ECO-111 Quiz 10 TESU
During recessions, declines in investment account for about _______ of the decline in real GDP.
2/3
The classical dichotomy and monetary neutrality are represented graphically by
a vertical long-run aggregate-supply curve
The multiplier effect is exemplified by the multiplied impact on _______ of a given increase in _________.
aggregate demand; government purchases
The aggregate-demand curve shows that a decrease in the price level _________ the _________ value of goods and services demanded in the economy.
increases; real
The wealth effect stems from the idea that a higher price level ___________ the real value of _________.
decreases; households' money holdings
Other things the same, if the price level rises, people increase __________ bond purchases, so the dollar _________.
domestic; depreciates
The term crowding-out effect refers to the reduction in aggregate demand that results when a __________ causes the interest rate to _________.
fiscal expansion; increase.
The decline in ________ accounts for about two-thirds of the decline in output during a recession.
investment spending
Other things the same, when the price level rises more than expected, some firms will have ________ than desired prices, which __________ their sales.
lower; increase
Which of the following is most commonly used to monitor short-run changes in economic activity?
real GDP
The classical dichotomy refers to the separation of __________ and ________.
real values; nominal variables
When the price level falls, the quantity of consumption goods demanded ____________ and the quantity of net exports demanded ____________.
rises; rises
An economic expansion caused by a shift in aggregate demand remedies itself over time as the expected price level ________, shifting aggregate __________.
rises; supply left
Suppose the economy is currently at point A. To restore full employment, the Federal Reserve should _________ government bonds, which will _________ the money supply.
sell; reduce
Liquidity preference theory is most relevant to the _______ run and supposes that the _______ adjusts to bring money supply and money demand into balance.
short; interest rate
The most important automatic stabilizer is
tax system
An example of an automatic stabilizer is
unemployment benefits
Keynes argued that aggregate demand is
unstable, because waves of pessimism and optimism create fluctuations in aggregate demand
According to liquidity preference theory, the money-supply curve is
vertical
For the U.S. economy, the ______ effect is the most important reason for the downward slope of the aggregate-demand curve.
wealth
