Macro Chap 28 33

Which of the following is included in the aggregate demand for goods and services?

a. consumption demand b. investment demand c. net exports d. All of the above are correct.

Other things the same, if the long-run aggregate supply curve shifts right, prices

decrease and output increases.

When taxes increase, consumption

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

The wealth effect stems from the idea that a higher price level

decreases the real value of households' money holdings

The interest-rate effect

depends on the idea that decreases in interest rates increase the quantity of goods and services demanded.

An increase in household saving causes consumption to

fall and aggregate demand to decrease.

Keynes believed that economies experiencing high unemployment should adopt policies to

increase aggregate demand.

When the dollar appreciates, U.S

net exports fall, which decreases the aggregate quantity of goods and services demanded.

Other things the same, a fall in an economy's overall level of prices tends to

raise the quantity demanded of goods and services, but lower the quantity supplied.

Economic variables we are most interested in are

real variables, but we usually observe nominal variables

A relatively mild period of falling incomes and rising unemployment is called a(n)

recession

Other things the same, when the price level rises, interest rates

rise, which means consumers will want to spend less on homebuilding.

If the price level falls, the real value of a dollar

rises, so people will want to buy more.

Most economists use the aggregate demand and aggregate supply model primarily to analyze

short-run fluctuations in the economy

Economic expansions in Europe and China would cause

the U.S. price level and real GDP to fall

According to classical macroeconomic theory, changes in the money supply affect

the price level, but not real GDP.

The aggregate supply curve is upward sloping in

the short run, but not the long run.

Which of the following typically rises during a recession?

unemployment

The goal of monetary policy and fiscal policy is to

. offset shifts in aggregate demand and thereby stabilize the economy.

Which of the following adjust to bring aggregate supply and demand into balance?

. the price level and real output

An adverse supply shock will shift short-run aggregate supply

left, making prices rise.