Final Study Deck Flashcards
The ________ shows the relationship between the price level and quantity of real GDP demanded.
A) aggregate expenditure line B) 45-degree line C) aggregate demand curve D) consumer price index
aggregate demand curve
Because of the slope of the aggregate demand curve, we can say that
A) a decrease in the price level leads to a higher level of real GDP demanded.
B) an increase in the price level leads to a higher level of real GDP demanded.
C) an increase in the price level leads to no change in the level of real GDP demanded.
D) a decrease in the price level leads to a lower level of real GDP demanded.
a decrease in the price level leads to a higher level of real GDP demanded
An increase in the price level will
) shift the aggregate demand curve to the right.
B) shift the aggregate demand curve to the left.
C) move the economy up along a stationary aggregate demand curve.
D) move the economy down along a stationary aggregate demand curve.
move the economy up along a stationary aggregate demand curve
Deflation will
A) increase the quantity of real GDP demanded. B) increase aggregate demand.
C) decrease aggregate demand. D) decrease the quantity of real GDP demanded.
increase the quantity of real GDP demanded.
Which of the following best describes the “wealth effect”?
A) When the price level falls, the nominal value of household wealth falls.
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 rises.
D) When the price level falls, the real value of household wealth rises
When the price level falls, the real value of household 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) investment and consumption spending.
B) net exports.
C) government spending.
D) government spending and unplanned investment
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) net exports; exports; imports
C) imports; exports; net exports D) exports; imports; net exports
imports; exports; net exports
The international trade effect states that
A) an increase in the price level will lower net exports.
B) an increase in the price level will raise net exports.
C) an increase in the price level will raise exports.
D) an increase in the price level will lower imports.
an increase in the price level will lower net exports
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 United States to Sweden and ________ U.S. aggregate demand.
) decrease; increase B) increase; increase C) decrease; decrease D) increase; decrease
decrease; decrease
The long-run aggregate supply curve shows the relationship between the ________ and ________.
A) real interest rate; quantity of real GDP supplied
B) nominal interest rate; quantity of real GDP supplied
C) price level; quantity of real GDP supplied
D) inflation rate; quantity of real GDP demanded
nominal interest rate; quantity of real GDP supplied
Changes in the price level
A) increase the level of aggregate supply in the long run only at very high levels of output.
B) increase the level of aggregate supply in the long run.
C) do not affect the level of aggregate supply in the long run.
D) decrease the level of aggregate supply in the long run
do not affect the level of aggregate supply in the long run.
An increase in the price level will
A) shift the short-run aggregate supply curve to the right.
B) move the economy down along a stationary short-run aggregate supply curve.
C) shift the short-run aggregate supply curve to the left.
D) move the economy up along a stationary short-run aggregate supply curve
move the economy up along a stationary short-run aggregate supply curve.
Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico which
subsequently drove up natural gas, gasoline, and heating oil prices. Three years later, once the refining
capacity was restored, these prices came back down. The restoration of refining capacity should
A) move the economy up along a stationary short-run aggregate supply curve.
B) shift the short-run aggregate supply curve to the left.
C) shift the short-run aggregate supply curve to the right.
D) move the economy down along a stationary short-run aggregate supply curve.
shift the short-run aggregate supply curve to the right.
Which of the following would cause the short-run aggregate supply curve to shift to the right?
A) an increase in the price level B) a decrease in inflation expectations
C) an increase in interest rates D) a technological advance
a technological advance
Suppose there has been an increase in investment. As a result, real GDP will ________ in the short
run, and ________ in the long run
A) increase; decrease to its initial value B) decrease; increase to its initial level
C) decrease; decrease further D) increase; increase further
increase; decrease to its initial value
Silver is an example of a
A) fiat money. B) commodity money.
C) representative money. D) barter money
commodity money
The statement, “My iPhone is worth $300” represents money’s function as
A) a store of value. B) a standard of deferred payment.
C) a medium of exchange. D) a unit of account.
a unit of account.
Which of the following functions of money would be violated if inflation were high?
A) medium of exchange B) unit of account
C) certificate of goldD) store of value
store of value
Dollar bills in the modern economy serve as money because
A) they are backed by the gold stored in Fort Knox.
B) they have value as a commodity independent of their use as money.
C) they can be redeemed for gold by the central bank.
D) people have confidence that others will accept them as money.
people have confidence that others will accept them as money
The Federal Reserve’s narrowest definition of the money supply is
A) M0. B) M1. C) M2.D) M3
M1
Which of the following is not counted in M1?
A) traveler’s check balances
B) checking account balances
C) currency in circulation
D) coins in circulation
E) credit card balances
credit card balances
If a person takes $100 from his/her piggy bank at home and puts it in his/her savings
account, then M1 will ________ and M2 will ________.
A) increase; increase
B) decrease; not change
C) not change; increase
D) increase; decrease
E) decrease; increase
decrease; not change
If people speculate that a run on one bank will cause a run on all banks in the
financial system, and this speculation proves accurate, then the financial system would
experience what is known as a
A) bank panic. B) securitization meltdown.
C) commodity crisis. D) institutional death spiral.
bank panic
to decrease the money supply, the Federal Reserve could
A) raise income taxes.
B) raise transfer payments.
C) conduct an open market sale of Treasury securities.
D) lower the discount rate.
E) lower the required reserve ratio.
conduct an open market sale of Treasury securities.
The seven members of the Board of Governors of the Federal Reserve are
appointed by
A) Congress.
B) the Treasury Department.
C) the President.
D) leaders in the banking industry.
E) the Governors of the States.
President.
A decrease in the discount rate ________ bank reserves and ________ the money
supply if banks respond appropriately to the change in the rate.
A) decreases; increases B) decreases; decreases
C) increases; increases D) increases; decreases
increases; increases
Using the quantity equation, if the velocity of money grows at 5 percent, the
money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation
rate will be
A) 19 percent. B) 15 percent. C) 11 percent. D) 6 percent
11 percent
According to the quantity theory of money, if the money supply grows at 20
percent and real GDP grows at 5 percent, then the inflation rate will be
A) 15 percent. B) 20 percent. C) 25 percent. D) 100 percent.
15 percent
Hyperinflation is caused by
A) a high rate of growth in the money supply.
B) the money supply growing more slowly than GDP.
C) Real GDP growing more rapidly than the money supply.
D) a constant increase in the money supply.
a high rate of growth in the money supply
The velocity of money is defined as
A) the total number of times each dollar is used to purchase goods and services.
B) P × Y.
C) .
D) the average number of times each dollar is used to purchase goods and services.
the average number of times each dollar is used to purchase goods and services.
