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Commerce and BusinessbackBusinessbackPrinciples of EconomicsbackEconomicsbackPractice Set 2495back

Output And Prices In The Short Run

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Question 1
Free
Multiple Choice

Other things being equal,a rise in the domestic price level

Choose correct answer/s
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.

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Question 2
Free
Multiple Choice

Other things being equal,a fall in the domestic price level leads to a rise in private-sector wealth and thus

Choose correct answer/s
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.

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Question 3
Free
Multiple Choice

Other things being equal,an exogenous rise in the domestic price level will

Choose correct answer/s
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.

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Question 4
Free
Multiple Choice

Other things being equal,when the domestic price level falls exogenously,

Choose correct answer/s
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.

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Question 5
Free
Multiple Choice

Other things being equal,when the domestic price level rises exogenously,

Choose correct answer/s
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.

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Question 6
Multiple Choice

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

Choose correct answer/s
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.
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Question 7
Multiple Choice

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 ________ .

Choose correct answer/s
A
rises; falls
B
falls; is not affected
C
falls; rises
D
is not affected; falls
E
is not affected; rises
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Question 8
Multiple Choice

An exogenous fall in the domestic price level causes an increase in real wealth and

Choose correct answer/s
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.
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Question 9
Multiple Choice

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.

Choose correct answer/s
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
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Question 10
Multiple Choice

Consider a simple macro model with demand-determined output.An exogenous increase in the domestic price level will

Choose correct answer/s
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.
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Question 11
Multiple Choice

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

Choose correct answer/s
A
positively.
B
proportionally.
C
progressively.
D
exponentially.
E
negatively.
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Question 12
Multiple Choice

Suppose there is an exogenous increase in the domestic price level.Which of the individuals listed below would experience an increase in wealth?

Choose correct answer/s
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
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Question 13
Multiple Choice

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.

Choose correct answer/s
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
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Question 14
Multiple Choice

Other things being equal,an exogenous increase in the price level causes the aggregate wealth of holders and issuers of private-sector bonds to

Choose correct answer/s
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.
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Question 15
Multiple Choice

Which of the following events would cause the AE function to shift upwards in a parallel way?

Choose correct answer/s
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
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Question 16
Multiple Choice

Other things being equal,as the price level rises exogenously,the aggregate expenditure (AE)function shifts

Choose correct answer/s
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.
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Question 17
Multiple Choice

Other things being equal,as the price level falls exogenously,the aggregate expenditure (AE)function shifts

Choose correct answer/s
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.
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Question 18
Multiple Choice

The AD curve relates the price level to which of the following?

Choose correct answer/s
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.
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Question 19
Multiple Choice

All points on an economy's AD curve

Choose correct answer/s
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.
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Question 20
Multiple Choice

In a macro model with a constant price level,an increase in autonomous desired consumption will cause the AE curve to shift

Choose correct answer/s
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.
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