Quiz 4

Which of the following properly describes the interest-rate effect?

a lower price level leads to lower money demand; lower money demand leads to lower interest rates; a lower interest rate increases the quantity of goods and services demanded

From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made people feel wealthier, then it would have shifted

aggregate demand right

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 would increase output in the short run?

an increase in stock prices makes people feel wealthier, government spending increases, firms chose to purchase more investment goods

The curve that shows the quantity of goods and services that firms produce and sell

as it relates to the overall price level is called the aggregate-supply curve

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

Wages tend to be sticky

because of contracts, social norms, and notions of fairness

Which of the following shifts the long-run aggregate supply curve to the right?

both an increase in the capital stock and technological improvements

Which of the following fall during a recession?

both retail sales and employment

Changes in the price level affect which components of aggregate demand?

consumption, investment, and net exports

According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had

decreased, so it would decrease population

Which of the following shifts aggregate demand to the left?

households decide to save a larger fraction of their income

Fiscal policy affects the economy

in both the short and long run

In 2008, the US was in recession. Which of the following things would you NOT expect to have happened?

increased real GDP

Which of the following explains why production rises in most years?

increases in labor force, increases in capital stock, advances in technological knowledge

When taxes decrease, consumption

increases, so aggregate demand shifts right

Most economists believe that fiscal policy

primarily affects aggregate demand

The aggregate demand and aggregate supply graph has

quantity of output on the horizontal axis. Output can be measured by real GDP

Other things the same, automatic stabilizers tend to

raise expenditures during recessions and lower expenditures during expansions

Which of the following is most commonly used to monitor short-run changes in economic activity?

real GDP

A relatively mild period of falling incomes and rising unemployment is called a?

recession

According to liquidity preference theory, the opportunity cost of holding money is

the interest rate on bonds

Which of the following is NOT an automatic stabilizer?

the minimum wage

Which of the following tends to make aggregate demand shift further to the right than the amount by which government expenditures increase?

the multiplier effect

The lag problem associated with fiscal policy is due mostly to

the political system of checks and balances that slows down the process of implementing fiscal policy

Aggregate demand includes

the quantity of goods and services households, firms, the government, and customer abroad want to buy

Which of the following typically rises during a recession?

unemployment

The aggregate supply curve is

vertical in the long run and slopes upward in the short run

Other things the same, a decrease in the price level makes the dollars people hold worth

more, so they can buy more

Which of the following is NOT a determinant of the long-run of real GDP?

the amount of capital used by firms

Which among the following assets is the most liquid?

funds in a checking account