ECN 351 Quiz 8

If the Federal Reserve decided to raise interest rates, it could

sell bonds to lower the money supply.

Liquidity preference theory is most relevant to the

short run and supposes that the interest rate adjusts to bring money supply and money demand into balance.

The Employment Act of 1946 states that

the government should promote full employment and production.

Which of the following illustrates how the investment accelerator works?

An increase in government expenditures increases aggregate spending so that Burgerville finds it profitable to build more new restaurants.

Which of the following events shifts aggregate demand rightward?

An increase in government expenditures, but not a change in the price level

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?

As the price level increases, the interest rate rises, so spending falls.

Shifts in aggregate demand affect the price level in

Both the short and long run

If the economy is in long-run equilibrium, then an adverse shift in short-run aggregate supply would move the economy from

C to D

Which of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment?

Increase government expenditures

The short-run equilibrium is defined by the given AD and SRAS curves. Which of the long-run aggregate-supply curves is consistent with a short-run economic expansion?

LRAS1