Econ: Ch. 9

18 Questions | Total Attempts: 233

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Econ Quizzes & Trivia

Economics. Chapter 9


Questions and Answers
  • 1. 
    Which of the following was the key problem of the Great Depression in the 1930s according to British economist John Maynard Keynes?
    • A. 

      Insufficient demand for goods and services.

    • B. 

      Insufficient supply of goods and services.

    • C. 

      Falling wages that reduced the purchasing power of households.

    • D. 

      The lack of vision of Classical economists.

  • 2. 
    In modern economies, some prices are very flexible, while others are not. Which of the following types of prices are very flexible?
    • A. 

      Auction prices.

    • B. 

      Wages.

    • C. 

      Custom prices.

    • D. 

      All of the above.

  • 3. 
    The short run in macroeconomics refers to:
    • A. 

      A period of time in which at least one input in production remains fixed.

    • B. 

      A period of time lasting less than one year.

    • C. 

      A period of time anywhere from one to five years.

    • D. 

      A period of time in which prices don’t change or don’t change very much.

  • 4. 
    Refer to the figure below. The demand curve in this graph depicts:
    • A. 

      Market demand.

    • B. 

      Aggregate demand.

    • C. 

      Labor demand.

    • D. 

      Each and every demand curve, or the sum of market demands in the economy.

  • 5. 
    The change in the purchasing power of money will affect aggregate demand. This concepts is closely related to a key principle of economics. Which one?
    • A. 

      The principle of opportunity cost.

    • B. 

      The real-nominal principle.

    • C. 

      The principle of diminishing returns.

    • D. 

      The principle of voluntary exchange.

    • E. 

      The marginal principle.

  • 6. 
      The wealth effect refers to the fact that:
    • A. 

      When the price level falls, the real value of household wealth rises, and so will consumption.

    • B. 

      When income rises, consumption rises.

    • C. 

      When the price level falls, the nominal value of assets rises, while the real value of assets remains the same.

    • D. 

      All of the above.

  • 7. 
    According to the interest rate effect, with a given money supply in the economy:
    • A. 

      A lower price level will lead to lower interest rates and higher consumption and investment spending.

    • B. 

      A lower price level will lead to lower interest rates and lower consumption and investment spending.

    • C. 

      A higher price level will lead to higher interest rates, lower consumption, and higher investment spending.

    • D. 

      A higher price level will lead to lower interest rates, higher consumption and higher investment spending.

  • 8. 
    The international-trade effect refers to the fact that an increase in the price level will result in:
    • A. 

      An increase in net exports.

    • B. 

      A decrease in net exports.

    • C. 

      No change in net exports.

    • D. 

      An ambiguous effect on net exports, causing net exports to increase sometimes and other times to decrease.

  • 9. 
    If the price level increases, then:
    • A. 

      The economy will move up and to the left along a stationary aggregate demand curve.

    • B. 

      The aggregate demand curve will shift to the right.

    • C. 

      The aggregate demand curve will shift to the left.

    • D. 

      None of the above.

  • 10. 
    Refer to the figure below. An increase in the money supply moves the AD curve from the initial AD curve to the curve labeled:
    • A. 

      Increased AD.

    • B. 

      Decreased AD.

    • C. 

      Neither the increased AD curve, nor decreased AD curve. The money supply does not affect the AD curve.

    • D. 

      Either curve depending on other factors.

  • 11. 
    The logic of the multiplier is that as government spending increases,
    • A. 

      The aggregate demand curve shifts to the right, causing output and income to increase. Then the additional consumption generated by the additional income causes a further increase in the aggregate demand curve.

    • B. 

      The aggregate demand curve shifts to the left, causing output and income to decrease. Then the resulting reduction in consumption and income causes a further decrease in the aggregate demand curve.

    • C. 

      Output, income and consumption remain unchanged, allowing government spending to have an indefinite ripple effect throughout the economy.

    • D. 

      The total shift in aggregate demand is identical to the initial shift in aggregate demand.

  • 12. 
    Consider the consumption function C = Ca + bY. Which part of this function describes the amount of consumption that is dependent on income?
    • A. 

      Ca.

    • B. 

      B.

    • C. 

      BY.

    • D. 

      Ca + bY.

  • 13. 
    If the marginal propensity to consume is 0.8, how much is the increase in GDP caused by an additional $10 of consumption?
    • A. 

      $18.

    • B. 

      $50.

    • C. 

      $8.

    • D. 

      None of the above.

  • 14. 
    Which of the following is necessary to determine the price level and real GDP?
    • A. 

      We need only information about aggregate supply.

    • B. 

      We need only information about aggregate demand.

    • C. 

      We need to combine both aggregate demand and aggregate supply.

    • D. 

      We need information other than that provided by aggregate demand or supply curves.

  • 15. 
    In the long run, an increase in aggregate demand will:
    • A. 

      Increase output but leave the level of prices unchanged.

    • B. 

      Increase prices but leave the level of output unchanged.

    • C. 

      Increase both prices and output.

    • D. 

      Leave both output and prices unchanged.

  • 16. 
    Refer to the graph below. This graph best describes:
    • A. 

      A beneficial supply shock.

    • B. 

      An adverse supply shock.

    • C. 

      A supply shock that could be adverse or beneficial.

    • D. 

      A supply shock that has no long-run impact on the economy.

  • 17. 
    Refer to the figure below. The economy depicted in this graph is going through:
    • A. 

      A recession.

    • B. 

      A depression.

    • C. 

      A recovery.

    • D. 

      A boom.

  • 18. 
    Refer to the figure below. What causes the shifts in the aggregate supply curve?
    • A. 

      Increases in the purchasing power of wages.

    • B. 

      Decreases in the purchasing power of wages.

    • C. 

      Increases in wages and prices.

    • D. 

      Decreases in wages and prices.