Aggregate Demand and Aggregate Supply

When the general price level in our economy increases, which of the following effects does NOT occur? A. The interest rate will also tend to increase. B. Our net exports will tend to decrease. C. The purchasing power of people's savings will increase. D. Foreign buyers will buy less of our output, and we tend to import more.

C. The purchasing power of people's savings will increase.

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. the interest-rate effect B. the real-balances effect C. a change in real value of consumer wealth D. a change in the degree of excess capacity

C. a change in real value of consumer wealth

An increase in aggregate demand is most likely to be caused by a(n) _____. A. increase in real interest rates B. decrease in government spending C. decrease in the tax rates on household income D. decrease in expected returns on investment

C. decrease in the tax rates on household income

Graphically, cost-push inflation is shown as a _____. A. rightward shift of the AD curve B. rightward shift of the AS curve C. leftward shift of the AS curve D. leftward shift of the AD curve

C. leftward shift of the AS curve

The aggregate supply curve (short run) _____. A. graphs as a vertical line B. graphs as a horizontal line C. slopes upward and to the right D. slopes downward and to the right

C. slopes upward and to the right

The foreign purchases, interest rate, and real-balances effects explain why the ____________. A. aggregate expenditures schedule may shift up or down B. economy will adjust towards equilibrium C. aggregate demand curve may shift to the left or right D. aggregate demand curve is downward-sloping

D. aggregate demand curve is downward-sloping

A decrease in aggregate demand in the short run will reduce _____. A. the price level and have no effect on real domestic output B. the real domestic output and have no effect on the price level C. the price level and increase the real domestic output D. both real output and the price level

D. both real output and the price level

Answer the next question based on the following list of items that are related to aggregate demand and/or aggregate supply. 1) Government Spending 2) Consumer Expectations 3) Degree of Excess Capacity 4) Personal Income Tax Rates 5) National Income Abroad 6) Business Taxes 7) Domestic Resource Availability 8) Prices of Imported Products 9) Profit Expectations on Investments Which combination of factors best explain why the aggregate supply curve would shift? A. 6 and 7 B. 2 and 9 C. 1 and 2 D. 3 and 5

A. 6 and 7

An increase in productivity will _____. A. increase aggregate supply B. increase aggregate demand C. decrease aggregate supply and aggregate demand D. increase aggregate supply and aggregate demand

A. increase aggregate supply

A decrease in aggregate supply means _____. A. the real domestic output would decrease and the price level would rise B. both the real domestic output and rises in the price level would become greater C. the real domestic output would increase and rises in the price level would become smaller D. both the real domestic output and the price level would decrease

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

An increase in the aggregate expenditures schedule _____. A. decreases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier B. increases aggregate demand by the amount of the increase in aggregate expenditures only C. decreases aggregate demand by the amount of the increase in aggregate expenditures D. increases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier

D. increases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier