5 Written questions
5 Matching questions
- An unexpected increase in the price of oil would be called _________ by economists.
a. a demand shock
b. an adverse supply shock
d. an increase in menu costs
- What are the three factors that cause the AD curve to shift?
- If the exchange rate between the dollar and foreign currencies rises (the dollar rises in value versus
foreign currencies), the price in foreign currency of U.S. products will _________ and the U.S.
aggregate demand curve will shift to the _________.
a. rise; right
b. rise; left
c. fall; right
d. fall; left
- How can government policies shift the aggregate demand curve to the right?
a. by increasing personal income taxes
b. by increasing business taxes
c. by increasing government purchases
d. all of the above
- Which of the following factors does not cause the aggregate demand curve to shift?
a. a change in the price level
b. a change in government policies
c. a change in the expectations of households and firms
d. a change in foreign variables
- a c. by increasing government purchases
- b 1. changes in government policies
2. changes in expectations of households
3. changes in foreign variables
- c a. a change in the price level
- d b. rise; left
- e b. an adverse supply shock
5 Multiple choice questions
- shows the relationship between the price level and the level of planned
aggregate expenditure by households, firms, and the government
- shows the relationship between
the price level and the quantity of real GDP that firms are willing to produce
- government purchases
- a. when the price level falls, the real value of household wealth rises, and so will consumption.
- D) They will shift the aggregate demand curve to the right
5 True/False questions
Describe the international effect. → As the price level increases, the real value of household wealth falls, and
so will consumption. In contrast, if the price level declines, real household wealth rises and so
What are the three reason why the other components of GDP change as the price level changes? → 1. the wealth effect
2. the interest rate effect
3. the international effect
Describe monetary policy. → involves the
actions the Federal Reserve takes to manage the money supply and interest rates to pursue
macroeconomic policy objectives
An increase in net exports that results from a change in the price level in the United States
a. will shift the aggregate demand curve to the right.
b. will shift the aggregate demand curve to the left.
c. will not cause the aggregate demand curve to shift.
d. will have an indeterminate effect on aggregate demand. → d. all of the above
. If short-run aggregate supply increases (shifts to the right) by less than long-run aggregate supply, then, at the
A) GDP will be above potential GDP.
B) aggregate demand will increase.
C) GDP will be below potential GDP.
D) GDP will be equal to potential GDP. → C) GDP will be below potential GDP