The idea that higher prices reduce the purchasing power of financial assets and lead to less ...

The idea that higher prices reduce the purchasing power of financial assets and lead to less consumption is known as the:
 a. real balances effect.
  b. interest rate effect.
  c. foreign purchases effect.
  d. income effect.
  e. aggregate demand effect.

QUESTION 2

Because of transactions which take place in the underground economy, the:
 a. GDP calculation tends to overstate the actual value of goods sold in the economy.
  b. GDP calculation tends to accurately portray the value of goods sold in the economy.
  c. GDP calculation tends to understate the actual value of goods sold in the economy.
  d. value of the GDP calculation will be equal to the value of the national income calculation.
  e. value of the GDP calculation through the expenditure approach will be greater then the value calculated through the income approach.

QUESTION 3

The real balances effect is the impact on real GDP caused by the ____ relationship between the price level and the real value of financial assets.
 a. direct
  b. inverse
  c. independent
  d. linear

QUESTION 4

If the underground economy is sizable, then GDP will:
 a. understate the economy's performance.
  b. overstate the economy's performance.
  c. fluctuate unpredictably.
  d. accurately reflect this subterranean activity.

QUESTION 5

The real balances effect occurs because a higher price level will reduce the real value of people's:
 a. financial assets.
  b. wages.
  c. unpaid debt.
  d. physical investments.

QUESTION 6

In recent years, people have benefited from greater amounts of leisure time. This trend:
 a. has caused GDP to rise.
  b. has caused GDP to fall.
  c. made GDP fluctuate randomly.
  d. is not accounted for in GDP.

QUESTION 7

As prices rise, people will buy fewer goods and services because:
 a. the interest rate has declined.
  b. aggregate demand has increased.
  c. the purchasing power of the fixed quantity of money has declined.
  d. the income of households has increased.

QUESTION 8

GDP does not count:
 a. the estimated value of homemaker production.
  b. state and local government purchases.
  c. spending for new homes.
  d. changes in inventories.