Question : 11) Consider a simple macro model with demand-determined output. Other : 1384392

 

 

11) 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.

Answer:  E

Diff: 1

Topic:  23.1a. effects of an exogenous change in the price level

Skill:  Recall

User2:  Qualitative

 

12) Consider a simple macro model with demand-determined output. An exogenous change in the price level shifts the AE curve because the change affects desired ________ and desired ________.

A) consumption; investment

B) consumption; imports

C) investment; consumption

D) government purchases; net exports

E) consumption; net exports

Answer:  E

Diff: 2

Topic:  23.1a. effects of an exogenous change in the price level

Skill:  Recall

User2:  Qualitative

13) 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

Answer:  A

Diff: 2

Topic:  23.1a. effects of an exogenous change in the price level

Skill:  Applied

User2:  Qualitative

 

14) 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

Answer:  A

Diff: 2

Topic:  23.1a. effects of an exogenous change in the price level

Skill:  Recall

Objective:  REVISED

User2:  Qualitative

 

15) 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.

Answer:  C

Diff: 2

Topic:  23.1a. effects of an exogenous change in the price level

Skill:  Recall

User2:  Qualitative

 

16) 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

Answer:  E

Diff: 2

Topic:  23.1a. effects of an exogenous change in the price level

Skill:  Applied

User2:  Qualitative

17) 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.

Answer:  A

Diff: 2

Topic:  23.1b. relationship between AE and AD curves

Skill:  Applied

User2:  Qualitative

 

18) 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.

Answer:  D

Diff: 2

Topic:  23.1b. relationship between AE and AD curves

Skill:  Recall

User2:  Qualitative

 

19) The AD curve relates the price level to

A) desired aggregate expenditure.

B) desired consumption.

C) equilibrium real GDP if output is demand determined.

D) equilibrium nominal GDP if output is demand determined.

E) equilibrium savings and wealth.

Answer:  C

Diff: 2

Topic:  23.1b. relationship between AE and AD curves

Skill:  Recall

User2:  Qualitative

 

20) 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

Diff: 2

Topic:  23.1b. relationship between AE and AD curves

Skill:  Recall

User2:  Qualitative