the foreign exchange rate and the balance… Show more Business cycles are linked to the interaction between: A)the foreign exchange rate and the balance of payments account. B)the aggregate demand and aggregate supply curves. C)the demand and supply curves for a particular good. D)the substitution and the wealth effect. E)the long-run aggregate supply curve and the aggregate resource curve. Aggregate demand represents the _____ at alternative price levels. A)total spending in the economy B)total saving in the economy C)total investment in the economy D)total output of the economy E)total money supply in the economy Which of the following is an incorrect statement? A)Macroeconomic equilibrium occurs at the intersection of the aggregate demand and aggregate supply curves. B)The aggregate supply curve indicates a positive relationship between the price level and GDP. C)Other things equal, a downward shift of the aggregate demand curve implies that the economy is entering a contractionary phase. D)Aggregate demand and aggregate supply determine the equilibrium price and quantity of any given good. E)The aggregate demand curve indicates a negative relationship between the price level and GDP. Which of the following is most likely to lead to an economic contraction? A)A decrease in the average price level B)An increase in aggregate supply C)A decrease in aggregate demand D)A decrease in taxes E)An increase in transaction demand for money Which of the following is true of the aggregate demand curve? A)The aggregate demand curve shows the various levels of expenditures in the economy at alternative price levels. B)The aggregate demand curve implies a positive relationship between inflation and unemployment. C)The aggregate demand curve is identical to the income consumption curve. D)The aggregate demand curve has the same slope as the aggregate supply curve. E)The aggregate demand curve relates relative prices to the quantity demanded of a particular good. _____ is the relation between total expenditures, or total spending, and the price level. A)Gross National Product B)Inflation C)Real Gross Domestic Product D)Aggregate supply E)Aggregate demand Which of the following is not a component of the aggregate expenditures of a country? A)Investment B)Government spending C)Net exports D)Consumption E)Transfer payments Which of the following economic changes will decrease household expenditures? A)Population growth B)Lower income taxes C)An appreciation of the domestic currency D)Increased consumer confidence E)A higher domestic price level Which of the following is true of the disposable income of the households? A)An increase in the average price level lowers the disposable income of the households. B)Disposable income refers to the purchasing power of nominal income. C)Increase in direct taxes will lower disposable income. D)Decrease in government transfers will increase disposable income. E)Disposable income refers to the net private transfers of the household sector. Lower interest rates on business loans usually result in a(n): A)decrease in aggregate demand. B)decrease in aggregate supply. C)decrease in investment spending. D)increase in government spending. E)increase in aggregate expenditures. Other things equal, investment spending will increase when: A)interest rates are lowered. B)firms operate under full capacity. C)corporate taxes are increased. D)capacity utilization is low. E)the cost of capital rises. Identify the correct statement. A)Investment is positively related to the interest rate. B)Investment spending in an economy is stimulated by new production technology. C)Investment is positively related to excess capacity. D)Investment spending is positively related to the cost of capital goods. E)Investment is negatively related to the rate of government spending. Other things equal, a decrease in government spending: A)increases the slope of the aggregate demand curve. B)increases the domestic interest rate. C)decreases aggregate expenditures. D)shifts the aggregate demand curve to the right. E)increases the equilibrium level of GDP. Which of the following will cause net exports to rise? A)A depreciation of the domestic currency B)A fall in foreign income C)Higher foreign tariffs on domestic goods D)Inflation in domestic economy E)A depreciation of the foreign currency If the exchange rate is defined as the price of the foreign currency in terms of the domestic currency, an increase in the exchange rate: A)increases domestic demand for foreign goods. B)makes domestic goods cheaper in the foreign markets. C)lowers net exports. D)lowers aggregate expenditure on domestic goods. E)increases the domestic country’s external debt burden. Identify the correct statement. A)As domestic income rises, imports rise and net exports fall. B)As foreign income rises, net exports fall. C)As domestic income falls, imports rise and net exports fall. D)As domestic income rises, imports fall and net exports rise. E)As foreign income falls, net exports rise. A lower domestic price level tends to: A)reduce aggregate expenditures and lower the aggregate quantity of goods and services supplied. B)reduce aggregate expenditures and lower aggregate demand. C)reduce aggregate expenditures and raise aggregate demand. D)increase aggregate expenditures and raise the aggregate quantity of goods and services demanded. E)increase aggregate expenditure on foreign goods and lower net exports. Other things held constant, when the general price level changes: A)we move along the aggregate demand curve. B)we shift the aggregate demand curve to the right. C)we shift the aggregate demand curve to the left. D)we shift the aggregate supply curve to the right. E)we shift the aggregate demand curve to the left. Which of the following is an impact of an increase in the general price level? A)An increase in aggregate demand for goods and services B)A decrease in aggregate supply of goods and services C)An increase in the price of the financial assets D)A decrease in supply of bonds and other assets E)An increase in interest rates The wealth effect and the interest rate effect are changes in the price level that: A)bring about a movement along the aggregate demand curve. B)lead to a shift of the demand curve for a particular good. C)result in a shift of the aggregate supply curve. D)help explain the vertical shape of the long-run aggregate supply curve. E)cause a movement along the aggregate supply curve The _____ is the change in the purchasing power of assets that causes spending to change when the price level changes. A)purchasing power effect B)interest rate effect C)substitution effect D)income effect E)real-balance effect A decrease in the price level will result in: A)a downward shift of the AD curve. B)an upward shift of the AD curve. C)a movement up the AD curve. D)a steeper slope of the AD curve. E)a movement down the AD curve As the general price level in the country of Norweinshire rose, the average interest rate in the economy increased, thereby lowering aggregate expenditure. This relationship between price level, interest rate, and aggregate expenditure is referred to as the: A)total price effect. B)interest rate effect. C)wealth effect. D)real-balance effect. E)income effect. The change in aggregate expenditures resulting from a movement in the domestic price level, which in turn changes the price of domestic goods in relation to foreign goods, is known as the: A)international trade effect. B)multilateral equilibrium condition. C)international exchange rate effect. D)magnified international pricing effect. E)international deficit effect. Suppose a representative household holds a bond that is expected to pay a real return of $100 one year from now. However, over the next year, the inflation rate rises 15 percent more than was originally anticipated. As a consequence: A)the real value of household wealth will increase. B)consumption spending will increase, and aggregate demand will rise. C)the purchasing power of money will rise. D)savings will fall and aggregate expenditures will rise. E)the aggregate expenditure in the economy will decrease. Assuming a fixed exchange rate, a decrease in U.S. prices relative to European prices will: A)decrease European exports to the United States. B)increase U.S. imports from Europe. C)decrease aggregate spending in the U.S. D)not affect U.S. exports or imports. E)raise the purchasing power of U.S. consumers. • Show less
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