Aggregate Demand and Aggregate Supply

If the prices of imported resources increase, then this event would most likely a. decrease aggregate supply b. increase aggregate supply c. increase aggregate demand d. decrease aggregate demand

a. decrease aggregate supply

When the price level rises, a. the demand for money and interest rates rises b. spending that is sensitive to interest- rate changes increases c. holders of financial assets with fixed money values increase their spending d. holders of financial assets with fixed money values increase their spending

a. the demand for money and interest rates rises

Fear of price wars, menu costs, and wage contracts are associated with a. a price level that is inflexible upward b. a price level that is inflexible downward c. a domestic output that cannot be increased d. a domestic output that cannot be decreased

b. a price level that is inflexible downward

If Congress passed much stricter laws to control the air pollution from businesses, this action would tend to a. increase per- unit production costs and shift the aggregate supply curve to the right b. increase per- unit production costs and shift the aggregate supply curve to the left c.increase per- unit production costs and shift the aggregate demand curve to the left d. decrease per- unit production costs and shift the aggregate supply curve to the left.

b. increase per- unit production costs and shift the aggregate supply curve to the left

The short-run aggregate supply curve assumes that a. nominal wages respond to changes in the price level b. nominal wages do not respond to changes in the price level c. the economy is operating at full- employment output d. the economy is operating at less than full- employment output

b. nominal wages do not respond to changes in the price level.

The aggregate supply curve is the relationship between the a. price level and the real domestic output purchased b. price level and the real domestic output purchased c price level that producers are willing to accept and the price level purchasers are willing to pay d. real domestic output purchased and the real domestic output produced.

b. price level and the real domestic output produced

The aggregate demand curve is the relationship between the a. price level and what producers will supply b. price level and the real domestic output purchased c. price level and the real domestic output produced d. real domestic output purchased and the real domestic output purchased

b. price level and the real domestic output purchased

The aggregate demand curve will be increased by a. a decrease in the price level b. an increase in the price level c. a depreciation of the value of the U.S. dollar d. an increase in the excess capacity of factories

c. a depreciation of the value of the U.S. dollar

An increase in business taxes will tend to a. decrease aggregated demand but not change aggregate supply b. decrease aggregate supply but not change aggregate demand c. decrease aggregate demand and decrease aggregate supply d. decrease aggregate supply and increase aggregate demand

c. decrease aggregate demand and decrease aggregate supply

In the aggregate demand- aggregate supply model, an increase in the price level will a. increase the real value of wealth b. increase the strength of the multiplier c. decrease the strength of the multiplier d. have no effect on the strength of the multipler

c. decrease the strength of the multiplier

If at a particular price level, real domestic output from producers is greater than real domestic output desired by purchasers, there will be a a. surplus and the price level will rise b. surplus and the price level will fall c. shortage and the price level will rise d. shortage and the price level will fall

c. shortage and the price level will rise

If there were cost-push inflation, a. both the real domestic output and the price level would decrease b. the real domestic output would increase and rises in the price level would become smaller c. the real domestic output would decrease and the price level would rise. d. both the real domestic output and rises in the price level would become greater

c. the real domestic output would decrease and the price level would rise

In the long run, the aggregate supply curve is a. upsloping b. downsloping c. vertical d.horizontal

c. vertical

a sharp decline in the real value of stock prices, which is independent of a change in the price level, would best be an example of a. the interest- rate effect b. the foreign purchases effect c. a change in household borrowing d. a change in real value of consumer wealth

d. a change in real value of consumer wealth

One explanation for the downward slope of the aggregate demand curve is that a change in the price level results in a. a multiplier effect b. an income effect c. a substitution effect d. a foreign purchases effect

d. a foreign purchases effect

An increase in aggregate demand will increase a. the price level and have no effect on real domestic output b. the real domestic output and have no effect on the price level c. the price level and decreases the real domestic output d. both real output and the price level

d. both real output and the price level

An increase in aggregate supply will a. increase the price level and real domestic output b. decrease the price level and real domestic output c. decrease the price level and increase the real domestic output d. decrease the price level and have no effect on real domestic output

d. decrease the price level and increase the real domestic output

Aggregate demand decreases and real output fails but the price level remains the same. which factor most likely contributes to downward price inflexibility? a. an increase in aggregate supply b. the foreign purchases effect c. lower interest rates d. efficiency wages

d. efficiency wages