Ch 20 Adaptive Quiz

The slope of the can be explained by the real balances effect, the interest-rate effect, and the net exports effect.

aggregate demand curve

Beginning from the full-employment level of real GDP, an increase in one of the components of the aggregate demand curve will increase the: average level of prices (CPI)

average level of prices (CPI)

If an economy is operating at an equilibrium below the level of real GDP, the self-correction model result is that:

Unemployment falls.

Which of the following would not be expected to shift the aggregate demand curve?

A change in the price level

causes a rightward shift of the aggregate supply curve.

A lower tax on business

if consumers become more optimistic about the future.

Aggregate demand will increase

is a likely cause of stagflation.

An increase in the price of imported oil

In the figure given below, beginning from long-run equilibrium at point E1, the aggregate demand curve shifts to AD2. The economy's path to a new long-run equilibrium is represented by a movement from:

E1, to E2, to E3.

Identify the correct statement about the interest-rate effect.

Higher demand for borrowed funds increases the rate of interest.

Which of the following is true of the aggregate demand curve?

It shows the total amount of goods and services purchased in an economy at various price levels.

Which of the following is a belief of classical theory?

Long-run full employment.

Given a shift of the aggregate demand curve from AD1 to AD2 in the figure given below, the real GDP and price level (CPI) in long-run equilibrium will be:

P3,Yp

Which of the following is true in the horizontal segment of the aggregate supply curve?

Real GDP of an economy can increase without any increase in the price level.

Which of the following is not a component of aggregate demand?

Savings (S)

A is likely to cause an increase in aggregate demand.

tax cut

The concurrent problems of inflation and unemployment is termed:

Stagflation.

In the intermediate range of the aggregate supply curve, if government expenditures increase causing the aggregate demand curve to shift outward, which of the following is most likely to occur?

The price level and real GDP will both rise.

In figure given below, the combination (P2, Y1) shows:

a short run equilibrium.

Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If an economy is on the intermediate range of the aggregate supply curve, then:

both real GDP and the price level will fall.

In the figure given below, the change in equilibrium from E2 to E1 represents:

cost-push inflation.

A shift in the aggregate supply curve in the following figure from AS1 to AS2 would be caused by a(n):

decrease in input prices.

An increase in total spending causes:

demand-pull inflation.

The aggregate demand curve is:

downward sloping, indication that people buy more goods an services at a lower average price level.

. Keynes theorized that there are when equilibrium real GDP is below the full employment level, which implies a aggregate supply curve.

fixed prices and wages, horizontal

The aggregate demand curve will shift to the right if:

government spending increases.

An increase in aggregate demand will increase only real gross domestic product:

in the Keynesian range of the aggregate supply curve.

According to the net exports effect, a higher domestic price level tends to:

increase imports as consumers substitute imported goods for domestic goods.

In the classical range, an increase in aggregate demand causes:

inflation.

The real balances effect is the impact of the on total spending.

inverse relationship between the price level and the real value of financial assets with fixed nominal value

In the figure given below, the level of real GDP represented by Yp:

is potential real GDP for this economy.

In the aggregate demand-supply model, cost-push inflation is graphically denoted by a:

leftward shift of the aggregate supply curve while the aggregate demand curve remains fixed.

Along the Keynesian range of the aggregate supply curve, a decrease in aggregate demand will decrease:

only real GDP.

If nominal wages and salaries are fixed as firms change product prices, the short-run aggregate supply curve is:

positively sloped.

The net exports effect is the inverse relationship between the net exports and the

price level of an economy.

A rise in the price level reduces the:

purchasing power of money.

The net exports effect is the impact on:

real GDP caused by the relationship between the rice level and the net exports of an economy.

The idea that a reduction in the price level increases the real value of assets held by households and increases consumption is the:

real balances effect.

Economic growth is represented in the following figure by a(n):

rightward shift in the long-run aggregate supply curve (LRAS).

A technological improvement will result in a:

rightward shift of the aggregate supply curve.

A will shift the aggregate demand curve rightward.

rise in net exports

A decline in the level of investment will:

shift the aggregate demand curve to the left.

The classical aggregate supply curve denotes the view:

supply creates it's own demand.

An increase in regulation will shift the aggregate:

supply curve leftward.

The aggregate supply curve shows:

the level of real GDP produced at different price levels during a time period, ceteris paribus.

In the intermediate range of the aggregate supply curve: the price level and the level of real GDP vary as an economy approaches full employment.

the price level and the level of real GDP vary as an economy approaches full employment.

The interest-rate effect is the impact on real gross domestic product (GDP) caused by the direct relationship between the interest rate and:

the price level.

According to the classical theory, a decrease in aggregate demand will result in:

unemployment and a surplus of goods and services causing price and wage cuts.

The pre-Keynesian or classical economic theory viewed the long-run aggregate supply curve for the economy to be:

vertical at the full-employment level or real GDP.

Assuming prices and wages are fully flexible, the aggregate supply curve will be:

vertical.

In an economy where nominal incomes adjust equally to changes in the price level, we would expect the long-run aggregate supply curve to be:

vertical.