Macro AD-AS

The foreign purchases, interest rate, and real-balances effects explain why the:

Aggregate demand curve is downward-sloping

A decrease in consumer spending can be expected to shift the:

Aggregate expenditures curve downward and the aggregate demand curve leftward

Which combination of factors would most likely increase aggregate demand?

An increase in consumer wealth and a decrease in interest rates

An increase in personal income tax rates will cause a(n):

Decrease (or shift left) in aggregate demand

If the U.S. dollar appreciates in value relative to foreign currencies, then this will:

Decrease aggregate demand and increase aggregate supply

The economy experiences an increase in the price level and an increase in real domestic output. Which is a likely explanation?

Net exports have increased

The fear of unwanted price wars may explain why many firms are reluctant to:

reduce prices when a decline in aggregate demand occurs.

A decrease in aggregate demand in the short run will reduce:

Both real output and the price level

If the dollar appreciates relative to foreign currencies, then:

Foreign buyers will find U.S. goods become more expensive

An expected increase in the prices of consumer goods in the near future will:

Increase (or shift right) in aggregate demand now

An increase in expected future income will:

Increase aggregate demand

A decrease in expected returns on investment will most likely shift the AD curve to the:

Left because Ig will decrease

The real-balances effect on aggregate demand suggests that a:

Lower price level will increase the real value of many financial assets and therefore cause an increase in spending