepted Answer

A)   aggregate demand (A
D)  ; AD
B)   short-run aggregate supply (SRAS) ; AD
C)   short-run aggregate supply (SRAS) ; SRAS
D)   employment; AD
E)   none of the above

Question 20

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; increase

Exam 8: Production and Costs

As the interest rate rises,businesses invest __________ and the AD curve shifts to the __________.

Correct AnswerverifiedShow Answer

The level of Real GDP and the price level always have a direct relationship.

Correct AnswerverifiedShow Answer

Real GDP and the unemployment rate are _________________,ceteris paribus.

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

-Refer to Exhibit 8-3.Which of the following could not have caused a shift in aggregate demand from AD1 to AD2?

Correct AnswerverifiedShow Answer

Can a change in the price level cause the aggregate demand curve to shift?

Correct AnswerverifiedShow Answer

Suppose the real exchange rate of 105 Japanese yen to the dollar changes to 115 yen to the dollar.In this situation,the dollar has _________________,making Japanese goods __________ expensive for Americans.

Correct AnswerverifiedShow Answer

A decrease in the price of a nonlabor input such as electricity will cause

Correct AnswerverifiedShow Answer

Short-run equilibrium exists

Correct AnswerverifiedShow Answer

-Refer to Exhibit 8-1.If we assume that Real GDP and the unemployment rate are inversely related,which of the points on this graph is most likely representative of the highest unemployment rate?

Correct AnswerverifiedShow Answer

Wage rates fall.This increases __________ and the __________ curve shifts rightward.

Correct AnswerverifiedShow Answer

List and describe the three effects that help to explain why the aggregate demand (AD)curve slopes downward.

Correct AnswerverifiedIf the AD curve slopes downward,it means...View AnswerShow Answer

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.

Correct AnswerverifiedShow Answer

Personal income taxes rise.This lowers __________,which lowers __________ and the __________ curve shifts __________.

Correct AnswerverifiedShow Answer

Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar.In this situation,the dollar has __________________,making American goods __________ expensive for Mexicans.

Correct AnswerverifiedShow Answer

Suppose consumption decreases at each price level.As a result,aggregate demand __________,and the AD curve shifts __________.

Correct AnswerverifiedShow Answer

A decrease in business taxes,causes the expected profitability of investment projects to __________,which then shifts the AD curve to the __________.

Correct AnswerverifiedShow Answer

After an adverse supply shock occurs,the ____________ curve shifts _____________ resulting in a(n) _________________ in the price level and a(n) ________________ in Real GDP.

Correct AnswerverifiedShow Answer

Explain why the short-run aggregate supply curve (SRAS)is upward sloping,while the long-run aggregate supply (LRAS)curve is a vertical line.

Correct AnswerverifiedThe SRAS curve slopes upward because of ...View AnswerShow Answer

The short-run aggregate supply curve slopes upward as a result of the real balance effect,the interest rate effect,and the international trade effect.

Correct AnswerverifiedShow Answer

As the interest rate rises,businesses invest and the AD curve shifts to the .

Correct Answer
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-Refer to Exhibit 8-3.Which of the following could not have caused a shift in aggregate demand from AD₁ to AD₂?

Correct Answer
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Suppose the real exchange rate of 105 Japanese yen to the dollar changes to 115 yen to the dollar.In this situation,the dollar has _______,making Japanese goods expensive for Americans.

Correct Answer
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Wage rates fall.This increases and the curve shifts rightward.

Correct Answer
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If the AD curve slopes downward,it means...
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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.

Correct Answer
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Personal income taxes rise.This lowers ,which lowers and the curve shifts .

Correct Answer
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Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar.In this situation,the dollar has ________,making American goods expensive for Mexicans.

Correct Answer
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Suppose consumption decreases at each price level.As a result,aggregate demand ,and the AD curve shifts .

Correct Answer
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A decrease in business taxes,causes the expected profitability of investment projects to ,which then shifts the AD curve to the .

Correct Answer
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After an adverse supply shock occurs,the ______ curve shifts _ resulting in a(n) _ in the price level and a(n) ______ in Real GDP.

Correct Answer
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The SRAS curve slopes upward because of ...
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