Exam 4
What shifts aggregate demand to the left?
A decrease in the money supply.
The price of imported oil rises. If the government wanted to stabilize output, what would do it?
Increase government expenditures or increase the money supply.
Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift...
aggregate demand left.
What would cause prices and real GDP to rise in the short run?
aggregate demand shifts right.
The multiplier effect...
amplifies the effects of an increase in government expenditures, while the crowding-out effect diminishes the effects.
If the Federal Reserve decided to lower interest rates, it could...
buy bonds to raise the money supply.
Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. This can be explained...
by technological progress and money supply growth.
In the short run, open-market sales...
decrease the price level and real GDP.
When the dollar appreciates, U.S.
exports decreases, while imports increase.
If aggregate demand shifts right then in the short run...
firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the left.
Fiscal policy affects the economy...
in both the short and long run.
If the Fed conducts open-market purchases, the money supply...
increases and aggregate demand shifts right.
When the money supply decreases...
interest rates rise and so aggregate demand shifts left.
The position of the long-run aggregate supply curve...
is determined by the things that determine output in the classical model.
A reduction in U.S. net exports would shift U.S. aggregate demand...
leftward. In an attempt to stabilize the economy, the government could cut taxes.
The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have...
lower than desired prices which leads to an increase in the aggregate quantity of goods and services supplied.
Other things the same, a decrease in the price level makes consumers feel...
more wealthy, so the quantity of goods and services demanded rises.
A decrease in the expected price level shifts...
only the short-run aggregate supply cure right.
If the price level falls, the real value of a dollar...
rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve.
According to liquidity preference theory, equilibrium in the money maket is achieved by adjustments in ...
the interest rate.
The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if...
the price level is higher than expected making production more profitable.
According to classical macroeconomic theory, changes in the money supply affect...
the price level, but not real GDP.
The long-run aggregate supply curve shifts left if...
there is a natural disaster.
The primary argument against active monetary and fiscal policy is that...
these policies affect the economy with a long lag.
An increase in government spending shifts aggregate demand...
to the right. The larger the multiplier is, the farther it shifts.
