A ___ in the price level increases the value of money in peoples' pockets, so the amount of goods people buy rises.
If the price level rises, the interest rate effect will cause investment:
and the quantity of aggregate demand to decrease.
A rise in the U.S. price level will cause:
exports to decrease and imports to increase.
In the 1990s, the price level in Japan fell relative to the price level in the United States. If the exchange rate did not change, one would expect that:
U.S. exports to Japan would decline and U.S. imports from Japan would rise.
If the multiplier effect did not exist, the aggregate demand curve would:
An increase in the price level might cause a decrease in the quantity of aggregate demand because of the ______ ______ effect.
Most economists agree that the aggregate demand curve is:
If businesses expect future demand to increase, this will cause a:
rightward shift of the aggregate demand curve.
A decrease in the expected future income of the U.S. would likely:
shift its AD curve to the left.
In 2009 Iran was experiencing inflation of about 20% per year. Other things equal, the expectations by the people of Iran of worsening inflation in the future would probably:
shift the AD curve to the right.
Which of the following would shift the aggregate demand curve to the left?
(an increase in foreign income, a depreciation in the value of the country's currency, a higher future expected price level, a decrease in exports)
a decrease in exports.
In the late 1990s, the Brazilian currency, the real, depreciated by 40%. The AS-AD model predicts that this would cause a trade:
surplus for Brazil and shifted its AD curve right.
If total income remains the same but profits fall and real wages rise, the aggregate demand curve will most likely:
shift to the right.
If the U.S. government increased taxes without changing spending, the U.S. AD curve would:
shift to the left.
In 1968, the government instituted a 10 percent income tax surcharge. In terms of the AS-AD model, this change should have:
shifted the AD curve to the left.
During the Vietnam War, Congress increased government expenditures while raising taxes. As a result:
what happened to the AD curve is unclear.
With an upward-sloping short-run aggregate supply curve, firms respond to a change in aggregate demand by adjusting:
both prices and quantities in the short run.
In late 2004, oil prices increased sharply while the rate of growth in labor productivity declined. The combination of these two factors should:
shift the short-run aggregate supply curve up (to the left).
In the late 1990s in the United States, those making policy at the Federal Reserve argued about whether productivity was increasing faster than it had in the past. If productivity was growing faster than anticipated, they would expect the:
short-run aggregate supply curve to be shifting down (to the right).
If productivity increases by 3% but wages increase by 4%, then it is most likely that the price level will:
rise by 1 percent.
An increase in aggregate demand:
does not change potential output.
Many economists have argued that labor market regulations in the European Union have stifled efficiency and held down potential GDP. If this argument is correct, the removal of these regulations should:
shift the long-run aggregate supply curve out to the right.
The short-run aggregate supply is most likely to shift down (to the right) when actual output:
is less than potential output.
Which of the following factors will shift the long-run aggregate supply curve?
A change in available resources
A shift in the long run aggregate supply curve will change:
both output and the price level.
A recessionary gap exists when:
potential output exceeds actual output.
If potential output is less than actual output, eventually the short-run aggregate supply curve will shift:
up and eliminate the inflationary gap.
Governments are said to fine tune the economy when they attempt to use fiscal policy to:
keep the economy always at its target or potential level of income.
Expenditures that would exist at a zero level of income are called _____ expenditures.
The aggregate production curve is a ___ degree line.
The multiplier model makes it possible to estimate how a change in aggregate expenditures affects:
The multiplier model allows economists to determine how:
a 2 percent decline in aggregate expenditure affects output.
The total level of expenditures in an economy equals:
C + I + G + X - M.
Autonomous expenditures are defined as expenditures that:
occur regardless of the level of income.
Induced expenditures are defined as expenditures that:
change as income changes.
In the multiplier model, aggregate expenditure equals:
the sum of autonomous and induced expenditures.
In the aftermath of the terrorist attack in New York on September 11, 2001, U.S. consumer confidence fell sharply, causing consumer spending to fall by about $40 billion in October, 2001. This decline in consumer spending caused the aggregate expenditures function to:
The aggregate expenditure function:
gives the relationship between an economy's expenditures and its income.
The marginal propensity to expend equals the ratio of:
the change in aggregate expenditure to a change in income.
The slope of the expenditures curve is:
equal to the marginal propensity to expend.
Cash is an example of a _____ financial asset.
Money does/doesn't have to have any inherent value to function as a medium of exchange.
When a bank creates loans, it also creates
If the reserve ratio is 0.10, the simple money multiplier is equal to
If the financial sector causes more to flow into spending than is saved, most likely:
the economy will experience inflation.
Every financial asset has a corresponding:
When you withdraw $1,000 from your bank account:
the bank's financial liabilities and assets fall by $1,000, and you have exchanged one financial asset for another.
The short-term interest rate is determined in the:
You are holding $200 in cash with the objective to buy in the near future a video game that is about to be offered in the market, until you buy the game this type of savings is:
escaping the circular flow of the economy.
In some countries the financial sector maintains private reserves in addition to the required reserves. These reserves do not go back to the circular flow of the economy. In this case, this economy most likely will experience:
A financial asset is liquid:
if it can be readily exchanged for another asset or good.
The Federal Reserve Bank is the U.S. central bank:
whose liabilities serve as cash in the United States.
The U.S. central bank is a financial institution that:
has the sole right to issue currency.
The U.S. dollar bills you sometimes have in your wallet are:
liabilities of the Federal Reserve.
The financial liability that makes the real economy function smoothly for its liquidity and its acceptability is called:
What is not one of the functions of money?
standard of economic well-being.