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The aggregate demand curve is the relationship between the: |
Price level and the purchasing of real domestic output |
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The amount of real domestic output that will be purchased at each possible price level is best shown by the: |
Aggregate demand curve |
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Which effect best explains the downward slope of the aggregate demand curve? |
A real-balances effect |
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What is one likely reason the level of domestic output purchased will be higher when the price level is lower? |
The interest-rate effect |
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The foreign purchases effect suggests that a: |
Rise in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand |
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The real-balances effect suggests that a: |
Lower price level will increase the real value of many financial assets and therefore cause an increase in spending |
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The foreign purchases, interest rate, and real-balances effects explain: |
Why the aggregate demand curve is downsloping |
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The foreign purchases effect provides an explanation why the: |
Lower the price level, the higher the level of domestic output purchased |
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One explanation for the downward slope of the aggregate demand curve is that a change in the |
A real-balances effect |
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Refer to the above graph, which shows an aggregate demand curve for a hypothetical economy. If the price level is 200, the quantity of real GDP demanded is: |
$600 billion |
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Refer to the above graph, which shows an aggregate demand curve for a hypothetical economy. If the economy is at point C and the price level increases by 100 points, the wealth, interest-rate, and foreign purchases effects will: |
Move the economy to point A |
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A decrease in interest rates caused by a change in the price level would cause a(n): |
Increase in the quantity of real domestic output demanded |
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An expected decline in the prices of consumer goods will: |
Decrease aggregate demand |
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An expected rise in the rate of inflation for consumer goods will: |
Increase aggregate demand |
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Which set of events would most likely decrease aggregate demand? |
An increase in personal income tax rates |
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When the excess capacity of business rises, aggregate: |
Demand decreases |
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An increase in government spending will cause a(n): |
Increase in aggregate demand |
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When national income in other nations increases: |
Aggregate demand increases |
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If the dollar depreciates in value relative to foreign currencies, aggregate: |
Demand increases |
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If the U.S. dollar appreciates in value relative to foreign currencies, then this will: |
Decrease aggregate demand |
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Which set of events would most likely increase aggregate demand? |
An increase in incomes in foreign nations and a depreciation of the dollar |
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A sharp rise in the real value of stock prices, which is independent of a change in the price level, would best be an example of: |
A change in real value of consumer wealth |
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Which of the following will lead to an increase in aggregate demand? |
An increase in national incomes abroad |
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Which event would most likely increase aggregate demand? |
A depreciation of the dollar |
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An aggregate supply curve represents the relationship between the: |
Price level and the production of real domestic output |
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The slope of the immediate-short-run aggregate supply curve is based on the assumption that: |
Both input and output prices are fixed |
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The upward slope of the short-run aggregate supply curve is based on the assumption that: |
Nominal wages and other resource costs do not respond to price level changes |
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A change in aggregate supply would be caused by a change in: |
An aggregate supply determinant |
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Which would most likely shift the aggregate supply curve? A change in: |
Prices of imported resources |
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An increase in productivity will: |
Increase aggregate supply |
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If the price per barrel of Crude decreases in the international market, then this event would most likely: |
Increase aggregate supply in the United States |
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Suppose that real domestic output in an economy is 2400 units, the quantity of inputs is 60, and the price of each input is $30.If Congress raised taxes on businesses, this action would: |
Increase per-unit production costs and thus decrease aggregate supply |
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Suppose that real domestic output in an economy is 2400 units, the quantity of inputs is 60, and the price of each input is $30.An increase in business taxes would tend to: |
Decrease aggregate demand and decrease aggregate supply |
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Which would most likely increase aggregate supply? |
A decrease in net exports |
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If the U.S. dollar appreciates in value relative to foreign currencies, then this will: |
Decrease aggregate demand and increase aggregate supply |
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If personal income taxes and business taxes increase, then this will: |
Decrease aggregate demand and aggregate supply |
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A decrease in business taxes will most likely result in a(n): |
Increase in aggregate demand and aggregate supply |
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The long run in macroeconomics is a period in which nominal wages: |
Change as the price level changes |
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The long-run aggregate supply curve is: |
Vertical |
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A graph of the long-run aggregate supply curve is: |
Vertical, and a graph of the short-run aggregate supply is upsloping |
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The intersection of the aggregate demand and aggregate supply curves determines the: |
Equilibrium level of real domestic output and prices |
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If at a particular price level, real domestic output from producers is greater than real domestic output desired by purchasers, there will be a: |
Surplus and the price level will fall |
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A decrease in aggregate demand will decrease: |
Both real output and the price level |
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Demand-pull inflation is associated with a(n): |
Increase in aggregate demand |
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One reason why the aggregate supply curve might shift to the left is that: |
Per unit production costs have increased |
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Cost-push inflation is characterized by a(n): |
Decrease in aggregate supply and no change in aggregate demand |
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The economy experiences an increase in the price level and a decrease in real domestic output. |
Input prices have increased |
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The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation? |
Interest rates and wage rates have decreased |
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Disinflation refers to a situation where: |
The rate of inflation falls, but the price level does not |
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Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to: |
A price level that is inflexible downward |
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Menu costs will: |
Make prices inflexible downward |
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Aggregate demand decreases and real output falls but the price level remains the same. Which factor would most likely contribute to downward price inflexibility? |
Menu cost |
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When aggregate demand decreases, product prices, wage rates, and per-unit production costs are inflexible downward because of a: |
Ratchet effect |
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