Everything else constant, the international trade effect indicates that aggregate expenditures in the domestic economy fall when:

A) domestic prices fall relative to foreign prices.

B) domestic interest rates fall relative to foreign interest rates.

C) domestic prices rise relative to foreign prices.

D) domestic purchasing power rises relative to foreign purchasing power.

E) domestic interest rates rise relative to foreign interest rates.

The aggregate demand curve shows:

A) how the equilibrium level of aggregate expenditure changes in response to changes in production.

B) the amount people spend at different real GDP levels.

C) the positive relationship between the price level and real GDP.

D) the negative relationship between aggregate expenditure and real GDP.

E) how the equilibrium level of aggregate expenditure changes as the price level changes.

Which of the following is associated with an increase in the average price level?

A) A decrease in the aggregate quantity demanded

B) An increase in the aggregate quantity demanded

C) A leftward shift of the aggregate demand curve

D) A rightward shift of the aggregate demand curve

E) Aggregate quantity demanded remains unchanged but the aggregate expenditures curve shifts leftward.

Suppose an appreciation of the French franc causes U.S. prices of French wine imports to rise sharply. On the other hand, Californian wine becomes relatively inexpensive to French consumers. Other things equal, this will result in:

A) an increase in U.S. aggregate expenditures and an increase in the aggregate quantity of U.S. goods and services demanded.

B) a decrease in U.S. aggregate expenditures and a decrease in the aggregate quantity of U.S. goods and services demanded.

C) an increase in U.S. aggregate expenditures and a decrease in the aggregate quantity of U.S. goods and services demanded.

D) no change in either U.S. aggregate expenditures or the aggregate quantity of U.S. goods and services demanded.

E) a decrease in U.S. aggregate expenditures and an increase in the aggregate quantity of U.S. goods and services demanded.

The Keynesian region of the aggregate supply curve is:

A) horizontal.

B) downward-sloping.

C) upward-sloping.

D) vertical.

E) a 45-degree line.

The Keynesian region of the aggregate supply curve explains the situation experienced during the Great Depression. Therefore, we can conclude that the Great Depression was characterized by:

A) high unemployment and low inflation.

B) low unemployment and low inflation.

C) low unemployment and high inflation.

D) high unemployment and high inflation.

E) excess capacity but no unemployment or inflation.

When total planned expenditures are more than real GDP, there will be inventory accumulation.

A) True

B) False

If total planned expenditures exceed real GDP, the economy will contract, causing production of goods and services to decrease and unplanned inventories to rise.

A) True

B) False

When the aggregate expenditures function of a closed economy is plotted against real GDP, any point on the 45-degree line represents C + I + G = Y, where C = Consumption, I = Investment, G = Government spending, and Y = Real GDP.

A) True

B) False

Injections represent outflows of planned expenditures from the real GDP stream.

A) True

B) False

Injections to the economy include consumption, investment, and government spending.

A) True

B) False

Leakages are greater than injections when total planned expenditures exceed real GDP.

A) True

B) False

Other things equal, a reduction in personal income taxes will decrease consumption and will have an expansionary effect on real GDP.

A) True

B) False

Suppose for an economy, investment = $40; saving = $50, government spending + exports = 100; and taxes + imports = $110. Then for this economy, total leakages exceed total injections by $20, so there will be pressure for the economy to contract.

A) True

B) False

The paradox of thrift explains that increased savings by households could actually lower savings for the economy as a whole.

A) True

B) False

A marginal propensity to consume of 0.75 and a marginal propensity to import of 0.05 are associated with an open-economy spending multiplier of 3.33.

A) True

B) False

In general, autonomous spending increases have a lower multiplier effect on real GDP when the economy is open to international trade.

A) True

B) False

If the MPS equals 0.25 and the MPI is 0.15, then an initial change in investment spending of $250 million will result in a total change in equilibrium real GDP of $625 million.

A) True

B) False

Given a constant GDP gap, the higher the spending multiplier, the smaller will be the recessionary gap.

A) True

B) False

The recessionary gap is given by the difference between potential GDP and real GDP.

A) True

B) False

If the spending multiplier equals 6 and equilibrium real GDP is $32 billion below potential real GDP, then total planned expenditures need to decrease by approximately $5.33 billion to close the recessionary gap.

A) True

B) False

Foreign repercussions of changes in domestic imports cause the true domestic spending multiplier to be less than 1/(MPS+MPI)

A) True

B) False

Suppose the multiplier effect for Japan is 0.8 for any $1 billion change in U.S. government purchases. Therefore, Japanese real GDP will rise by $8 billion when U.S. government spending rises by $10 billion.

A) True

B) False

In reality, the simple spending multiplier [1/(MPS+MPI)] is applicable only to countries whose imports are a substantial fraction of income in foreign countries.

A) True

B) False

An increase in U.S. imports from Mexico will cause a decrease in income for Mexican individuals and businesses.

A) True

B) False

If German imports of French products are very important in determining the volume of German exports to France, we would expect the actual German spending multiplier to be larger than 1/(marginal propensity to save +marginal propensity to import).

A) True

B) False

The Keynesian aggregate expenditures model assumes that price level is constant.

A) True

B) False

A change in the price level in an economy will be depicted by a movement along the AE curve and not by a leftward or rightward movement of the curve.

A) True

B) False

Wealth is considered to be a nonincome determinant of consumption.

A) True

B) False

A depreciation of the U.S. dollar will result in an increase in aggregate expenditures in the country.

A) True

B) False

When the price level in an economy falls, the demand for bonds and other nonmonetary financial assets rises.

A) True

B) False

The aggregate demand curve depicts a negative relationship between real GDP and the general price level.

A) True

B) False

Ceteris paribus, a decline in the general price level in the United States will make foreign-produced goods relatively more expensive to U.S. residents and increase the aggregate demand of domestic goods.

A) True

B) False

A decrease in the general price level is associated with an upward shift in the aggregate expenditures function.

A) True

B) False

If the equilibrium level of income is solely a function of aggregate supply, then the aggregate supply curve must be in the Keynesian region.

A) True

B) False

The portion of the aggregate supply curve that is a positive function of the general price level represents excess capacity and unemployed resources.

A) True

B) False

A horizontal aggregate supply curve indicates that equilibrium real GDP is determined by aggregate supply.

A) True

B) False

According to economists, the fixed-price model of macroeconomic equilibrium depicts the modern economy most closely because it assumes that aggregate supply is independent of price.

A) True

B) False

A major drawback of the Keynesian approach to macroeconomic equilibrium is the assumption that the supply of goods and services in the economy always adjusts to aggregate expenditures

A) True

B) False.

Two.

ECO 202 Assessment Problem: In this essay you will be asked to reflect the following issues using the supply and demand model.

1. There are two important inputs in the production of lattes: coffee beans and labor from workers at the coffee shop. a. Workers need to make a decision about how much time to spend working and how much time to spend doing other things. What factors affect the decision of a worker and how do these things affect the price of lattes? Rubric item 1. Demonstrate the knowledge of basic elements and concepts of microeconomics How does the following concepts affect price of lattes Microeconomic factors

1. Opportunity Cost

2. PPF with graph

3. Marginal cost and marginal benefit

4. Comparative advantage and absolute advantage

5. Price controls- price floor,

6. Explain with graph surplus in labor market if minimum wages is above equilibrium wages

7. Benefits, tuition and retirement plans

8. Consumer preferences Rubric item

2. Identify economic resources and their use

a. Natural resources

b. Human resources labor, education, skills

c. Technology

d. Entrepreneurship

b. Suppose a drought strikes the major coffee growing regions of Brazil. Describe the effect of the drought on the price and quantity of lattes in the context of the supply and demand model.

Explain with graph 1. Demand and supply, equilibrium price and output 2. Increase and decrease in demand 3. Increase and decrease in Quantity demanded 4. Increase and decrease in Supply 5. Increase and decrease in Quantity supplied 6. Explain Increase /decrease in supply of coffee beans due to drought with a graph 7. Effect on price and quantity demanded and supplied of coffee beans 8. Are coffee beans and latte complementary goods or substitutes 9. Cross price elasticity definition 10. Effect on price and quantity demanded and supplied of lattes

2. Now consider the local coffee market more broadly. Explain how the output decision made by a particular coffee shop differs under each of the four market structures: competition, monopoly, oligopoly, and monopolistic competition.

3 Differentiate production under pure competition, monopoly, oligopoly and monopolistic competition

1. Draw a graph. Label it and explain all types of costs i. Explain Law of diminishing marginal returns ii. Economies of scale iii. Short run and long run curves 2. In context of local coffee market, explain the features of pure competition, monopoly, oligopoly and monopolistic competition 3. Draw graphs of pure competition, monopoly, oligopoly and monopolistic competition and label it. 4. Discuss the output and price decision under pure competition, monopoly, oligopoly and monopolistic competition and label it.

ii..

Question 2: Suppose that a monopolist can produce any level of output it wishes at a constant marginal (and average} cost of $5 per unit. Assume that the monopoly sells its goods in two different markets that are separated by some distance. The demand curve in the rst market is given by Q1 = 60 P1, and the demand curve in the second {casket is given by, Q2= 100 2P2, {a} (b)- {c} {d} If the monopolist can maintain the separation between the two markets, what level of output should he produced in each market, and what price will be charged in each market? What are total prots in this situation? How would your answer change with respect to the output sold in each market, price charged, and total prots, if transportation costs were zero and the rm was forced to follow a single-price policy? Suppose the rm adopted a w pricing policy where each market as a whole must pay an equal entiy fee for the right to boy from the monopolist (equal to the smallest consmuer surplus in the two markets). In addition the customers in each market must pay a price per unit sold equal to marginal cost. In this case what would be the entry fee, how much would he sold in the two markets, and what are total prots of the monopolist? Suppose the rm adopted a M pricing policy where each market as a whole must pay an equal entry fee for the right to buy from the monopolist (equal to the smallest consumer surplus in the two markets). In addition the customers in each market must pay a price per unit sold and the monopolist designs an \"optimal\" two part tari' where the price is set as to maximize its prots. In this case what would he the entiy fee, what would be the \"optima \" price charged, and how much would be sold in the two markets, and what are total prots of the monopolist? General Description: This assignment tests the student's ability to write a professional introductory business email to a prospect as follows: You are a B2B sales rep. The company you work for specializes in e-commerce - high end web development. (See complete profile and instructions at the end of this assignment). Your key objective is to secure an introductory telephone call or meeting with a prospective customer that you've never met or spoken with before. Through your initial research, you have identified a company that you feel would be a great prospect (See complete profile and instructions at the end of this assignment). Compose your email to the buyer/contact at this company designed to meet the above objective. Evaluation Criteria: Be sure your email contains the following elements to ensure the best possible success: 1. Subject (2 marks) 2. Introductory statement (3 marks) 3. Benefit statement (5 marks) 4. Ask / Call to action (5 marks) 5. Your contact information (include name, Student # and class) (2 marks) 6. Grammar / spelling and creativity (3 marks) Hint: Be sure to follow the format and advice referenced in the Top 10 Email Do's and Don'ts slides referenced in the Chapter 7 PowerPoint and discussed in class. This can be found the Chapter 7 Module in Canvas. Expected format: Submit this email (in word document format) to the Canvas folder labelled Introductory Email Assignment. Please type your answers directly into a new document (do not include the full assignment questions in your document or it will be flagged by the Originality Checker). Your email should be no more than one page in length. Late submissions: Will receive a grade of zero, unless exceptional circumstances have arisen that have prevented on-time submission and the instructor has been notified in advance