chapter 13 econ question 1-40
6.Which of the following would cause a downward movement along the aggregate demand curve?
A fall in the price level increases savings and lowers interest rates.
2.The aggregate demand curve is best represented by which of the following equations?
AD = C + I + G + NX
33.__________ would cause a rightward shift of the aggregate demand curve.
An increase in expected income
34.__________ would cause a leftward shift of the aggregate demand curve.
An increase in expected income
5.Which of the following would cause an upward movement along the aggregate demand curve?
An increase in the price level increases the value of real wealth.
37.Which of the following would shift aggregate demand to the right?
Stock market values increase by 20%.
38.Which of the following would shift aggregate demand to the left?
The value of the dollar increases.
10.The value of one`s accumulated assets is best defined as:
Wealth
13.A fall in the price level that causes a change in the real value of wealth results in:
a downward movement along the aggregate demand curve.
7.The aggregate demand curve slopes downward because:
a higher price level reduces wealth.
19.According to the interest rate effect, an increase in the price level leads to __________ in the interest rate, and therefore to __________ in the quantity of aggregate demand.
a rise; a fall
8.The wealth effect, interest rate effect, and international trade effect all explain why the:____ 8. The wealth effect, interest rate effect, and international trade effect all explain why the:
aggregate demand (AD) curve has a negative slope.
11.The wealth effect is best described as resulting from:
an increase in the price level reducing the real value of wealth.
22.A rise in the price level that leads to a change in the interest rate, and therefore to a change in the quantity of aggregate demand, will cause:
an upward movement along the aggregate demand curve.
25.When the price level rises and U.S. goods become relatively more expensive than foreign goods, there will be:
an upward movement along the aggregate demand curve.
26.Shifts in the aggregate demand curve are caused by:
changes in spending.
1.Aggregate demand is determined by adding up the spending of:
consumers, firms, the government, and foreigners that buy goods and services produced in the United States.
9.When the price level rises, __________ declines from the wealth effect, __________ declines from the interest rate effect, and __________ decline(s) from the international trade effect.
consumption; investment; net exports
39.Input prices affect the firm`s _________, and output prices affect the firm`s _________.
costs; revenue
32.An increase in the value of the dollar will:
decrease aggregate demand.
12.An increase in the price level that reduces the real value of wealth is likely to __________ consumption and __________ saving.
decrease; decrease
21.When saving declines, the quantity of investment will __________, and therefore aggregate demand will __________.
decrease; decrease
24.When U.S. goods become more expensive relative to foreign goods, exports will __________ and imports will __________.
decrease; increase
30.An increase in the value of the dollar will __________ exports and __________ imports.
decrease; increase
35.If large emerging economies continue to grow rapidly, we can expect U.S. aggregate:
demand to increase.
31.When foreign income rises, U.S. aggregate:
demand will shift to the right.
4.The price index used to illustrate the aggregate demand curve is the:
gross domestic product (GDP) deflator.
27.You read in the paper that there has been a significant increase in the consumer confidence index. Having taken an economics class, you predict that spending in the economy will __________ and aggregate demand will __________.
increase; increase
36.You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation. Having taken an economics class, due to this expected change in prices, you predict that spending today will _________ and aggregate demand today will _________.
increase; increase
14.If prices fall, then real wealth __________ and the quantity of aggregate demand __________.
increases; increases
28.When median home prices rise, the value of real wealth __________ and aggregate demand __________.
increases; increases
29.If people expect higher income in the future, then spending today __________ and aggregate demand __________.
increases; increases
15.When a change in the price level leads to a change in saving, this is known as the:
interest rate effect.
16.When a change in the price level leads to a change in the interest rate and thus a change in the quantity of aggregate demand, it is called the:
interest rate effect.
18.When firms invest less because people are saving less, it is called the:
interest rate effect.
23.When a change in the price level leads to a change in the quantity of net exports demanded, it is called the:
international trade effect
3.The aggregate demand curve illustrates the:
inverse relationship between the price level and the quantity demanded of real GDP.
17.The interest rate effect results from people:
saving less when the price level rises.
40.Aggregate demand is about _________ and aggregate supply is about _________.
spending; production
20.Suppose that an increase in the price level reduces the value of real wealth, which then causes a reduction in consumption but no change in saving. In this case:
there is a wealth effect but no interest rate effect.
