Study sets, textbooks, questions
Upgrade to remove ads
Ch 9 Macro End of Chapter Questions
Terms in this set (24)
Increased consumer worries about job security may affect consumption spending and be most likely to cause which of the following?
A decrease in employment and perhaps a decrease in inflation
A fall in interest rates is likely to change investment, real GDP, prices, and employment in the short run in the following manners.
Increase investment, real GDP, prices, and employment
A booming stock market may affect consumption spending and be most likely to cause which of the following?
An increase in employment and perhaps an increase in inflation
Which of the following represents movement along the aggregate demand curve? Select all that apply.
-As the average price level falls¸ consumers have more financial wealth and decide to increase spending.
-Falling prices decreases the demand for money¸ decreasing interest rates¸ and investment spending rises.
-Optimistic consumers decide to spend more.
As spending increases, there will be upward pressure on the price of inputs including wages. As the marginal cost of production rises, businesses start to increase prices as they attempt to produce more. This scenario best describes _____________.
Movement along the aggregate supply curve
Which of the following changes would cause a shift in the aggregate demand curve?
I. Increase in investment
II. Decrease in productivity
III. Increase in consumption
I and III only
In 2007, the price of houses fell dramatically across the country. As a result, the wealth of most households fell substantially. How would we model the effect of this change in terms of AS/AD?
A shift in the AD curve to the left
Categorize each of the following scenarios as likely to cause immediate shifts in AD, AS, or both.
1. Sudden drop in the stock market¸ reducing household wealth -> AD
2. Increase in the payroll tax (tax businesses pay on wages paid) -> both
3. A flood damages factory equipment -> AS
4. A sudden increase in the world price of oil (assume we are net importers of oil) -> both
5. A wave of consumer and business optimism -> AD
Assuming we are producing near full capacity, an increase in demand (a shift to the right in AD) will result in which of the following?
-An increase in real GDP
-An increase in the price level
-Movement along the AS curve
If everything else remains the same, a rise in the GDP deflator (a measure of the average price level) should cause _____________.
-The real value of currency and deposits to fall
-The demand for money to rise
-Interest rates to rise
-Consumption spending to fall
Which of the following would cause AD to decrease, that is, shift to the left?
Increase in income taxes
Which of the following spending components of GDP will be affected by a change in the average price level?
Aggregate demand slopes down because ______________.
-The price level affects the real value of currency and deposits
-The price level affects interest rates
-The price level affects imports and exports
Why does the aggregate supply curve become very steep at high levels of real GDP?
At very high levels of production, capacity constraints become severe and more spending can only lead to higher prices.
How would we model an increase in the amount of capital available in an economy?
A shift to the right of the AS curve
The long-run effect of an increase in investment spending will be a shift of the aggregate demand curve to the ______________ and ______________ shift of the aggregate supply curve.
Right; a rightward
How would we model the effect of a new costly regulation on businesses?
A shift left of the AS curve
An increase in Aggregate Demand results in a ____________.
Higher GDP deflator and higher real GDP
An decrease in Aggregate Supply results in a __________.
Higher GDP deflator and lower real GDP
A decrease in Aggregate Demand results in a _____________.
Lower GDP deflator and lower real GDP
People tend to like higher incomes and lower prices. What kind of change in our model results in higher incomes and lower prices?
An increase in AS
People really dislike falling income and rising prices. What kind of change in our model will make people really unhappy?
A decrease in AS
Suppose the federal government reduces taxes on the profits earned from investment in physical capital. According to our model, this policy will eventually result in:
An increase in real GDP and an ambiguous effect on prices
An economy is initially in equilibrium. Suppose that a natural disaster destroys some of the physical capital in the economy. Sort the statements in order so that they describe what happens.
1. With less capital¸ businesses cannot produces as much as before the disaster. Output initially falls and the aggregate supply curve shifts left.
2. At the old price level¸ desired spending exceeds production.
3. Business inventory begins to fall.
4. Businesses respond by increasing output.
5. Marginal costs begin to rise as production increases.
6. Businesses start to increase prices.
7. Spending on consumption¸ investment¸ and net exports slows down as the price level rises.
8. A new equilibrium is reached at a higher price and lower level of real GDP.
Sets with similar terms
Econ 2301 Ch.22
Unit 3 AP macro
Macroeconomics-Chapter 5 Test Study
Econ chapter 32 33
Other sets by this creator
Macroeconomics Ch 3: Question Bank
Chapter 9 Macro
geog 1050 exam 1
Wmu geography 1050 exam 1
Other Quizlet sets
NUTRITIONAL ASSESSMENT AND EDUCATION FOR DENTAL PA…
Integrate Vocabulary Quiz