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KEYWORDS:
Bloom's: Comprehension
69. The short-run aggregate supply curve shows the various amounts of real output that producers are willing to
a.
sell at different profit levels.
b.
sell at different price levels.
c.
buy at different income levels.
d.
buy at different price levels.
70. A decrease in the price level
a.
shifts the SRAS curve to the right.
b.
shifts the SRAS curve to the left.
c.
causes an upward movement along the existing SRAS curve.
d.
causes a downward movement along the existing SRAS curve.
e.
none of the above
71. A decrease in the price of a nonlabor input such as machinery
a.
shifts the SRAS curve to the right.
b.
shifts the SRAS curve to the left.
c.
causes an upward movement along the existing SRAS curve.
d.
causes a downward movement along the existing SRAS curve.
e.
none of the above
72. In the short run, an increase in investment, ceteris paribus, shifts the
a.
AD curve to the right, causing equilibrium price level to rise and equilibrium Real GDP to increase.
b.
AD curve to the left, causing equilibrium price level to fall and equilibrium Real GDP to decrease.
c.
SRAS curve to the right, causing equilibrium price level to fall and equilibrium Real GDP to increase.
d.
SRAS curve to the left, causing equilibrium price level to rise and equilibrium Real GDP to decrease.
73. In the short run, a decrease in wage rates, ceteris paribus, shifts the
a.
AD curve to the right, causing equilibrium price level to rise and equilibrium Real GDP to increase.
b.
AD curve to the left, causing equilibrium price level to fall and equilibrium Real GDP to decrease.
c.
SRAS curve to the right, causing equilibrium price level to fall and equilibrium Real GDP to increase.
d.
SRAS curve to the left, causing equilibrium price level to rise and equilibrium Real GDP to decrease.
74. The AD curve shows that, as the price level falls the quantity of
a.
GDP demanded increases.
b.
GDP demand decreases.
c.
Real GDP demanded increases.
d.
Real GDP demanded decreases.
e.
none of the above
75. An increase in short-run aggregate supply is
a.
the result of an increase in the price level.
b.
represented by a movement up along the SRAS curve.
c.
represented by a rightward shift in the SRAS curve.
d.
both a and b
e.
both a and C
76. Which of the following would cause a rightward shift in the AD curve?
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
77. Which of the following will not lead to a leftward shift in the SRAS curve?
a.
an increase in wage rates
b.
an increase in the prices of nonlabor inputs
c.
an increase in productivity
d.
an adverse supply shock
78. 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.
a.
shifts rightward; reduce
b.
shifts leftward; increase
c.
shifts leftward; reduce
d.
remains constant; increase
79. If foreign input prices increase and the United States is a purchaser of those inputs, then the U.S.
a.
AD curve will shift leftward and U.S. prices will fall.
b.
AD curve will shift rightward and U.S. prices will rise.
c.
SRAS curve will shift leftward and U.S. prices will rise.
d.
SRAS curve will shift rightward and U.S. prices will fall
80. In a two-country world, an increase in foreign input prices, ceteris paribus,
a.
shifts the SRAS curve leftward, causing the price level to increase.
b.
shifts the SRAS curve leftward, causing the price level to decrease.
c.
shifts the SRAS curve rightward, causing the price level to increase.
d.
shifts the SRAS curve rightward, causing the price level to decrease.
e.
does not affect the SRAS curve or the price level.
81. In a two-country world, a decrease in foreign input prices, ceteris paribus,
a.
shifts the SRAS curve leftward, causing the price level to increase.
b.
shifts the SRAS curve leftward, causing the price level to decrease.
c.
shifts the SRAS curve rightward, causing the price level to increase.
d.
shifts the SRAS curve rightward, causing the price level to decrease.
e.
does not affect the SRAS curve or the price level.
82. One reason the AD curve is downward sloping is the __________ effect.
a.
wage rate
b.
productivity
c.
interest rate
d.
structural
e.
none of the above
83. The real balance effect works through a change in the value of
a.
monetary assets in response to changes in the unemployment rate.
b.
nonmonetary assets in response to changes in the unemployment rate.
c.
monetary assets in response to changes in the price level.
d.
nonmonetary assets in response to changes in the price level.
84. Which of the following is not a factor that can shift the short-run aggregate supply curve?
a.
changes in the wage rate
b.
changes in the price of non-labor inputs such as oil
c.
changes in labor productivity
d.
a severe drought which extensively damages grain crops
e.
none of the above
85. Ceteris paribus, Real GDP and the unemployment rate are
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.
86. Aggregate demand refers to the
a.
quantity demanded of all goods and services at various price levels, ceteris paribus.
b.
quantity demanded of all goods and services at a particular price level, ceteris paribus.
c.
quantity demanded of Real GDP at various price levels, ceteris paribus.
d.
various amounts of GDP that are demanded at various price levels, ceteris paribus.
e.
a and c
87. Which of the following statements is false?
a.
Real GDP is the quantity of goods and services valued in base-year prices or base-year dollars.
b.
"Aggregate demand" and the "quantity demanded of Real GDP" are the same.
c.
According to the aggregate demand (AD) curve, the quantity demanded of Real GDP and the price level are
inversely related.
d.
Real GDP is denominated in current-year prices.
e.
b and d
88. Which of the following best describes how the real balance effect works?
a.
The price level falls, purchasing power rises, a person's monetary wealth rises, and the person buys fewer
goods and services.
b.
The price level rises, purchasing power rises, a person's monetary wealth decreases, and the person buys more
goods and services.
c.
The price level rises, purchasing power falls, a person's monetary wealth falls, and the person buys fewer
goods and services.
d.
The price level falls, purchasing power rises, a person's monetary wealth falls, and the person buys fewer
goods and services.
e.
none of the above
89. Which of the following best describes how the international trade effect works?
a.
The price level in the U.S. falls relative to foreign price levels, U.S. goods become relatively less expensive
than foreign goods, and both Americans and foreigners buy more U.S. goods.
b.
The price level in the U.S. falls relative to foreign price levels, U.S. goods become relatively more expensive
than foreign goods, and both Americans and foreigners buy more U.S. goods.
c.
The price level in the U.S. rises relative to foreign price levels, U.S. goods become relatively more expensive
than foreign goods, and both Americans and foreigners buy fewer U.S. goods.
d.
The price level in the U.S. rises relative to foreign price levels, U.S. goods become relatively more expensive
than foreign goods, and both Americans and foreigners buy more U.S. goods.
e.
a and c
90. A rise in the price level prompts an increase in the demand for credit. This is relevant to the __________ effect.
a.
international trade
b.
real balance
c.
aggregate demand
d.
interest rate
e.
b and c
91. A fall in the price level changes the purchasing power of money. This is relevant to the __________ effect.
a.
international trade
b.
real balance
c.
aggregate demand
d.
interest rate
e.
aggregate supply
92. Which of the following statements is false?
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.
93. The purchases made by the foreign sector are called __________; the purchases made by the household sector are
called __________; the purchases made by the government sector are called __________; and the purchases made by the
business sector are called investment.
a.
net exports; consumption; net interest
b.
net exports; domestic spending; government purchases
c.
net exports; consumption; government purchases
d.
exports; domestic spending; government product
e.
imports; consumption; government expenditures
94. A change in the quantity demanded of Real GDP is graphically represented as a
a.
shift in the AD curve.
b.
movement from one point on the AD curve to another point on the same curve.
c.
movement from a point on the AD curve to a point on the SRAS curve.
d.
shift in the real balance effect curve.
e.
shift in the interest rate effect curve.
95. If total expenditures fall at a given price level, then the
a.
quantity demanded of Real GDP rises.
b.
quantity demanded of Real GDP falls.
c.
AD curves shifts to the right.
d.
AD curve shifts to the left.
e.
none of the above
96. The aggregate demand (AD) curve shifts to the right. This is a result of
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
97. Can a change in the price level change aggregate demand?
a.
Yes, as the price level rises, aggregate demand falls.
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 change aggregate demand.
d.
No, a change in the price level can only change aggregate supply.
e.
none of the above
98. Which of the following statements is false?
a.
Aggregate demand is a specific dollar amount, such as $400 billion.
b.
At a given price level, anything that changes total expenditures changes aggregate demand.
c.
Total expenditures rises if consumption rises, ceteris paribus.
d.
Total expenditures rises if investment spending rises, ceteris paribus.
99. If businesses buy fewer capital goods, and nothing else changes, then total expenditures on U.S. goods and services
will decrease. And if total expenditures decrease, then __________ will decrease; consequently, the __________ curve
will shift __________.
a.
aggregate demand (AD); AD; rightward
b.
short-run aggregate supply (SRAS); SRAS; leftward
c.
aggregate demand (AD); AD; leftward
d.
interest rates; AD; leftward
e.
prices; AD; rightward
100. Which of the following statements represents a correct and sequentially accurate economic explanation?
a.
If consumption falls, total expenditures on goods and services rises, and the AD curve shifts leftward.
b.
If investment increases, total expenditures on goods and services falls, and the AD curve shifts leftward.
c.
If net exports rise, total expenditures on goods and services rises, and the AD curve shifts rightward.
d.
If consumption falls, total expenditures on goods and services falls, and the AD curve shifts leftward.
e.
c and d
101. Which of the following statements represents a correct and sequentially accurate economic explanation?
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
102. Which of the following statements represents a correct and sequentially accurate economic explanation?
a.
The (U.S.) dollar appreciates, net exports rise, total expenditures on goods and services rises, AD rises, and the
AD curve shifts rightward.
b.
The interest rate falls, investment rises, total expenditures on goods and services rises, AD falls, and the AD
curve shifts leftward.
c.
Wealth increases, consumption rises, total expenditures on goods and services rises, AD falls, and the AD
curve shifts rightward.
d.
(Business) expectations about future sales become more positive, investment rises, total expenditures on goods
and services rises, AD rises, and the AD curve shifts rightward.
e.
Foreign real national income rises, net exports rise, total expenditures on goods and services falls, AD rises,
and the AD curve shifts rightward.
103. Which of the following statements represents a correct and sequentially accurate economic explanation?
a.
Business taxes rise, investment falls, total expenditures on goods and services falls, AD rises, and the AD
curve shifts rightward.
b.
The dollar depreciates, net exports rise, total expenditures on goods and services rises, AD rises, and the AD
curve shifts rightward.
c.
The interest rate falls, consumption rises, total expenditures on goods and services rises, AD rises, and the AD
curve shifts rightward.
d.
b and c
e.
a, b, and c
104. The dollar appreciates against foreign currencies. This makes foreign-produced goods __________ for Americans
and U.S.-produced goods __________ for foreigners. As a result, U.S. __________ fall and U.S. __________ rise.
a.
more expensive; cheaper; imports; exports
b.
cheaper; more expensive; exports; imports
c.
cheaper; more expensive; imports; exports
d.
more expensive; cheaper; exports; imports
105. Foreign real national income rises. This raises U.S. ___________ which ________ aggregate demand (AD). The AD
curve shifts ___________ as a result.
a.
net exports; raises; rightward
b.
imports; raises; rightward
c.
prices; reduces; leftward
d.
investment; reduces; leftward
e.
none of the above
106. Business taxes fall. This raises __________, which raises __________ and the __________ curve shifts rightward.
a.
consumption; aggregate demand (AD); AD
b.
investment; government purchases; AD
c.
investment; aggregate demand (AD); AD
d.
net exports; aggregate demand (AD); AD
e.
none of the above
107. Personal income taxes rise. This lowers __________, which lowers __________ and the __________ curve shifts
__________.
a.
net exports; aggregate demand (AD); AD; leftward
b.
consumption; short-run aggregate supply (SRAS); SRAS; rightward
c.
government revenue; net exports; AD; rightward
d.
consumption; aggregate demand (AD); AD; leftward
e.
none of the above
108. Which of the following statements is false?
a.
The exchange rate is the price of one (country's) currency in terms of another (country's) currency.
b.
A currency has appreciated in value if more of a foreign currency is needed to buy it.
c.
A change in the money supply can change aggregate demand.
d.
A change in business taxes can change investment, which can change aggregate demand.
e.
none of the above
109. The short-run aggregate supply (SRAS) curve shows the quantity
a.
demanded of all goods and services at different price levels, ceteris paribus.
b.
supplied of all goods and services at a particular price level, ceteris paribus.
c.
supplied of all goods and services at different price levels, ceteris paribus.
d.
supplied of GDP at a particular price level, ceteris paribus.
110. Which of the following statements represents a correct and sequentially accurate economic explanation?
a.
Wage rates rise, SRAS rises, and the SRAS curve shifts to the left.
b.
The prices of nonlabor inputs rise, SRAS decreases, and the SRAS curve shifts to the right.
c.
Labor productivity rises, SRAS increases, and the SRAS curve shifts to the right.
d.
An adverse supply shock hits, SRAS decreases, and the SRAS curve shifts to the right.
e.
a and c
111. Wage rates fall. This increases __________ and the __________ curve shifts rightward.
a.
aggregate demand (AD); AD
b.
short-run aggregate supply (SRAS); AD
c.
short-run aggregate supply (SRAS); SRAS
d.
employment; AD
e.
none of the above
112. Which of the following statements is true?
a.
A decrease in wage rates will shift the SRAS curve to the left.
b.
An adverse supply shock will shift the SRAS curve to the left.
c.
A fall in the prices of nonlabor inputs will shift the SRAS curve to the left.
d.
An increase in labor productivity will shift the SRAS curve to the left.
e.
c and d
113. If wage rates rise at the same time that labor productivity increases, what is the effect on short-run aggregate supply
(SRAS)?
a.
SRAS rises.
b.
SRAS falls.
c.
SRAS remains constant.
d.
SRAS may rise, fall, or remain constant.
114. If wage rates fall at the same time that labor productivity increases, what is the effect on short-run aggregate supply
(SRAS)?
a.
SRAS falls.
b.
SRAS remains constant.
c.
SRAS rises.
d.
SRAS may rise, fall, or remain constant.
115. If labor productivity rises at the same time that there is a beneficial supply shock, what is the effect on short-run
aggregate supply (SRAS)?
a.
SRAS rises.
b.
SRAS falls.
c.
SRAS remains constant.
d.
SRAS may rise, fall, or remain constant.
116. Starting from short-run equilibrium, the following occurs: labor productivity rises and individuals expect higher
(future) incomes. What is the effect on the price level and Real GDP in the short run?
a.
Real GDP falls and the price level necessarily rises.
b.
Real GDP rises and the effect on the price level cannot be determined.
c.
Real GDP rises and the price level necessarily falls.
d.
Real GDP falls and the effect on the price level cannot be determined.
e.
Real GDP rises and the price level necessarily rises.
117. Starting from short-run equilibrium, wage rates rise. What is the effect on the price level and Real GDP in the short
run?
a.
The price level rises and Real GDP falls.
b.
The price level falls and Real GDP rises.
c.
The price level rises and Real GDP rises.
d.
The price level falls Real GDP falls.
118. Starting from short-run equilibrium, the following occurs: personal income taxes rise and foreign real national
income rises. What is the effect on the price level and Real GDP in the short run?
a.
The price level rises and Real GDP falls.
b.
The price level falls and Real GDP falls.
c.
The price level rises and Real GDP rises.
d.
The price level falls and Real GDP rises.
e.
There is not enough information to answer this question.
119. Starting from short-run equilibrium, the following occurs: individuals expect higher (future) incomes and wage rates
rise. What is the effect on the price level and Real GDP in the short run?
a.
The price level rises and Real GDP rises.
b.
The price level falls and Real GDP falls.
c.
The price level rises, but the effect on Real GDP cannot be determined.
d.
Real GDP rises, but the effect on the price level cannot be determined.
e.
Real GDP falls, but the effect on the price level cannot be determined.
120. Starting from short-run equilibrium, the following occurs: the U.S. dollar depreciates and wage rates rise. Moreover,
the effect on the economy from the dollar depreciating is stronger than the effect on the economy from rising wage
rates.What is the effect on the price level and Real GDP in the short run?
a.
The price level falls and Real GDP falls.
b.
The price level rises and Real GDP falls.
c.
The price level falls and Real GDP rises.
d.
The price level rises and Real GDP rises.
e.
none of the above
121. 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?
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.
122. Which of the following statements is false?
a.
If the SRAS curve shifts rightward, the price level falls in the short run.
b.
If AD rises and SRAS is constant, the price level rises in the short run.
c.
If both SRAS and AD decline, Real GDP falls in the short run.
d.
If both SRAS and AD increase, the price level necessarily rises in the short run.
e.
none of the above
123. A business firm's profitability is based in part on the
a.
prices of their nonlabor inputs.
b.
productivity of their workers.
c.
wage rates they must pay their workers.
d.
business taxes they must pay.
e.
all of the above
124. 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?
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 above
125. Which set of changes will definitely shift the aggregate demand (AD) curve to the right?
a.
Business taxes decline and foreign real national income rises.
b.
Businesses become pessimistic about future sales and the U.S. dollar depreciates.
c.
Wealth increases and individuals expect higher (future) incomes.
d.
a and b
e.
a and c
126. Which set of changes is definitely predicted to raise Real GDP in the short run?
a.
Wealth increases and there is an adverse supply shock.
b.
Individuals expect higher (future) incomes and wage rates fall.
c.
Business taxes rise and wage rates fall.
d.
The U.S. dollar appreciates and there is a beneficial supply shock.
e.
none of the above
127. Which set of changes is definitely predicted to raise the price level in the short run?
a.
The money supply falls and wage rates rise.
b.
The money supply falls and wage rates fall.
c.
The money supply rises and wage rates fall.
d.
Labor productivity rises and there is a beneficial supply shock.
e.
The prices of nonlabor inputs rise and individuals expect higher (future) incomes.
128. Which set of changes is definitely predicted to lower Real GDP in the short run?
a.
The money supply rises and labor productivity rises.
b.
The U.S. dollar depreciates and wage rates fall.
c.
The U.S. dollar appreciates and labor productivity rises.
d.
Foreign real national income falls and wage rates rise.
e.
none of the above
129. As the U.S. dollar appreciates and the Japanese yen depreciates,
a.
U.S.-produced goods become more expensive for the Japanese and Japanese-produced goods become cheaper
for Americans.
b.
U.S.-produced goods become cheaper for the Japanese and Japanese-produced goods become more expensive
for Americans.
c.
U.S.-produced goods become cheaper for both the Japanese and Americans.
d.
Japanese-produced goods become more expensive for both the Japanese and Americans.
e.
none of the above
130. Which set of changes is definitely predicted to lower Real GDP in the short run?
a.
Interest rates rise and wage rates fall.
b.
Interest rates rise and there is a beneficial supply shock.
c.
Interest rates rise and labor productivity increases.
d.
Interest rates rise and individuals expect lower (future) incomes.
e.
c and d
131. If the nominal wage is $12 per hour and the price level (as measured by a price index) is 2, it follows that the real
wage is _________ per hour.
a.
$24.00
b.
$6.00
c.
$2.50
d.
$14.00.
e.
none of the above
132. If wages are “sticky”, a decline in the price level will
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 above
