macro 1040

When the price level falls

The interest rate falls, so the quantity of goods and services demand rises

The saying Money is a veil means that

While nominal variables are the firs thing we may observe about the economy whats important are the real variables and the forces that determine them

Other things the same, when the government spends more, the initial effect is that

aggregate demand shifts right

If the price level is higher than expected, firms might raise their production in the short run if

all of the above are correct

The long run aggregate supply curve shifts right if

all of the above are correct

Which of the following is included in the aggregate demand for goods and services

all of the above are correct

During recessions

all the above are correct

Which of the following shifts long run aggregate supply right

an increase in either technology or the human capital stock

wages tend to be sticky

because of contracts, social norms, and notions of fairness

People had been expecting the price level to be 120 but turns out to be 122. In response Robinson Tire company increases the number of workers it employs. what could explain this?

both sticky price theory and sticky wage theory

When the price level falls the quantity of

consumption goods demanded and the quantity of net exports demanded both rise

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to

decrease consumption which shifts aggregate supply left

When taxes increase consumption

decreases as shown by a shift of the aggregate demand curve to the left

an increase in household saving causes consumption to

fall and aggregate demand to decrease

When the price level increases the real value of peoples money holdings

falls, so they buy less

In the context of the aggregate demand curve, the interest rate effect refers to the idea that when the price level increases

households increase their holdings of money, in turn, interest rates increase, which reduces spending on investment goods

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

increased consumption, which shifts the aggregate demand curve right

The misperceptions theory of the short run aggregate supply curve says that if the price level is higher than people expected then some firms believe that the relative price of what they produce has

increased, so they increase production

In the context of aggregate demand and aggregate supply, the wealth effect refers to the idea that when the price level decreases, the real wealth of households

increases and as a result consumption spending increases. This effect contributes to the downward slope of the aggregate demand curve

When the dollar appreciates US

net exports fall, which decreases the aggregate quantity of goods and services demanded

When the dollar depreciates US

net exports rise, which increases the aggregate quantity of goods and services demanded

According to classical macroeconomics theory, changes in the money supply affect

nominal variables but not real variables

The aggregate quantity of goods and services demanded changes as the price level rises

real wealth falls, interest rates rise and the dollar appreciates

The sticky wage theory of the short run aggregate supply curve says that when the price level is lower than expected

relative to price wages are higher and employment falls

If the price level falls the real value of a dollar

rises, so people will want to buy more

Which of the following would both shift aggregate demand right?

taxes decrease and government expenditures increase

if speculators lost confidence in foreign economies and so wanted to buy more US bonds

the dollar would appreciate which would cause aggregate demand to shift left

The wealth effect interest rate effect and exchange rate effect are all explanations for

the slope of the aggregate demand curve

During a recession the economy experiences

Falling employment and income

Which of the following is correct

Real GDP is the variable most commonly used to measure short run economic fluctuations. It is almost impossible to predict these fluctuations with much accuracy

Which of the following shifts aggregate demand right?

The Fed buys bonds in the open market

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer US bonds

The dollar would depreciate which would cause aggregated demand to shift left

When taxes decrease consumption

increases as shown by a shift of the aggregate demand curve to the right

When the money supply increases

interest rate fall and so aggregate demand shifts right

Other things the same, an increase in the price level induces people to hold

more money, so they lend less and the interest rate rises