If other factors are held constant, an increase in the price level
A) causes the quantity of goods and services demanded to increase.
B) causes the quantity of goods and services demanded to fall.
C) causes the real value of the money to increase.
D) induces people to spend their money faster.
32) The vertical axis for an aggregate demand curve measures
A) real GDP per year.
B) nominal GDP per year.
C) the price level.
D) real income.
33) Other things equal, a higher price level is associated with
A) a higher real GDP.
B) a lower real GDP.
C) a lower nominal GDP.
D) higher income levels.
34) When the relative prices of American-made goods go down, the result is
A) a decrease in the exports of Canadian-made goods.
B) a decrease in exports of Canadian-made goods.
C) an increase in imports of Canadian-made goods.
D) no net change in imports or exports of Canadian-made goods.
35) An increase in the price level
A) increases the real value of money balances which causes borrowing to decrease, leading to a decrease in investment and the quantity demanded of aggregate output.
B) causes exports to fall and imports to rise, leading to an decrease in quantity demanded of aggregate output.
C) leads to an increase in the quantity of aggregate output because of the open economy effect.
D) causes the quantity demanded of aggregate output to increase as long as the fall is less than the fall in the price level in other countries.
36) If you have $5 000 and the GDP deflator decreases from 100 to 80
A) the $5 000 will buy 20 percent less of the goods and services produced by society.
B) the $5 000 will buy 20 percent more of the goods and services produced by society.
C) the value of the $5 000 decreases.
D) the value of the $5 000 remains constant.
37) According to the interest rate effect, an increase in the price level, if other factors are held constant, will lead to
A) a reduction in the quantity demanded of interest-rate-sensitive goods.
B) an increase in the stock of real wealth held by the public.
C) an outward shift of the aggregate demand curve.
D) an increase in the real interest rate.
38) The real-balance effect implies that when
A) the price level decreases, the value of money balances held by individuals, firms, government, and foreigners increases and spending decreases.
B) the price level increases, the value of money balances held by individuals, firms, government, and foreigners increases, and spending increases.
C) the price level increases, the value of money balances held by individuals, firms, government, and foreigners decreases, and spending decreases.
D) the price level decreases, the value of money balances held by individuals, firms, government, and foreigners decreases, and spending decreases.
39) When prices increase the interest rate effect
A) will increase and the aggregate demand for goods and services will increase.
B) will increase and the aggregate demand for goods and services will decrease.
C) will decrease and the aggregate demand for goods and services will decrease.
D) will not be affected.
40) When a change in the price level causes a change in the purchasing power of currency, which then changes the desired rate of consumption at all income levels, it is called
A) the real-balance effect.
B) the substitution effect.
C) the open-economy effect.
D) the interest rate effect.
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