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5 Written questions

5 Matching questions

  1. The aggregate demand and aggregate supply model explains
    a. the effect of changes in the inflation rate on the nominal interest rate.
    b. short-run fluctuations in real GDP and the price level.
    c. the effect of long-run economic growth on the standard of living.
    d. the effect of changes in the interest rate on investment spending.
  2. Why is the aggregate demand curve downward sloping?
  3. 7. Higher personal income taxes
    A) increase aggregate demand.
    B) increase disposable income.
    C) decrease aggregate demand.
    D) both b and c.
  4. Spending on the war in Iraq is essentially categorized as government purchases. How do increases in spending
    on the war in Iraq affect the aggregate demand curve?
    A) They will shift the aggregate demand curve to the left.
    B) They will move the economy up along a stationary aggregate demand curve.
    C) They will move the economy down along a stationary aggregate demand curve.
    D) They will shift the aggregate demand curve to the right.
  5. The interest rate effect refers to the fact that a higher price level results in
    a. higher interest rates and higher investment.
    b. higher interest rates and lower investment.
    c. lower interest rates and lower investment.
    d. lower interest rates and higher investment.
  1. a D) They will shift the aggregate demand curve to the right
  2. b C) decrease aggregate demand.
  3. c b. short-run fluctuations in real GDP and the price level.
  4. d b. higher interest rates and lower investment.
  5. e because a decrease in the price level increases the quantity of real GDP demanded

5 Multiple choice questions

  1. c. the short-run aggregate supply curve will shift to the left.
  2. a combination
    of inflation and recession, usually resulting from a supply shock
  3. 1.shows the relationship in the long run between the price level and the quantity of real GDP supplied
    2. a vertical line because in the long run, real GDP is always at its
    potential level and is unaffected by the price level
  4. involves changes in federal taxes and purchases that are intended to achieve macroeconomic policy
    objectives
  5. d. the labor force increases

5 True/False questions

  1. If firms and workers could predict the future price level exactly, the short-run aggregate supply curve
    would be
    a. downward sloping.
    b. upward sloping.
    c. horizontal.
    d. the same as the long-run aggregate supply curve
    c. a movement up and to the right along a stationary curve

          

  2. If the price level increases, then
    a. the economy will move up and to the left along a stationary aggregate demand curve.
    b. the aggregate demand curve will shift to the right.
    c. the aggregate demand curve will shift to the left.
    d. none of the above
    c. the short-run aggregate supply curve will shift to the left.

          

  3. The international-trade effect refers to the fact that an increase in the price level will result in
    a. an increase in exports and a decrease in imports.
    b. a decrease in exports and an increase in imports.
    c. an increase in exports and an increase in imports.
    d. a decrease in exports and a decrease in imports.
    b. a decrease in exports and an increase in imports

          

  4. Which of the following government policies affects the economy through intended changes in the
    money supply and interest rates?
    a. fiscal policy
    b. monetary policy
    c. both fiscal and monetary policies
    d. neither fiscal nor monetary policies
    c. In the long run, changes in the price level do not affect the level of real GDP

          

  5. . Suppose the economy is at full employment and firms become more optimistic about the future profitability of
    new investment. Which of the following will happen in the short run?
    A) Prices will decline.
    B) Aggregate demand will shift to the left.
    C) Unemployment will decline.
    D) Output will decline.
    C) Unemployment will decline