Econ: Ch. 9
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Economics. Chapter 9
- 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:
- ProProfs]( "Refer to the figure below. The demand curve in this graph depicts:")
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:
- ProProfs]( "Refer to the figure below. An increase in the money supply moves the AD curve from the initial AD curve to the curve labeled:")
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:
- ProProfs]( "Refer to the graph below. This graph best describes:")
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:
- ProProfs]( "Refer to the figure below. The economy depicted in this graph is going through:")
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?
- ProProfs]( "Refer to the figure below. What causes the shifts in the aggregate supply curve?")
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.
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