Question

16. to the wealth effect, an increase in the price level causes ease in real wealth and more purchases b. An incr C. A decrease d. rease in real wealth and fewer purchases se in real wealth and fewer purchases A decrease in r price level increase tends to reduce net exports, thereby reducing the amount of real goods a. The b. The international banner effect C. rvices purchased in the U.S. Economists refer to this phenomenon as international wealth effect The international substitution effect d. The GDP effect 18. Held constant along a short-run aggregate supply curve is a. Real output b. Aggregate demand c. The money wage profits macroeco 19. In short-run macroeconomic equilibrium Potential GDP and aggregate demand determine the price level b. a. The price level is fixed and aggregate demand determines real GDP Real GDP and the price level are jointly determined by short-run aggregate supply and c. aggregate demand. d. 20. An increase in which of the following (assuming the increase was not due to a price level Real GDP is less than potential GDP change) shifts aggregate demand to the right? a. Consumption b. investment t c government expenditures d. all of the above are correct 21. The short-run aggregate supply curve shifts because of changes in all of the following EXCEPT 22. Fiscal policy includes a. The capital stock b. technological progress c nominal wage rates d. the output level Maintaining a stable money supply. b. a. Using consumer product safety regulations to promote consumer confidence Regulating banking and securities industries to encourage investment Using government expenditures and taxation to improve macroeconomic performance c. d. e. Funding oversight agencies, such as the General Accounting Office to ensure that government carries out its fiduciary responsibilities 23. Expansionary fiscal policy involves a. A decrease in government spending and/or an increase in taxes b. Only an increase in taxes c. An increase in government spending and/or a decrease in taxes d. Only a decrease in government spending 24. A discretionary fiscal policy is a fiscal policy that a. Involves a change in government defense spending b. Is triggered by the state of the economy C. Requires action by the Congress d. Involves a change in corporate tax rates

Answer 1

16) Option C. When nominal wealth is unchanged but price level rises, real wealth falls and consumers start feeling poor and so they start consuming less

17) Option C. This happens because rising prices reduce real exchange rate so exports become expensive for foreigners and net exports fall. This reduces aggregate spending and so real GDP falls

18) Option C. Prices are kept flexible but wages are fixed for the contractual terms

19) Option C

20) Option D

21) Option D

22) Option D

23) Option C

24) Option C