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CH 13

Terms in this set (30)

The​ ________ shows the relationship between the price level and quantity of real GDP demanded.

A. 45-degree line
B. aggregate expenditure line
C. consumer price index
D. aggregate demand curve
D. aggregate demand curve
An increase in the value of which of the following would not increase household​ wealth?

A. a credit card balance
B. 500 shares of Google stock
C. the equity in​ one's home
D. the balance in your savings account
A. a credit card balance
Which of the following best describes the​ "wealth effect"?

A. When the price level​ falls, the real value of household wealth rises.
B. When the price level​ falls, the real value of household wealth falls.
C. When the price level​ falls, the nominal value of household wealth falls.
D. When the price level​ falls, the nominal value of household wealth rises.
A. When the price level falls, the real value of households wealth rises.
The​ "interest rate​ effect" can be described as an increase in the price level that raises the interest rate and chokes off

A. government spending and unplanned investment.
B. investment and consumption spending.
C. government spending.
D. net exports.
B. investment and consumption spending
When the price level in the United States falls relative to the price level of other​ countries, ________ will​ fall, ________ will​ rise, and​ ________ will rise.

A. net​ exports; imports; exports
B. imports; exports; net exports
C. ​exports; imports; net exports
D. net​ exports; exports; imports
B. imports; exports; net exports
An increase in the price level will

A.
move the economy down along a stationary aggregate demand curve.
B.
shift the aggregate demand curve to the right.
C.
move the economy up along a stationary aggregate demand curve.
D.
shift the aggregate demand curve to the left.
C. move the economy up along a stationary aggregate demand curve
The recession of 2007minus2009 made many consumers pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand​ curve?
A.
This will move the economy down along a stationary aggregate demand curve.
B.
This will shift the aggregate demand curve to the right.
C.
This will shift the aggregate demand curve to the left.
D.
This will move the economy up along a stationary aggregate demand curve.
C. this will shift aggregate demand curve to the left.
Higher personal income taxes
A.
increase aggregate demand.
B.
increase disposable income.
C.
decrease aggregate demand.
D.
both B and C.
C. decrease disposable income.
If the U.S. dollar decreases in value relative to other​ currencies, how does this affect the aggregate demand​ curve?
A.
This will move the economy down along a stationary aggregate demand curve.
B.
This will move the economy up along a stationary aggregate demand curve.
C.
This will shift the aggregate demand curve to the left.
D.
This will shift the aggregate demand curve to the right.
D. this will shift aggregate demand curve to the right.
Last​ week, six Swedish kronor could purchase one U.S. dollar. This​ week, it takes eight Swedish kronor to purchase one U.S. dollar. This change in the value of the dollar will​ _____________ exports from the U.S. to Sweden and​ __________ U.S. aggregate demand.
A.
​decrease; increase
B.
​increase; decrease
C.
​increase; increase
D.
​decrease; decrease
D. decrease; decrease
Suppose the U.S. GDP growth rate is faster relative to other​ countries' GDP growth rates. U.S. imports will therefore increase faster than U.S.​ exports, and this will
A.
shift the aggregate demand curve to the right.
B.
move the economy down along a stationary aggregate demand curve.
C.
shift the aggregate demand curve to the left.
D.
move the economy up along a stationary aggregate demand curve.
C. shift the aggregate demand curve to the left
How do lower taxes affect aggregate​ demand?
A.
They reduce disposable​ income, consumption, and aggregate demand.
B.
They increase corporate investment and aggregate demand.
C.
They increase disposable​ income, consumption, and aggregate demand.
D.
They increase aggregate supply and thus increase aggregate demand as well.
C. they increase disposable income, consumption, and aggregate demand.
Japanese electronics exports were hurt in 2008 as a result of the recession. How would this decrease in exports have affected​ Japan's aggregate demand​ curve?
A.
The aggregate demand curve would have shifted to the right.
B.
The aggregate demand curve would not have​ shifted, but there would have been a movement down the aggregate demand curve.
C.
The aggregate demand curve would have shifted to the left.
D.
The aggregate demand curve would not have​ shifted, but there would have been a movement up the aggregate demand curve.
C. the aggregate demand curve would have shifted to the right.
The level of aggregate supply in the long run is not affected by
A.
changes in the capital stock.
B.
changes in the number of workers.
C.
changes in technology.
D.
changes in the price level.
D. changes in the price level.
Potential GDP refers to the level of
A.
nominal GDP in the short run.
B.
nominal GDP in the long run.
C.
real GDP in the long run.
D.
real GDP in the short run.
C. real GDP in the long run.
The long run aggregate supply curve
A.
has a negative slope.
B.
is vertical.
C.
is horizontal.
D.
curve has a steep but positive slope.
B. is vertical.
If stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home​ countries,
A.
the​ long-run aggregate supply curve will shift to the right.
B.
we will move up along the​ long-run aggregate supply curve.
C.
we will move down along the​ long-run aggregate supply curve.
D.
the​ long-run aggregate supply curve will shift to the left.
D. the long-run aggregate supply curve will shift to the left.
What is potential​ GDP?
A.
the difference between current GDP and maximum GDP
B.
the level of real GDP in the long run
C.
the level of real GDP in the short run
D.
the level of GDP at which inflation is constant
B. the level of real GDP in the long-run
​Full-employment GDP is also known as
A.
potential GDP.
B.
​balanced-budget GDP.
C.
​politico-economic GDP.
D.
realized GDP.
A. potential GDP.
On the​ long-run aggregate supply​ curve,
A.
a decrease in the price level decreases the aggregate quantity of GDP supplied.
B.
a decrease in the price level has no effect on the aggregate quantity of GDP supplied.
C.
a decrease in the price level decreases the level of potential GDP.
D.
a decrease in the price level increases the aggregate quantity of GDP supplied.
B. a decrease in the price level has no effect on the aggregate quantity of GDP supplied.
The​ long-run aggregate supply curve will shift to the right if the economy
A.
experiences technological change.
B.
experiences high levels of inflation.
C.
has a decrease in population.
D.
net exports decrease.
A. experiences technological change.
Which aggregate supply curve has a positive​ slope?
A.
neither long run nor short run
B.
long run only
C.
short run only
D.
both long run and short run
C. short run only.
The level of long-run aggregate supply is affected by all of the following except
A.
changes in the technology.
B.
changes in the capital stock.
C.
changes in the price level.
D.
changes in the number of workers.
C. changes in the price level.
​Long-run macroeconomic equilibrium occurs when
A.
output is above potential GDP.
B.
the aggregate demand curve intersects the​ short-run aggregate supply curve.
C.
structural and frictional unemployment equal zero.
D.
the aggregate demand and​ short-run aggregate supply curves intersect at a point on the​ long-run aggregate supply curve.
D. the aggregate demand and short-run aggregate supply curves intersect at a point on the long-run aggregate supply curve.
Where the aggregate demand curve and the​ short-run aggregate supply curve​ intersect,
A.
structural and frictional unemployment equal zero.
B.
inflation must be increasing.
C.
the​ long-run aggregate supply curve must also intersect at the same point.
D.
the economy is in​ short-run macroeconomic equilibrium.
D. the economy is in short-run macroeconomic equilibrium.
Interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short​ run?
A.
Aggregate demand will​ fall, the equilibrium price level will​ rise, and the equilibrium level of GDP will fall.
B.
Aggregate demand will​ fall, the equilibrium price level will​ fall, and the equilibrium level of GDP will fall.
C.
Aggregate demand will​ rise, the equilibrium price level will​ fall, and the equilibrium level of GDP will rise.
D.
Aggregate demand will​ rise, the equilibrium price level will​ rise, and the equilibrium level of GDP will rise.
D. aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise.
The process of an economy adjusting from a recession back to potential GDP in the long run without any government intervention is known as
A.
monetary policy.
B.
​"releasing sticky​ prices."
C.
fiscal policy.
D.
an automatic mechanism.
D. an automatic mechanism.
In the long​ run,
A.
GDP​ > potential GDP.
B.
LRAS and SRAS lie on the same line.
C.
unemployment is at its natural rate.
D.
the inflation rate is zero.
C. unemployment is at its natural rate.
Stagflation occurs when
A.
inflation rises and GDP falls.
B.
inflation rises and GDP rises.
C.
inflation falls and GDP rises.
D.
inflation falls and GDP falls.
A. inflation rises and GDP falls.
Stagflation usually results from
A.
a decrease in aggregate demand.
B.
an increase in aggregate demand.
C.
a supply shock.
D.
an increase in aggregate supply.
C. a supply shock.
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