Chapter 14 Quiz
Along the long-run aggregate supply curve, the level of RGDP supplied ____ with increases in the price level.
does not change
Which of the following will decrease aggregate demand?
exports falling faster than imports
Which of the following does not explain why the aggregate demand curve is negatively sloped?
misperception effect
Aggregate demand does not include:
Aggregate demand does not include any of the above.
Exports are not included in GDP because they do not reflect domestic consumption.
False
If the price level in the United States decreases, domestic goods will become relatively cheaper than foreign goods, the demand for U.S.-made goods will increase, and the U.S. aggregate demand curve will shift to the right.
False
The SRAS curve is vertical at the natural level of real output.
False
The long-run level of RGDP changes whenever the aggregate demand curve shifts.
False
The quantity of RGDP supplied will decrease in both the short run and long run when the price level falls.
False
When there is a recessionary gap, one is likely to see an increase in overtime work and more hours worked by part-time workers.
False
According to the "misperception effect" explanation of short-run aggregate supply, firms increase output as the price level rises because they mistake the increase in overall prices for an increase in the relative price of their own output.
True
If the price level in the United States increases, domestic goods will become relatively more expensive than foreign goods. Consumers will import more and reduce the quantity of domestic goods and services they buy.
True
If there is currently a recessionary gap, a decrease in aggregate demand would make the recessionary gap larger.
True
The aggregate supply curves show how much a nation's businesses are willing and able to produce at each price level.
True
The long-run equilibrium level of RGDP only changes when the LRAS shifts.
True
The real wealth and the real interest rate effects are both causes of the downward slope of the aggregate demand curve.
True
When the price level falls, households and firms reduce their holdings of money, leading to a lower interest rate and an increase in borrowing and an increase in RGDP demanded.
True
Cost-push inflation is caused by:
a decrease in short-run aggregate supply.
Investment will decrease if business taxes ____, real interest rates ____, or if business confidence ____.
increase, increase, decreases
If there was no misperception effect, but there was a profit effect in the short run, then SRAS is ____ and LRAS is ____.
upward sloping: vertical
