QUESTION 1 an increase in labor productivity. an increase in the marginal income
ID: 1151062 • Letter: Q
Question
QUESTION 1
an increase in labor productivity.
an increase in the marginal income tax rate.
an increase in government expenditures.
an increase in the quantity of money in circulation.
0.42 points
QUESTION 2
A price level increase tends to reduce net exports, thereby reducing the amount of real goods and services purchased in the United States. Economists refer to this phenomenon as
the open-economy effect.
the wealth effect.
the Gross Domestic Product (GDP) effect.
the barrier effect.
0.42 points
QUESTION 3
The long run aggregate supply curve is vertical because
technology increases at a constant rate.
the aggregate demand curve is downward sloping.
the production possibilities curve is vertical.
a change in the level of prices will have no effect on real output in the long-run.
0.42 points
QUESTION 4
The interest rate effect is part of the reason
the short-run aggregate supply curve is upward sloping.
the aggregate demand curve is downward sloping.
the long-run aggregate supply curve is vertical.
the aggregate demand curve is upward sloping.
0.42 points
QUESTION 5
Economic growth is demonstrated by the LRAS as it
shifts to the right.
shifts to the left.
becomes more vertical.
becomes more horizontal.
0.42 points
QUESTION 6
The horizontal axis for an aggregate demand curve measures
quantity demanded of the representative good.
output of all goods and services measured as a quantity index.
real Gross Domestic Product (GDP).
disposable personal income.
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QUESTION 7
A shift away from expenditures on domestic goods and a shift toward expenditures on foreign goods when the domestic price level increases is known as
the open economy effect.
demand side inflation.
the interest rate effect.
the real-balance effect.
0.42 points
QUESTION 8
What determines the total value of aggregate demand for U.S. real GDP?
the Federal Reserve Board
the spending decisions of consumers, firms, and governments
Wall Street
the Congressional Budget Office
0.42 points
QUESTION 9
If your income stays the same and the price level increases, you will buy fewer goods and services due to the
real-balance effect.
open economy effect.
aggregate balances effect.
interest rate effect.
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QUESTION 10
All of the following are components of aggregate demand EXCEPT
net foreign spending on domestic production.
government purchases.
consumption spending.
the level of technology.
0.42 points
QUESTION 11
According to the interest rate effect, a decrease in the price level will
cause interest rates to fall, which generates an increase in borrowing, so that total planned real expenditures increase.
decrease the real value of money balances, which causes total planned real expenditures to increase.
increase the real value of money balances, which causes interest rates to increase, thereby reducing total planned expenditures.
lead to a decrease in net exports, which causes total planned real expenditures to decrease.
0.42 points
QUESTION 12
According to the real-balance effect, an increase in the price level will
decrease total planned real expenditures because of an increase in interest rates.
leave total planned real expenditures unchanged since the price level of all goods has increased.
lead to a corresponding increase in total planned real expenditures since businesses are now earning higher profits.
decrease total planned real expenditures as a result of a decrease in the real value of money balances.
0.42 points
QUESTION 13
Long-run aggregate supply reflects
only foreign production from U.S. subsidiaries.
both production and spending in the economy.
total production in the economy at full employment.
total spending in the economy at full employment.
0.42 points
QUESTION 14
Aggregate supply
is the overall wealth within an economy.
is the total of all planned production in an economy.
is the total amount of money circulating in an economy.
is the total amount of raw materials available in an economy.
0.42 points
QUESTION 15
The aggregate demand curve is
vertical if full employment exists in the economy.
horizontal if full employment exists in the economy.
downward sloping because more goods are produced as per unit cost of producing each item falls.
downward sloping because of the real-balance, interest rate, and open economy effects.
an increase in labor productivity.
an increase in the marginal income tax rate.
an increase in government expenditures.
an increase in the quantity of money in circulation.
Explanation / Answer
Question 1. Image is not available.
QUESTION 2.
A price level increase tends to reduce net exports, thereby reducing the amount of real goods and services purchased in the United States. Economists refer to this phenomenon as
Answer: a. Open Economy effect
Explanation: Net exports fall whenever the price of domestic goods increases with respect to the price of foreign goods, thereby reducing the aggregate expenditure. This phenomenon is called open economy or international trade effect.
QUESTION 3
The long run aggregate supply curve is vertical because
Answer: d. a change in the level of prices will have no effect on real output in the long-run.
Explanation: LAS curve shows the relationship between Price level and ouptut in the long run. In LAS, output is potential output. Potential output is the output which is obtained when resources ( inputs to production ) are fully utilised. When price level rises, then in long run input prices also rises. Input prices here refer to wages to labour, rent on land, interest rate on capital. This rise in input prices maintains the level of demand and thereby the production.
QUESTION 4
The interest rate effect is part of the reason
Answer: b. The aggregate demand curve is downward sloping.
Explanation: Interest rate Effect: Increase in price level means households and firms will require more money to purchse their necessities. However, the supply of money is fixed. But demand has increased, this results in increase in interest rate. Increase in interest rate will result in decline of spendings which involve interest rate. In this way Interest rate effect causes the negative relationship between price level and the demand.
QUESTION 5
Economic growth is demonstrated by the LRAS as it
Answer: (a).shifts to the right.
Explanation: Economic growth is measured by increase in Output. And , LRAS shifts right when output increases.
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