1. Over time, an increase in the real output and incomes of the trading partners

Question

1.      Over time, an increase in the real output and incomes of the trading partners of the United States will:

a)      Increase U.S. exports and U.S. imports

b)      Decrease U.S. exports and U.S. imports

c)      Increase U.S. exports and decrease U.S. imports

d)      Decrease U.S. exports and increase U.S. imports

2.      The amount by which an aggregate expenditures schedule must shift downward to eliminate demand-pull inflation and still achieve the full-employment GDP Is an:

A)     Inflationary expenditure gap

B)     Recessionary expenditure gap

C)      Depression rate

D)     Price-level change

3.      A rightward shift of the AD curve in the very steep upper part of the upsloping AS curve will:

a)      Increase real output by more than the price level

b)      Increase the price level by more than real output

c)      Reduce real output by more than the price level

d)      Reduce the price level by more than real output

4.      The fear of unwanted price wars may explain why firms are reluctant to:

a)      Reduce wages when a decline in aggregate demand occurs

b)      Reduce prices when a decline in aggregate demand occurs

c)      Expand production capacity when an increase in aggregate demand occurs

d)      Provide wage increases when labor productivity rises

5.      The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries will:

A)     Increase the amount of U.S. real output purchased

B)     Increase U.S. imports and decrease U.S. exports

C)      Increase both U.S. imports and U.S. exports

D)     Decrease both U.S. imports and U.S. exports

6.      Which set of events would most likely decrease aggregate demand?

a)      A reduction in the excess capital of the existing capital stock

b)      A reduction in business and personal tax rates

c)      An increase in investment spending

d)      An increase in personal income tax rates

7.      The slope of the immediate-short-run aggregate supply curve is based on the assumption that:

a)      Both input and putput prices are fixed

b)      Neither input nor output prices are fixed

c)      Input prices are flexible but output prices are fixed

d)      Input prices are fixed but output prices are flexible

8.      A fall in the price of capital goods will shift the aggregate:

A)     Demand curve leftward

B)     Demand curve rightward

C)      Supply curve rightward

D)     Supply curve leftward

9.      A decline in the quantity of real output demand along the aggregate demand curve is a result of an

a)      Decrease in the level of income

b)      Increase in the price level

c)      Increase in the level of income

d)      Decrease in the price level

10.   Efficiency wages are associated with:

a)      A price level that is inflexible upward

b)      A price level that is inflexible downward

c)      A domestic output that cannot be increased

d)      A domestic output that cannot be decreased

11.   The economy experiences an increase in that price level and a decrease in real domestic output. Which is a likely explanation?

a)      Productively has increased

b)      Input prices have increased

c)      Excess capacity has decreased

d)      Government regulations have been reduced

12.   If at a particular price level, real domestic output from producers is greater than real domestic output desired by purchasers, there will be a:

a)      Surplus and the price level will rise

b)      Surplus and the price level will fall

c)      Shortage and the price level will rise

d)      Shortage and the price level fall

Explanation / Answer

ans 1. option a is correct Increase U.S. exports and U.S. imports

ans 2. option a is correct Inflationary expenditure gap.

ans 3. option b is correct increase the price level by more than real output.

ans 4. option b is correct reduce prices when a decline in aggreagate demand occurs.

ans 5. option b is correct increase US imports and decrease US exports.

ans 6. option d is correct An increase in personal income tax rates.

ans 7. option a is correct

ans 8. option c is correct

ans 9. option b is correct

ans 10. option b is correct

ans 11. option b is correct

ans 12. option b is correct

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