MAC Exam 2 Questions With Completed
And Verified Solutions21
As the price level falls, - ANSWERSa. the purchasing power of cash holdings rises.
The real balance effect describes the change in - ANSWERSd. the value of cash holdings that
results from a change in the price level.
An aggregate demand (AD) curve shows the - ANSWERSd. real output (Real GDP) people are
willing and able to buy at different price levels, ceteris paribus.
Aggregate demand curves are - ANSWERSa. downward sloping.
One of the reasons why the AD curve slopes downward is that as the - ANSWERSb. price level
falls, purchasing power rises.
If some of a person's wealth is in cash, it follows that - ANSWERSa. this person's monetary
wealth will change as the price level changes.
The change in the purchasing power of dollar-denominated assets (such as cash holdings) is the
- ANSWERSd. real balance effect.
Suppose consumption decreases at each price level. As a result, aggregate demand
__________, and the AD curve shifts __________. - ANSWERSb. decreases; leftward
,Suppose consumption increases at each price level. As a result, aggregate demand __________,
and the AD curve shifts __________. - ANSWERSc. increases; rightward
Suppose consumption increases at each price level. As a result, aggregate demand __________,
and the AD curve shifts __________. - ANSWERSc. increases; rightward
As the interest rate rises, the cost of a given investment project __________ and businesses
invest __________. - ANSWERSb. rises; less
As the interest rate rises, businesses invest __________ and the AD curve shifts to the
__________. - ANSWERSd. less; left
Business optimism about future sales tends to __________ investment expenditures, shifting
the AD curve to the __________. - ANSWERSb. increase; right
A rise in foreign real national income tends to raise U.S. __________, shifting the U.S. AD curve
to the __________. - ANSWERSb. exports; right
Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the
dollar. In this situation, the dollar has __________________, making American goods
__________ expensive for Mexicans. - ANSWERSc. depreciated; less
If the price level remains constant but the wage rate increases, then there will be __________ in
production and the SRAS curve will shift __________. - ANSWERSd. a decrease; leftward
An increase in the price level - ANSWERSc. causes an upward movement along the existing AD
curve.
, A decrease in the price level - ANSWERSd. causes a downward movement along the existing AD
curve.
The real balance effect is the change in - ANSWERSc. purchasing power that results from a
change in the price level.
A rise in the price level prompts an increase in the demand for credit. This is relevant to the
__________ effect. - ANSWERSd. interest rate
A fall in the price level changes the purchasing power of money. This is relevant to the
__________ effect. - ANSWERSb. real balance
A change in the quantity demanded of Real GDP is graphically represented as a - ANSWERSb.
movement from one point on the AD curve to another point on the same curve.
Foreign real national income rises. This raises U.S. ___________ which ________ aggregate
demand (AD). The AD curve shifts ___________ as a result. - ANSWERSa. net exports; raises;
rightward
Business taxes fall. This raises __________, which raises __________ and the __________ curve
shifts rightward. - ANSWERSc. investment; aggregate demand (AD); AD
Personal income taxes rise. This lowers __________, which lowers __________ and the
__________ curve shifts __________. - ANSWERSd. consumption; aggregate demand (AD); AD;
leftward
A business firm's profitability is based in part on the - ANSWERSe. all of the above
And Verified Solutions21
As the price level falls, - ANSWERSa. the purchasing power of cash holdings rises.
The real balance effect describes the change in - ANSWERSd. the value of cash holdings that
results from a change in the price level.
An aggregate demand (AD) curve shows the - ANSWERSd. real output (Real GDP) people are
willing and able to buy at different price levels, ceteris paribus.
Aggregate demand curves are - ANSWERSa. downward sloping.
One of the reasons why the AD curve slopes downward is that as the - ANSWERSb. price level
falls, purchasing power rises.
If some of a person's wealth is in cash, it follows that - ANSWERSa. this person's monetary
wealth will change as the price level changes.
The change in the purchasing power of dollar-denominated assets (such as cash holdings) is the
- ANSWERSd. real balance effect.
Suppose consumption decreases at each price level. As a result, aggregate demand
__________, and the AD curve shifts __________. - ANSWERSb. decreases; leftward
,Suppose consumption increases at each price level. As a result, aggregate demand __________,
and the AD curve shifts __________. - ANSWERSc. increases; rightward
Suppose consumption increases at each price level. As a result, aggregate demand __________,
and the AD curve shifts __________. - ANSWERSc. increases; rightward
As the interest rate rises, the cost of a given investment project __________ and businesses
invest __________. - ANSWERSb. rises; less
As the interest rate rises, businesses invest __________ and the AD curve shifts to the
__________. - ANSWERSd. less; left
Business optimism about future sales tends to __________ investment expenditures, shifting
the AD curve to the __________. - ANSWERSb. increase; right
A rise in foreign real national income tends to raise U.S. __________, shifting the U.S. AD curve
to the __________. - ANSWERSb. exports; right
Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the
dollar. In this situation, the dollar has __________________, making American goods
__________ expensive for Mexicans. - ANSWERSc. depreciated; less
If the price level remains constant but the wage rate increases, then there will be __________ in
production and the SRAS curve will shift __________. - ANSWERSd. a decrease; leftward
An increase in the price level - ANSWERSc. causes an upward movement along the existing AD
curve.
, A decrease in the price level - ANSWERSd. causes a downward movement along the existing AD
curve.
The real balance effect is the change in - ANSWERSc. purchasing power that results from a
change in the price level.
A rise in the price level prompts an increase in the demand for credit. This is relevant to the
__________ effect. - ANSWERSd. interest rate
A fall in the price level changes the purchasing power of money. This is relevant to the
__________ effect. - ANSWERSb. real balance
A change in the quantity demanded of Real GDP is graphically represented as a - ANSWERSb.
movement from one point on the AD curve to another point on the same curve.
Foreign real national income rises. This raises U.S. ___________ which ________ aggregate
demand (AD). The AD curve shifts ___________ as a result. - ANSWERSa. net exports; raises;
rightward
Business taxes fall. This raises __________, which raises __________ and the __________ curve
shifts rightward. - ANSWERSc. investment; aggregate demand (AD); AD
Personal income taxes rise. This lowers __________, which lowers __________ and the
__________ curve shifts __________. - ANSWERSd. consumption; aggregate demand (AD); AD;
leftward
A business firm's profitability is based in part on the - ANSWERSe. all of the above
