Chapter 23.1 Flashcards
Other things being equal, a rise in the domestic price level
A) causes a decrease in real saving.
B) lowers the real value of all assets denominated in money units.
C) makes domestic goods more attractive to foreigners.
D) makes foreign goods less attractive to domestic residents.
E) raises the real burden of repaying a fixed money value debt.
B
Other things being equal, a fall in the domestic price level leads to a rise in private-sector wealth and thus
A) an increase in the average propensity to save.
B) an increase in autonomous desired consumption.
C) a downward shift in the AE curve.
D) a downward shift in net exports.
E) domestic goods appearing less attractive to foreigners.
B
Other things being equal, an exogenous rise in the domestic price level will
A) have no effect on the level of desired real expenditure.
B) increase the level of desired real expenditure.
C) decrease desired real expenditure only if it is accompanied by a change in the current income of households.
D) decrease desired real expenditure because it will affect the real value of wealth.
E) cause net exports to rise.
D
Other things being equal, when the domestic price level falls exogenously,
A) Canadian goods become more expensive relative to foreign goods.
B) the net export function shifts upward.
C) the aggregate expenditure function shifts downward.
D) imports of foreign goods rise.
E) the net export function shifts downward
B
Other things being equal, when the domestic price level rises exogenously,
A) Canadian goods become more expensive relative to foreign goods.
B) the net export function shifts upward.
C) the aggregate expenditure function shifts upward.
D) imports of foreign goods fall.
E) the desired investment function shifts upward.
A
Consider a simple macro model with a given price level and demand-determined output. An exogenous change in the domestic price level changes equilibrium real GDP
A) in the same direction.
B) in the opposite direction.
C) by the same amount in the same direction.
D) by the same amount in the opposite direction.
E) by a lesser amount in either direction.
B
Other things being equal, when the price level rises, the real value of money holdings \_\_\_\_\_\_\_\_; when the domestic price level falls, the real value of money holdings \_\_\_\_\_\_\_\_. A) rises; falls B) falls; is not affected C) falls; rises D) is not affected; falls E) is not affected; rises
C
An exogenous fall in the domestic price level causes an increase in real wealth and
A) a fall in desired investment.
B) a rise in desired consumption.
C) a downward shift in the AE curve.
D) a downward shift of the net export function.
E) a fall in government purchases.
B
Consider a simple macro-model with demand-determined output. An exogenous increase in the domestic price level will \_\_\_\_\_\_\_\_ the real value of the private sector's wealth, which leads to \_\_\_\_\_\_\_\_ in autonomous consumption and thus \_\_\_\_\_\_\_\_ shift in the AE function. A) increase; a decrease; a downward B) increase; an increase; a downward C) increase; an increase; an upward D) reduce; a decrease; a downward E) reduce; an increase; an upward
D
Consider a simple macro model with demand-determined output. An exogenous increase in the domestic price level will
A) shift both the net export function and the AE curve upward.
B) shift the net export function upward and the AE curve downward.
C) shift both the net export function and the AE curve downward.
D) shift the net export function downward and the AE curve upward.
E) pivot the net export function and the AE curve upward.
C
Consider a simple macro model with demand-determined output. Other things being equal, the price level and desired aggregate expenditure are related to each other A) positively. B) proportionally. C) progressively. D) exponentially. E) negatively.
E
Suppose there is an exogenous increase in the domestic price level. Which of the individuals listed below would experience an increase in wealth?
A) a person with a 25-year home mortgage
B) a person with cash under the mattress
C) a person with deposits in a bank savings account
D) a person with a government bond that promises to pay the holder $1000, 5 years hence
E) a person with a corporate bond that promises to repay the face value of the bond in the future
A
Other things being equal, a rise in the price level will imply \_\_\_\_\_\_\_\_ in wealth for the bondholder and \_\_\_\_\_\_\_\_ in the wealth of the issuer of the bond. A) a decline; an increase B) a decline; a decline C) a decline; no change D) an increase; a decline E) an increase; an increase
A
Other things being equal, an exogenous increase in the price level causes the aggregate wealth of holders and issuers of private-sector bonds to
A) decrease.
B) increase.
C) not change since the changes in the wealth of bondholders and bond issuers offset each other.
D) either increase or decrease depending on other factors.
E) rise in nominal terms, but fall in real terms.
C
Which of the following events would cause the AE function to shift upwards in a parallel way?
A) an increase in the MPC
B) a decrease in the net tax rate
C) a decrease in the business confidence of firms
D) a decrease in foreign income
E) a decrease in the aggregate price level
E
Other things being equal, as the price level rises exogenously, the aggregate expenditure (AE) function shifts
A) down and the economy will move upward to the left along the AD curve.
B) down and the economy will move downward to the right along the AD curve.
C) upward and the economy moves upward to the left along the AD curve.
D) upward and the economy moves downward to the right along the AD curve.
E) to the right and the AD curve will also shift to the right.
A
Other things being equal, as the price level falls exogenously, the aggregate expenditure (AE) function shifts
A) down and the economy will move upward along the AD curve.
B) down and the economy will move downward along the AD curve.
C) upward and the economy moves upward along the AD curve.
D) upward and the economy moves downward along the AD curve.
E) to the left, as does the AD curve.
D
The AD curve relates the price level to which of the following?
A) desired aggregate expenditure
B) desired consumption
C) the level of real GDP where desired AE equals actual national income
D) the level of nominal GDP where desired AE equals actual national income
E) equilibrium savings and wealth
C
All points on an economy’s AD curve
A) correspond to a particular point on industry demand curves for a particular product.
B) relate a particular price level to the total demand for output at that price level.
C) show only changes in relative prices and quantities.
D) show the direct relationship between the price level and net exports.
E) show the direct relationship between the price level and the demand for consumer goods.
Answer: B
B
In a macro model with a constant price level, an increase in autonomous desired consumption will cause the AE curve to shift
A) downward and the AD curve to shift to the left.
B) downward and the AD curve to shift to the right.
C) upward and the AD curve to shift to the left.
D) upward and the AD curve to shift to the right.
E) upward and a movement to the right along the AD curve.
D
In a macro model with a constant price level, an increase in government purchases will cause the AE curve to shift
A) downward and the AD curve to shift to the right.
B) downward and the AD curve to shift to the left.
C) downward and a movement to the right along the AD curve.
D) upward and the AD curve to shift to the left.
E) upward and the AD curve to shift to the right.
E
On a graph that shows the derivation of the AD curve, an exogenous change in the price level causes
A) a shift in the AE curve and a movement along the AD curve.
B) a shift in both the AE and AD curves.
C) a movement along the AE curve and a shift in the AD curve.
D) a movement along the AE curve but not along the AD curve.
E) a movement along both the AE and AD curves.
A
