Chapter 33 Quiz (AP Macroeconomics)
aggregate demand left
Imagine that businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift
The price level is higher and real GDP is unchanged
Imagine that in 2010 the economy is in a long run equilibrium. Then stock prices rise more than expected and stay high for some time. How is the new long run equilibrium different from the original?
Short run aggregate supply left
Imagine that in 2010 the economy is in a long run equilibrium. Then stock prices rise more than expected and stay high for some time. In the long run, the change in price expectations created by the stock market boom shifts
both the price level and real GDP rise
Imagine that in 2010 the economy is in a long run equilibrium. Then stock prices rise more than expected and stay high for some time. In the short run, what happens to the price level and real GDP?
The expected price level rises. Bargains are struck for higher wages.
Imagine that in 2010 the economy is in a long run equilibrium. Then stock prices rise more than expected and stay high for some time. What happens to the expected price level and what impact does this have on wage bargaining?
Aggregate demand shifts right
Imagine that in 2010 the economy is in a long run equilibrium. Then stock prices rise more than expected and stay high for some time. Which curve shifts and in what direction?
Short run aggregate supply shifts
Which of the following would cause prices to fall and output to rise in the short run?
The price level, but not the real GDP
According to classical macroeconomic theory, changes in the money supply affect
an increase in the price level but does not change real GDP
According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to
falls, shifting aggregate supply right
An economic contraction caused by a shift in aggregate demand remedied itself over time as the expected price levels
Interest rates rise, so firms decrease investment
Other things the same, when the price level rises
Increased consumption, which shifts the aggregate demand curve right
Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire
The slope of the aggregate demand curve
The wealth effect, interest rate effect, and exchange rate effect are all explanations for