Assignment 8

10) ________ economists believe that the economy is self-regulating and will be at full 10) employment . A) Classical B) All C) Keynesian D) Democratic

A) Classical

11) ________ economists believe that active help from fiscal and monetary policy is needed to insure that the economy is operating at full employment. A) Keynesian B) Classical C) All D) Republican

A) Keynesian

17) People expect their incomes will decrease next year. As a result, the ________ will shift ________. A) aggregate demand curve; left ward B) long-run aggregate supply curve; rightward C) aggregate demand curve; rightward D) short-run aggregate supply curve; rightward

A) aggregate demand curve; left ward

2) Which of the following does NOT shift the aggregate demand curve? A) an increase in the price level B) an increase in investment C) a decrease in taxes D) a decrease in the quantity of money

A) an increase in the price level

19) As the price level falls and other things remain the same, real wealth ________ and ________. A) increases; the quantity of real GDP demanded increases B) decreases; short-run aggregate supply decreases C) increases; aggregate demand increases D) decreases; the quantity of real GDP demanded decreases

A) increases; the quantity of real GDP demanded increases

29) If the tax rate rises with income, the tax system is A) progressive B) proportional C) regressive D) none of the above

A) progressive

30) Suppose you make $20,000 per year and Joe makes $100,000 per year, if you both pay $1,000 tax the system is: A) regressive C) progressive B) proportional D) none of the above.

A) regressive

22) When the prices of U.S.-produced goods rise and the price of foreign-produced goods do not change, the result is A) no change in imports or exports. B) a decrease in exports. C) a decrease in imports. D) an increase in exports.

B) a decrease in exports

21) Suppose that the economy begins at a long-run equilibrium. Which of the following raises the price level and decrease real GDP in the short run? A) an increase in the stock of capital that increases aggregate supply B) an increase in the price of oil that decreases aggregate supply C) an increase in government expenditures D) a decrease in the quantity of money

B) an increase in the price of oil that decreases aggregate supply

15) Higher taxes A) increase the aggregate quantity demanded. B) decrease aggregate demand. C) decrease the aggregate quantity demanded. D) increase aggregate demand.

B) decrease aggregate demand

7) An increase in the money wage rate (or an increase in other input prices) A) decreases the long-run aggregate supply. B) decreases the short-run aggregate supply. C) increases the long-run aggregate supply. D) increases the short-run aggregate supply.

B) decreases the short-run aggregate supply

4) An increase in the quantity of money A) increase the short-run quantity supply. B) increases aggregate demand. C) decrease the short-run aggregate supply. D) decreases aggregate demand.

B) increases aggregate demand

13) According to the interest rate effect (i.e. inter temporal substitution effect), a fall in the price level will A) cause the interest rate to fall. As a result, investment increases and the quantity of real GDP demanded increases. B) lead to an increase in net exports, which causes the quantity of real GDP demanded to increase. C) decrease the real value of wealth, which causes the quantity of real GDP demanded to increase. D) increase the real value of wealth, which causes interest rates to increase. As a result, the quantity of real GDP demanded decreases.

B) lead to an increase in net exports, which causes the quantity of read GDP demanded to increase

14) Aggregate demand decreases when A) incomes in foreign countries increase. B) the government implements monetary policies that decrease the quantity of money. C) the government cuts taxes. D) businesses come to expect higher profits in the future.

B) the government implements monetary policies that decrease the quantity of money

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

C) aggregate demand curve; leftward

3) Higher taxes A) decrease the short-run aggregate supply. B) increase the short-run quantity supply. C) decrease aggregate demand. D) increase aggregate demand.

C) decrease in aggregate supply

27) The budget deficit A) reached its peak in the year 2000. B) is the total outstanding borrowing by the government. C) is the difference between government outlays and tax revenues. D) decreased during the Obama Administration.

C) is the difference between government outlays and tax revenues

9) In the long-run A) the long-run aggregate supply curve is upward sloping. B) the long-run aggregate supply depends on the price level. C) real GDP is equal to potential GDP. D) All of the above answers are correct.

C) real GDP is equal to potential GDP

28) If the federal governmentʹs tax revenues are greater than its outlays, then the federal budget has a A) deficit B) transfer payment C) surplus D) balanced budget

C) surplus

18) Which of the following shifts the aggregate demand curve rightward? A) the expectation of a future loss of income B) a decrease in the quantity of money and an increase in interest rates C) a decrease in government expenditures D) a cut in personal income taxes

D) a cut in personal income taxes

16) Which of the following shifts the aggregate demand curve left ward? A) an increase in net exports of goods and services B) an increase in consumption expenditures C) a decrease in taxes D) a decrease in government expenditures on goods and services

D) a decrease in government expenditures on goods and services

12) One possible result of a decrease in aggregate demand (ceteris paribus): A) an increase in employment levels. B) a rise in the price level. C) an economic expansion. D) a recession.

D) a recession

1) Why does the demand curve slope downward? A) Wealth effect B) export effect C) interest rate effect D) all of the above E) none of the above

D) all of the above

20) An increase in the price level creates a A) wealth effect. B) decrease in consumption expenditures. C) movement along the aggregate demand curve. D) All of the above answers are correct.

D) all of the above answers are correct

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

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

8) A decrease in government expenditure on goods and services A) decreases the aggregate quantity demanded. B) increases the aggregate quantity demanded. C) increases aggregate demand. D) decreases aggregate demand.

D) decreases aggregate demand