econ quiz

Other things the same, when the government spends more, the initial effect is that

aggregate demand shifts right.

Which of the following shifts long‐run aggregate supply right?

an increase in either technology or the human capital stock.

During recessions which type of spending falls?

consumption and investment

Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

decrease consumption, shown by shifting the aggregate‐demand curve to the left.

When taxes increase, consumption

decreases as shown by a shift of the aggregate demand curve to the left.

Assuming that disposable income does not change, an increase in household saving causes consumption to

fall and aggregate demand to decrease.

In which case can we be sure real GDP rises in the short run?

government purchases increase and taxes fall.

Which of the following would not be included in aggregate demand?

government's tax collections.

Historically, as recessions have ended the unemployment rate declined

gradually to a rate of about 5%‐6%.

Other things the same, an unexpected fall in the price level results in some firms having

higher than desired prices, which depresses their sales.

Most economists believe that classical theory describes the world

in the long run.

The long‐run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long‐run change

in the price level, but not output.

Other things the same, if the long‐run aggregate supply curve shifts left, prices

increase and output decreases.

The misperceptions theory of the short‐run aggregate supply curve says that if the price level is higher than people expected, then some firms believe that the relative price of what they produce has

increased, so they increase production.

The sticky‐wage theory of the short‐run aggregate supply curve says that when the price level is lower than expected,

production is less profitable and employment falls.

The aggregate‐demand curve shows the

quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Which of the following would cause stagflation?

short run aggregate supply shifts left

The aggregate supply curve is

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

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

A) the real value of wealth B) the interest rate C) the value of currency in the market for foreign exchange

Which part of real GDP fluctuates most over the course of the business cycle?

investment expenditures

When the price level falls

investment spending rises.

When the dollar depreciates, each dollar buys

less foreign currency, and so buys fewer foreign goods.