Aggregate Demand and Supply MC

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

A decrease in personal income tax rates will cause a(n)

increase (or shift right) in aggregate demand

An increase in expected future income will

increase aggregate demand

A decrease in business taxes will tend to

increase aggregate demand and increase aggregate supply

Congress's passage of new laws significantly increasing the regulation of business would tend to

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

If the price level decreases, then the aggregate expenditures schedule will shift and this translates into a

movement down along the aggregate demand curve

A decrease in personal income taxes would shift AD to the

right because C would increase

If government purchases increase by $10 billion and the economy's MPC is .8, the aggregate demand curve will shift

rightward by $50 billion at each price level

Graphically, the full employment, low inflation, rapid growth economy of the last half of the 1990s is depicted by a

rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve

refer to 10: At the price level of 150 there will be a general

shortage in the economy and output demanded will decrease as the price level rises

Disinflation refers to a situation where

the rate of inflation falls, but the price level does not

A decrease in aggregate supply means

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

Refer to 17: If the quantity of real domestic output demanded increased by $1,000 at each price level, the new equilibrium price level and quantity of real domestic output would be

250 and 2500

The real balances effect on aggregate demand suggest that a

A lower price level will increase the real value of many financial assets and therefore cause an increase in spending

refer to 1: Which of the following factors will shift AD2 to AD1?

an increase in real interest rates

Which of the following effects best explains the downward slope of the aggregate demand curve?

an interest rate effect

An increase in the price level in the aggregate expenditures model would

decrease aggregate expenditures and shift the AD curve to the left

Cost push inflation is characterized by a(n)

decrease in aggregate supply and no change in aggregate demand

An increase in aggregate demand is most likely to be caused by a(n)

decrease in the tax rates on household income

The short run aggregate supply curve shows the

direct relationship between the price level and real GDP produced

The expenditures multiplier concept of the aggregate expenditures model

explains movement up or down the aggregate demand curve

The short run version of aggregate supply assumes that product prices are

flexible and resource prices are fixed