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Which of the following shifts aggregate demand to the left?


A) The price level rises.
B) Interest rates fall.
C) The dollar depreciates for some reason other than a change in the price level.
D) Stock prices fall for some reason other than a change in the price level.

E) A) and D)
F) B) and C)

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Illustrate the classical analysis of growth and inflation with aggregate demand and long-run aggregate supply curves.

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See graph. blured image Over time, technological adv...

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Other things the same, as the price level falls,


A) the money supply falls.
B) interest rates rise.
C) a dollar buys more domestic goods.
D) the aggregate-demand curve shifts right.

E) A) and C)
F) None of the above

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Suppose a boom in stock market prices helps make people feel wealthier. Using the model of aggregate demand and aggregate supply, identify the curves that are affected, and which way these curves would shift.

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The aggregate demand...

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Classical economist David Hume observed that as the money supply expanded after gold discoveries


A) prices and output both increased immediately.
B) prices increased immediately while output remained unchanged.
C) it took time for prices to rise; in the meantime output was lower.
D) it took time for prices to rise; in the meantime output was higher.

E) A) and C)
F) None of the above

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When taxes increase, consumption


A) decreases as shown by a movement to the left along a given aggregate-demand curve.
B) decreases as shown by a shift of the aggregate demand curve to the left.
C) increases as shown by a movement to the right along a given aggregate-demand curve.
D) increases as shown by a shift of the aggregate demand curve to the right.

E) A) and D)
F) B) and C)

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Other things the same, what happens to the price level and the quantity of output when the short run aggregate supply curve shifts to the right?

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The price ...

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The effect of an increase in the price level on the aggregate-demand curve is represented by a


A) shift to the right of the aggregate-demand curve.
B) shift to the left of the aggregate-demand curve.
C) movement to the left along a given aggregate-demand curve.
D) movement to the right along a given aggregate-demand curve.

E) None of the above
F) A) and B)

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Financial Crisis Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time. -Refer to Figure 33-7. Suppose the economy starts at Y. If aggregate demand increases from AD2 to AD3, then the economy moves to


A) V.
B) W.
C) X.
D) Z.

E) A) and D)
F) A) and C)

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The recession of 2008-2009 was associated with a fall in housing prices which shifted aggregate demand to the left.

A) True
B) False

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List the three reasons for why the aggregate-demand curve slopes downward.

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The wealth effect, t...

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Which of the following shifts short-run aggregate supply right?


A) an increase in the minimum wage
B) an increase in immigration from abroad
C) an increase in the price of oil
D) an increase in the actual price level

E) A) and C)
F) C) and D)

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In the aggregate demand and aggregate supply model, sticky wages, sticky prices, and misperceptions about relative prices


A) have temporary effects.
B) explain why the short run aggregate supply curve might shift.
C) explain why the aggregate demand curve is downward sloping.
D) explain monetary neutrality.

E) A) and B)
F) None of the above

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When the dollar depreciates, U.S.


A) exports and imports increase.
B) exports increase, while imports decrease.
C) exports decrease, while imports increase.
D) exports and imports decrease.

E) C) and D)
F) B) and D)

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Suppose the expected price level increases. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

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The short run aggreg...

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Figure 33-4 Figure 33-4 -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) back to A in the long run. D) to D in the long run. -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) back to A in the long run.
D) to D in the long run.

E) A) and B)
F) A) and C)

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Suppose speculators lost confidence in foreign economies and bought more U.S. bonds. How would this affect net exports in the U.S., and which way would this cause the aggregate demand curve to shift?

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Net exports would fa...

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Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

A) True
B) False

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The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,


A) production is more profitable and employment rises.
B) production is more profitable and employment falls.
C) production is less profitable and employment rises.
D) production is less profitable and employment falls.

E) B) and D)
F) B) and C)

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The aggregate quantity of goods and services demanded changes as the price level rises because


A) real wealth falls, interest rates rise, and the dollar appreciates.
B) real wealth falls, interest rates rise, and the dollar depreciates.
C) real wealth rises, interest rates fall, and the dollar appreciates.
D) real wealth rises, interest rates fall, and the dollar depreciates.

E) All of the above
F) A) and C)

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