If foreign income falls, there will be _____.
a. an increase in foreign spending
b. a rise in domestic aggregate demand
c. no change in either domestic net exports or aggregate demand
d. a decline in the domestic price level
e. a decrease in domestic aggregate demand
Question 2A hypothesis is:
a. a normative economic statement.
b. a testable proposition.
c. a statement that cannot be evaluated using real-world data.
d. a model with no connection to the real world.
Question 3The AD curve will shift to the right if:
a. people become pessimistic about the future of the economy.
b. there is a decrease in foreign income.
c. the government decreases spending.
d. the domestic price level decreases.
e. the foreign price level increases.
Question 4An economic hypothesis:
a. can be tested using empirical analysis.
b. can be tested using normative analysis.
c. cannot be tested since it is normative in nature.
d. cannot be tested since it is a positive economic statement.
Question 5The wealth effect, the interest rate effect, and the international trade effect account for the:
a. positive slope of the short-run aggregate supply curve.
b. the shape of the long-run aggregate supply curve.
c. positive slope of the aggregate demand curve.
d. negative slope of the aggregate demand curve.
e. negative slope of the short-run aggregate supply curve.
Question 6Economics is different from a hard science like physics because:
a. economists abstract from reality in creating their theories.
b. economics is easier to study than physics.
c. economists must explain their theories to policy makers who lack formal mathematical training.
d. economists cannot easily control all the variables that might influence human behavior.
Question 7Assuming 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.
Question 8A good economic theory:
a. includes every detail that affects the economic behavior of interest.
b. relies on simplifying assumptions in order to explain economic behavior.
c. does not rely on simplifying assumptions.
d. is impossible to achieve because of the difficulty of conducting controlled experiments.
Question 9Suppose 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.
Question 10A good economic theory:
a. rests on realistic assumptions.
b. explains economic behavior and predicts well.
c. can best be expressed mathematically.
d. always provides a highly detailed analysis of an economic sector.
Question 11The 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.
Quick Reply
