Question 13 As the price level rises, Answer the exchange rate falls, so net exports fall. the exchange rate falls, so net exports rise. the exchange rate rises, so net exports fall. the exchange rate rises, so net exports rise. Question 14 Other things the same, as the price level rises, the real value of a dollar Answer rises, and interest rates rise. rises, and interest rates fall. falls, and interest rates rise. falls, and interest rates fall. Question 15 Other things the same, as the price level falls, a country’s exchange rate Answer and interest rates rise. and interest rates fall. falls and interest rates rise. rises and interest rates fall. Question 16 Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to desire Answer decreased consumption, shown as a movement to the left along a given aggregate-demand curve. increase consumption, shown as a movement to the right along a given aggregate-demand curve. decreased consumption, shifting the aggregate-demand curve to the left. increased consumption, shifting the aggregate-demand curve to the right. Question 17 Which of the following both shift aggregate demand left? Answer a decrease in taxes and at a given price level consumers feel more wealthy a decrease in taxes and at a given price level consumers feel less wealthy an increase in taxes and at a given price level consumers feel more wealthy an increase in taxes and at a given price level consumers feel less wealthy Question 18 If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then Answer U.S. goods become more expensive relative to foreign goods so aggregate demand shifts right. U.S. goods become less expensive relative to foreign goods so aggregate demand shifts right. U.S. goods become more expensive relative to foreign goods so aggregate demand shifts left. U.S. goods become less expensive relative to foreign goods so aggregate demand shifts left. Question 19 The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change Answer in the price level and output. in the price level, but not output. in output, but not the price level. in neither the price level nor output. Question 20 The long-run aggregate supply curve shifts right if Answer immigration from abroad increases. the capital stock increases. technology advances. All of the above are correct. Question 21 According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to Answer increases in both the price level and real GDP. an increase in real GDP but does not change the price level. an increase in the price level but does not change real GDP. no change in either the price level or real GDP. Question 22 In the long run, technological progress Answer and increases in the money supply both make the price level rise. and increases in the money supply both make the price level fall. makes the price level rise, while increases in the money supply make prices fall. makes the price level fall, while increases in the money supply make prices rise. Question 23 If the price level rises above what was expected and nominal wages are fixed, then Answer production becomes less profitable so firms will hire fewer workers. production becomes less profitable so firms will hire more workers. production becomes more profitable so firms will hire fewer workers. production become more profitable so firms will hire more workers. Question 24 Other things the same, when the price level rises more than expected, some firms will have Answer higher than desired prices which increases their sales. higher than desired prices which depresses their sales. lower than desired prices which increases their sales. lower than desired prices which depresses their sales. Question 25 According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what they produce had Answer increased, so they would increase production. increased, so they would decrease production. decreased, so they would increase production. decreased, so they would decrease production.
Question 13
As the
Answer
the exchange rate falls, so net exports fall.
the exchange rate falls, so net exports rise.
the exchange rate rises, so net exports fall.
the exchange rate rises, so net exports rise.
Question 14
Other things the same, as the price level rises, the real value of a dollar
Answer
rises, and interest rates rise.
rises, and interest rates fall.
falls, and interest rates rise.
falls, and interest rates fall.
Question 15
Other things the same, as the price level falls, a country’s exchange rate
Answer
and interest rates rise.
and interest rates fall.
falls and interest rates rise.
rises and interest rates fall.
Question 16
Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to desire
Answer
decreased consumption, shown as a movement to the left along a given aggregate-
increase consumption, shown as a movement to the right along a given aggregate-demand curve.
decreased consumption, shifting the aggregate-demand curve to the left.
increased consumption, shifting the aggregate-demand curve to the right.
Question 17
Which of the following both shift aggregate demand left?
Answer
a decrease in taxes and at a given price level consumers feel more wealthy
a decrease in taxes and at a given price level consumers feel less wealthy
an increase in taxes and at a given price level consumers feel more wealthy
an increase in taxes and at a given price level consumers feel less wealthy
Question 18
If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then
Answer
U.S. goods become more expensive relative to foreign goods so aggregate demand shifts right.
U.S. goods become less expensive relative to foreign goods so aggregate demand shifts right.
U.S. goods become more expensive relative to foreign goods so aggregate demand shifts left.
U.S. goods become less expensive relative to foreign goods so aggregate demand shifts left.
Question 19
The long-run
Answer
in the price level and output.
in the price level, but not output.
in output, but not the price level.
in neither the price level nor output.
Question 20
The long-run aggregate supply curve shifts right if
Answer
immigration from abroad increases.
the capital stock increases.
technology advances.
All of the above are correct.
Question 21
According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to
Answer
increases in both the price level and real GDP.
an increase in real GDP but does not change the price level.
an increase in the price level but does not change real GDP.
no change in either the price level or real GDP.
Question 22
In the long run, technological progress
Answer
and increases in the money supply both make the price level rise.
and increases in the money supply both make the price level fall.
makes the price level rise, while increases in the money supply make prices fall.
makes the price level fall, while increases in the money supply make prices rise.
Question 23
If the price level rises above what was expected and nominal wages are fixed, then
Answer
production becomes less profitable so firms will hire fewer workers.
production becomes less profitable so firms will hire more workers.
production becomes more profitable so firms will hire fewer workers.
production become more profitable so firms will hire more workers.
Question 24
Other things the same, when the price level rises more than expected, some firms will have
Answer
higher than desired prices which increases their sales.
higher than desired prices which depresses their sales.
lower than desired prices which increases their sales.
lower than desired prices which depresses their sales.
Question 25
According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what they produce had
Answer
increased, so they would increase production.
increased, so they would decrease production.
decreased, so they would increase production.
decreased, so they would decrease production.
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