Chapter 15 Aziza Macro 1040

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During recessions

Workers are laid off, factories are idle, firms may find they are unable to sell all they produce. Answer: D all the above

which of the following shifts long run aggregate supply right

an increase another technology or the human capital stock

Wages tend to be sticky

because of contracts social norms and notion of fairness

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

consumption demand, investment demand, net exports, D all the above

When the price level falls the quantity of

consumption goods demanded rises and the quantity of net exports demanded rises

When taxes increase, consumption

decrease 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

During a recession the economy experiences

falling employment and income

When the price level increases, the real value of people's money holdings

falls, so they buy less

In the context of the aggregate demand curve, the interest rate effects 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

The long run aggregate supply curve shifts right if

immigration from abroad increase, technology advances, the capital stock increases, D all the above

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

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

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

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

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

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 macroeconomic theory, changes in money supply affect

nominal variables but not real variables

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

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 prices wages are lower and employment falls

If the price level falls, the real value of a dollar

rises, so people will want to buy more

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

the dollar would appreciate, causing a shift to the left

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

the slope of the aggregate- demand curve

The saying, " Money is a veil" means

while nominal variables are the first thing we may observe about an economy, what important are the real variables and the forces that determine them

When the government spends more, the initial effect is that

Aggregate demand shifts right

Which of the following would both shift aggregate demand right

Taxes decrease and government expenditures increase

which of the following shifts aggregate demand to the right

The feds buys bonds in the open markets

When money supply increases

interest rates fall and so aggregate demand shifts right


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