UNIT 7 Study Material Set - Accurate and Verified

UNIT 7 Study Material Set - Accurate and Verified Aggregate demand shifts right if a. government purchases increase and shifts left if stock prices fall. b. government purchases increase and shifts left if stock prices rise. c. government purchases decrease and shifts left if stock prices rise. d. government purchases decrease and shifts left is stock prices fall. - answer - a. government purchases increase and shifts left if stock prices fall. Consider the exhibit below for the following questions. Refer to Figure 33-4. If the economy starts at A, a decrease in the money supply moves the economy a. to A in the long run. b. to C in the long run. c. to D in the long run. d. back to A in the long run. - answer - b. to C in the long run Consider the exhibit below for the following questions. Refer to Figure 33-4. If the economy is at A and there is a fall in aggregate demand, in the short run the economy a. moves to B. b. moves to C. c. moves to D. d. stays at A. - answer - c. moves to D. Which of the following decreases in response to the interest-rate effect from an increase in the price level? a. both investment and consumption b. consumption but not investment c. investment but not consumption d. neither investment nor consumption - answer - a. both investment and consumption Which of the following would increase output in the short run? a. an increase in stock prices makes people feel wealthier b. government spending increases c. firms chose to purchase more investment goods d. All of the above are correct. - answer - d. All of the above are correct. Which of the following will NOT shift a nation's long-run aggregate supply curve to the right? An increase in the size of the labor force. A decrease in the nominal wage rate. An increase in the capital available in the economy. An improvement in technology. - answer - A decrease in the nominal wage rate. An increase in the price of a key input, such as labor, will result in Decrease in prices. Increase in national production. both increase in prices and decrease in national production. All of the above. - answer - both increase in prices and decrease in national production. When looking at a graph of aggregate demand, which of the following is correct? a. The variable on the vertical axis is real; the variable on the horizontal axis is nominal b. There are real variables on both the vertical and horizontal axes. c. The variable on the vertical axis is nominal; the variable on the horizontal axis is real d. There are nominal variables on both the vertical and the horizontal axes - answer - c. The variable on the vertical axis is nominal; the variable on the horizontal axis is real During the 1990-91 recession, consumers decided to decrease consumption to repay a larger portion of household debt. What happened? Short run Aggregate supply shifted to the left, causing equilibrium GDP to decline. Aggregate demand increased, causing the recessionary GDP gap to diminish. Short run Aggregate supply and aggregate demand both shifted to the left, causing short run GDP to decline. Aggregate demand shifted to the right, causing a higher equilibrium real GDP. Aggregate demand declined, resulting in lower levels of real output and employment. - answer - Aggregate demand declined, resulting in lower levels of real output and employment. The price level rises in the short run if a. aggregate demand or aggregate supply shifts right. b. aggregate demand shifts right or aggregate supply shifts left. c. aggregate demand shifts left or aggregate supply shifts right. d. aggregate demand or aggregate supply shifts right. - answer - b. aggregate demand shifts right or aggregate supply shifts left. The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected, a. . production is more profitable and employment falls. b. production is less profitable and employment rises. c. production is more profitable and employment rises. d. product