Question

1) When U.S. net exports rise, which increases the aggregate quantity of goods and services demanded, the dollar must have

A. reciprocated.

B. equivocated.

C. depreciated

D. appreciated.

2) When the price level rises less than expected, a firm with a sticky price will sell its output at a price that is

A. more than the firm desires and decrease its production.

B. less than the firm desires and increase its production.

C. less than the firm desires and decrease its production.

D. more than the firm desires and increase its production.

3) If the government institutes an investment tax credit and decreases income taxes,

A. real GDP and the price level fall.

B. real GDP falls, and the price level could rise, fall, or stay the same.

C. real GDP and the price level rise.

D. real GDP rises, and the price level could rise, fall, or stay the same.

4) Which of the following macroeconomic variables is a small part of real GDP, yet accounts for a large share of the fluctuation in real GDP?

A. auto sales

B. investment

C. consumer spending

D. unemployment

5) In the model of aggregate demand and aggregate supply, the GDP deflator measures the

A. price of oil.

B. amount of real output.

C. average price level.

D. nominal interest rate.

6) Most macroeconomic variables that measure some type of income, spending, or production fluctuate very separately from each other.

A) True B) False

Answer 1

Question 1

US net exports will rise when either exports increase or imports decrease or there is combination of two.

The depreciation of currency results in an increase in exports and decrease in imports.

So,

When US net exports rise, which increases the aggregate quantity of goods and services demanded, the dollar must have depreciated.

Hence, the correct answer is the option (C).

Question 2

When the price level rises less than expected then firm with sticky price will sell its output at price more than the firm desires.

This will enhance the profit of firms and would induce them to increase production.

Hence, the correct answer is the option (D).

Question 3

Investment tax credit and decrease in income taxes will boost investment and consumption spending.

This, in turn, will boost aggregate demand.

Given the aggregate supply, this increase in aggregate demand will lead to increase in real GDP and price level.

Hence, the correct answer is the option (C).