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Econ 201 > Final Chapter 11 > Flashcards

Final Chapter 11 Flashcards

1
Q

In the long-run
Answers:
real GDP is equal to potential GDP.
the aggregate supply curve is upward sloping.
aggregate supply depends on the price level.
All of the above answers are correct.

A

real GDP is equal to potential GDP.

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2
Q

If the economy is in short run equilibrium then
Answers:
real GDP equals potential GDP.
real GDP can be greater than, less than, or equal to potential GDP.
nominal GDP equals potential GDP.
real GDP cannot be equal to potential GDP.

A

real GDP can be greater than, less than, or equal to potential GDP.

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3
Q 
An increase in the quantity of money
Answers:	
increases aggregate demand.
increase the short-run quantity supply.
decreases aggregate demand.
decrease the short-run aggregate supply.
A

increases aggregate demand.

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4
Q

The long-run aggregate supply curve is vertical because
Answers:
there is no cyclical inflation.
potential GDP is independent of the price level.
the money wage rate increases faster than the price level.
at full employment prices are stable.

A

potential GDP is independent of the price level.

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5
Q 
The quantity of real GDP supplied (or aggregate production) at different price levels is reflected by the
Answers:	
aggregate supply curve.
aggregate demand curve.
total expenditure curve.
real wealth curve.
A

aggregate supply curve.

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6
Q

The U.S. aggregate demand curve shifts leftward (decreases) if:
Answers:
the economic conditions in Europe improve so that European incomes increase.
U.S. exports increase.
there is a tax cut.
the Federal Reserve increases the interest rate by cutting the money supply.

A

the Federal Reserve increases the interest rate by cutting the money supply.

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7
Q

Which of the following shifts the aggregate demand curve rightward?
Answers:
a decrease in consumption
a decrease in net exports
an increase in investment
a decrease in government expenditure on goods and services

A

an increase in investment

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8
Q

Which of the following does NOT shift the aggregate demand curve?
Answers:
an increase in the price level
a decrease in the quantity of money
an increase in people’s expected future incomes
an increase in current foreign income

A

an increase in the price level

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9
Q 
An increase in the price level creates a
Answers:	
wealth effect.
decrease in consumption expenditures.
movement along the aggregate demand curve.
All of the above answers are correct.
A

All of the above answers are correct.

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10
Q

An increase in the money wage rate (or of other input prices)
Answers:
decreases the short-run aggregate supply.
decreases the long-run aggregate supply.
increases the long-run aggregate supply.
increases the short-run aggregate supply.

A

decreases the short-run aggregate supply.

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11
Q

Which of the following increases aggregate demand and shifts the AD curve rightward?
answers:
predictions of a recession that lead to expectations of lower future income
an increase in the exchange rate that makes imports less expensive
an increase in the quantity of money and a resulting fall in the interest rate
a fall in the price level

A

an increase in the quantity of money and a resulting fall in the interest rate

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12
Q

For movements along the long-run aggregate supply curve,
Answers:
the price level and the money wage rate change by the same percentage.
potential GDP is dependent on the price level.
the prices of goods and services change while the prices of productive resources hold steady.
All of the above are correct.

A

the price level and the money wage rate change by the same percentage.

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13
Q

At potential GDP
Answers:
there is no unemployment but there is not necessarily full employment.
there is no unemployment and there is full employment.
unemployment is at its natural rate.
None of the above is correct.

A

unemployment is at its natural rate.

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14
Q

People expect their incomes will decrease next year (i.e. consumer expectations). As a result, the ________ will shift ________.
Answers:
aggregate demand curve; rightward
long-run aggregate supply curve; rightward
aggregate demand curve; left ward
short-run aggregate supply curve; rightward

A

aggregate demand curve; left ward

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15
Q

A decrease in government transfer payments
Answers:
increases aggregate demand.
increases the aggregate quantity demanded.
decreases the aggregate quantity demanded.
decreases aggregate demand.

A

decreases aggregate demand.

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16
Q

Substitution (i.e. interest rate) effects help explain the slope of the aggregate demand curve. This refers to the:
Answers:
effect on investment expenditures that result from a change in interest rates produced by a change in the price level.
change in wealth that results from a change in the interest rate.
inverse relationship between the interest rate and the price level.
direct relationship between the interest rate and the real value of wealth.

A

effect on investment expenditures that result from a change in interest rates produced by a change in the price level.

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17
Q

people expect their incomes will decrease next year. As a result, the ________ will shift ________.
Answers:
aggregate demand curve; rightward
aggregate demand curve; leftward
long-run aggregate supply curve; rightward
short-run aggregate supply curve; rightward

A

aggregate demand curve; leftward

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18
Q

Which of the following statements is FALSE?
Answers:
Fiscal policy is the attempt to influence the economy using taxes, transfer payments, and government expenditures.
Taxes and transfer payments affect aggregate demand by changing disposable income.
An increase in disposable income leads to a decrease in aggregate demand.
Government expenditure affects aggregate demand directly because government expenditure is a component of aggregate demand.

A

An increase in disposable income leads to a decrease in aggregate demand.

19
Q 
Why does the aggregate demand curve slope downward?
Answers:	
Wealth effect
export effect
interest rate effect
all of the answers in this question
none of the answers
A

all of the answers in this question

20
Q

Which of the following is true?
Answers:
a change the money wage and other resource prices does not shift the long-run aggregate supply.
a shift right of the long-run aggregate supply and potential GDP will also shift the short-run aggregate supply curve right as well.
a shift left of the long-run aggregate supply and potential GDP will also shift the short-run aggregate supply curve left as well.
all of the above are true.

A

all of the above are true.

21
Q

A decrease in government transfer payments
Answers:
increases aggregate demand.
increases the aggregate quantity demanded.
decreases the aggregate quantity demanded.
decreases aggregate demand.

A

decreases aggregate demand.

22
Q

According to the interest rate effect (i.e. intertemporal substitution effect), a fall in the price level will
Answers:
decrease the real value of wealth, which increases the quantity of real GDP demanded.
increase net exports, which causes the quantity of real GDP demanded to increase.
increase the real value of wealth, which raises the interest rate so that the quantity of real GDP demanded decreases.
cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases.

A

cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases.

23
Q 
Which of the following events will increase long-run aggregate supply?
answers:	
an advance in technology
an increase in resource prices
an increase in the interest rate
a decrease in expected profit
A

an advance in technology

24
Q

As the price level falls and other things remain the same, real wealth ________ and ________.
Answers:
aggregate demand curve; left ward
aggregate demand curve; rightward
short-run aggregate supply curve; rightward
long-run aggregate supply curve; rightward

A

aggregate demand curve; left ward

25
Q

Moving along a short-run aggregate supply curve, resource prices (and other input prices) ________, the money rate wage ________, and potential GDP ________.
Answers:
change; does not change; does not change
do not change; changes; does not change
do not change; does not change; changes
do not change; does not change; does not change

A

do not change; does not change; does not change

26
Q

A decrease in government expenditure on goods and services
Answers:
decreases the aggregate quantity demanded.
increases aggregate demand.
decreases aggregate demand.
increases the aggregate quantity demanded.

A

decreases aggregate demand.

27
Q

people expect their incomes will decrease next year. As a result, the ________ will shift ________.
Answers:
aggregate demand curve; left ward
aggregate demand curve; rightward
short-run aggregate supply curve; rightward
long-run aggregate supply curve; rightward

A

aggregate demand curve; left ward

28
Q

Other things equal, along the aggregate demand curve, a higher price level is associated with
Answers:
higher income levels.
a decrease in the quantity of real GDP demanded.
an increase in the quantity of real GDP demanded.
a decrease in the quantity of nominal GDP demanded.

A

a decrease in the quantity of real GDP demanded.

29
Q 
One possible result of a decrease in aggregate demand (ceteris paribus):
Answers:	
a recession.
an economic expansion.
a rise in the price level.
an increase in employment levels.
A

a recession.

30
Q

When talking about aggregate supply, it is necessary to
Answers:
focus on the long run.
focus on the short run.
distinguish between long-run full employment and short-run full-employment.
distinguish between long-run aggregate supply and short-run aggregate supply.

A

distinguish between long-run aggregate supply and short-run aggregate supply.

31
Q

Aggregate demand decreases when
Answers:
the government implements monetary policies that decrease the quantity of money.
the government cuts taxes.
businesses come to expect higher profits in the future.
incomes in foreign countries increase.

A

the government implements monetary policies that decrease the quantity of money.

32
Q

The short-run aggregate supply curve is upward sloping because
Answers:
each firm must keep its production up to the level of its rivals, and some firms will expand production as the price level increases.
firms can increase their profits by increasing their maintenance.
the money wage rate (and other input prices) remains constant so the higher prices makes it profitable for firms to expand production.
the higher prices allow the firm to hire more workers by offering higher wages, thereby increasing productivity and profits.

A

the money wage rate (and other input prices) remains constant so the higher prices makes it profitable for firms to expand production.

33
Q

The supply of real GDP is a function of
Answers:
the total expenditures of consumers, investors and government.
the sum of wages, salaries, corporate profits, rents and interest.
only the state of technology.
the quantities of labor, capital and the state of technology.

A

the quantities of labor, capital and the state of technology.

34
Q

Higher taxes
Answers:
decrease the aggregate quantity demanded.
decrease aggregate demand.
increase aggregate demand.
increase the aggregate quantity demanded.

A

decrease aggregate demand.

35
Q 
Which of the following shifts the aggregate demand curve rightward?
Answers:	
an increase in imports
an increase in tax rates
an increase in the exchange rate
an increase in government expenditure
A

an increase in government expenditure

36
Q

A fall in the money wage rate (or other input prices) shifts
Answers:
both the SRAS and LRAS curves leftward.
the SRAS curve rightward but leaves the LAS curve unchanged.
the LRAS curve rightward but leaves the SAS curve unchanged.
both the SRAS and LRAS curves rightward.

A

the SRAS curve rightward but leaves the LAS curve unchanged.

37
Q 
Aggregate supply describes the behavior of
Answers:	
government.
producers.
households.
foreign buyers.
A

producers.

38
Q

Factors that shift the long-run aggregate supply and potential GDP rightward include an increase in:
Answers:
technology.
quality and quantity of other inputs.
quantity of capital (physical capital and human capital).
quantity of labor.
all of the above.

A

all of the above.

39
Q

According to the wealth effect, if real wealth decreases then people
Answers:
decrease their consumption expenditure.
do not respond if their nominal wealth does not change.
increase their consumption expenditure.
decrease their consumption expenditure only if their nominal wealth also decreases.

A

decrease their consumption expenditure.

40
Q 
The long-run aggregate supply ( LRAS) curve
Answers:	
has a negative slope.
is vertical.
is horizontal.
has a positive slope.
A

is vertical.

41
Q 
Higher taxesAnswers:	
decrease the short-run aggregate supply.
increase the short-run quantity supply.
decrease aggregate demand.
increase aggregate demand.
A

decrease aggregate demand.

42
Q

The short-run aggregate supply curve is upward sloping because
Answers:
marginal costs rise with increased output so firms have to receive higher prices to justify their increase in output.
capital is scarce.
technology is scarce.
potential GDP is less than real GDP when the price level falls.

A

marginal costs rise with increased output so firms have to receive higher prices to justify their increase in output.

43
Q

Other things constant, the economy’s aggregate demand curve shows that
Answers:
the quantity of real GDP demanded and the price level are not related.
as the price level falls, real GDP decreases.
the quantity of real GDP demanded decreases when the price level rises.
any change in the price level shifts the aggregate demand curve.

A

the quantity of real GDP demanded decreases when the price level rises.

44
Q

Which of the following shifts the aggregate demand curve left ward?
Answers:
an increase in net exports of goods and services
a decrease in taxes
an increase in consumption expenditures
a decrease in government expenditures on goods and services

A

a decrease in government expenditures on goods and services

Econ 201 (10 decks)

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