question
An aggregate demand (AD) curve shows the:
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real output (Real GDP) people are willing and able to buy at different price levels, ceteris paribus
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A person has $50,000 and the price level is 120. The price level falls to 113. As a result there is a change in purchasing power of the $50,000. This change in purchasing power of $50,000 is referred to as the _________ and it helps to explain why the AD curve slopes ________
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Real balance effect; downward
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Suppose that investment decreases at each price level. As a result, aggregate demand ________ and the AD curve shifts _________
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decreases; leftward
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If investment changes because of a change in a factor other than the price level, then the:
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AD curve shifts
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Suppose the exchange rate of 120 Japanese yen to dollar moves to 104 yen to the dollar. The dollar has _______, thus making Japanese goods ________ expensive for Americans. In turn, this is likely to _________________ U.S. net exports
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none of the above
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A decrease in labor productivity shifts the:
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SRAS curve leftward
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Can a change in the price level change aggregate demand?
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No, a change in the price level changes the quantity demanded of Real GDP
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Wage rates rise. This decreases _________ and the _________ shifts __________
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SRAS; SRAS curve; leftward
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If nominal wages are sticky, a rise in the price level will:
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lower the real wages and lower the quantity supplied of labor
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________ is the Real GDP that is produced at the natural unemployment rate and the _______ curve is a vertical line at this level of Real GDP
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Natural Real GDP, LRAS
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Suppose that the stock market rises making individuals feel wealthier. The result would be a __________ shift to the _______ curve.
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Rightward; aggregate demand
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Suppose that in a given economy the price level is rising rapidly and people expect that this trend will continue in the future. These expectations would cause individuals to ________ current consumption shifting the AD curve _________
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Increase; rightward
-If individuals expect the price level to continue rising in the future, they will be more incline to make purchases now rather than later when they perceive that prices will be higher. The aggregate demand curves shifts when there is a change in spending that is caused by some factor other than a change in the price level of goods and services. The expectation of higher future prices will shift the current aggregate demand curve rightward
-If individuals expect the price level to continue rising in the future, they will be more incline to make purchases now rather than later when they perceive that prices will be higher. The aggregate demand curves shifts when there is a change in spending that is caused by some factor other than a change in the price level of goods and services. The expectation of higher future prices will shift the current aggregate demand curve rightward
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There is a(n) _________ relationship between the interest rate and consumption, and a(n) ________ relationship between the interest rate and investment
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Inverse; inverse
-When the interest rate rises, spending on consumer durables tends to fall, so consumption falls
-When the interest rate rises, the cost of an investment project rises, so investment falls
-Therefore, both consumption and investment are inversely related to rate
-When the interest rate rises, spending on consumer durables tends to fall, so consumption falls
-When the interest rate rises, the cost of an investment project rises, so investment falls
-Therefore, both consumption and investment are inversely related to rate
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________ is the average number of times a dollar is spent to buy goods and services in a year
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Velocity
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As foreign real national income falls, foreigners purchase _________ U.S. exports and the U.S. AD curve shifts ___________
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Fewer; leftward
-Foreign real national income represents the inflation-adjusted national income of people living in other countries. Just as we tent to purchase less when our real national income falls, so too will those living in other countries. This will make it harder for U.S. producers to sell their goods and services to those foreigners, making U.S. exports and net exports fall. The result will be a leftward shift of the U.S. AD curve
-Foreign real national income represents the inflation-adjusted national income of people living in other countries. Just as we tent to purchase less when our real national income falls, so too will those living in other countries. This will make it harder for U.S. producers to sell their goods and services to those foreigners, making U.S. exports and net exports fall. The result will be a leftward shift of the U.S. AD curve
question
Which of the following cannot cause a shift of the short-run aggregate supply (SRAS) curve?
a) a beneficial supply shock
b) changes in productivity
c) changes in price level
d) changes in wage rates
a) a beneficial supply shock
b) changes in productivity
c) changes in price level
d) changes in wage rates
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Changes in the price level
-The SRAS curve is graphed with price level represented on the vertical axis and Real GDP represented on the horizontal axis
-A SRAS curve shows the quantity supplied of all goods and services at various price levels, ceteris paribus.
-A change in price level would therefore cause a movement from one point to another on a SRAS curve
-The SRAS curve is graphed with price level represented on the vertical axis and Real GDP represented on the horizontal axis
-A SRAS curve shows the quantity supplied of all goods and services at various price levels, ceteris paribus.
-A change in price level would therefore cause a movement from one point to another on a SRAS curve
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The interest rate effect begins with a change in the ________ and helps to explain why _________
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price level; aggregate demand curve is downward sloping
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A change in investment that results from a decrease in the price level causes _________, while a change in investment caused by an increase in business taxes causes ___________
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a movement down along a given AD curve; the AD curve to shift leftward
-The AD curve is graphed with the price level on the vertical axis and Real GDP on the horizontal axis
-A change in spending that is caused by a change in the price level would cause a movement along a given AD curve
-When business tax rise, the expected after-tax profit form a business project will fall, discouraging businesses from taking on such projects
-This would lead to a leftward shift in the AD curve
-The AD curve is graphed with the price level on the vertical axis and Real GDP on the horizontal axis
-A change in spending that is caused by a change in the price level would cause a movement along a given AD curve
-When business tax rise, the expected after-tax profit form a business project will fall, discouraging businesses from taking on such projects
-This would lead to a leftward shift in the AD curve
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Suppose that last month one U.S. dollar was worth 1.25 euros, but this month one U.S. dollar is worth 1.35 euros. Based upon this info, the U.S. dollar has __________ against the euro over the past month, which would cause U.S. exports to Europe to ________ and U.S. imports form Europe to ___________
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Appreciated; Fall; Rise
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Suppose the following: (1) personal income taxes rise, (2) the price of oil rises, (3) change in the SRAS is equal to any changes in AD. Based on this info, short-run Real GDP will ________ and the price level will _____________
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Fall; remain unchanged
-A rise in the price of oil (an important resource) would lead to greater less production of goods and services, shifting the SRAS curve leftward.
-This would cause an increase in the price level and a decrease in short-run Real GDP
A rise in personal income taxes would discourage individuals form purchasing goods and services, shifting the AD curve leftward, lowering both the price level and short-run Real GDP
-Since the shift of the AD curve is noted to be equal to the shift of the SRAS curve, the net impact would be a decrease in short-run Real GDP and the price level would remain the same
-A rise in the price of oil (an important resource) would lead to greater less production of goods and services, shifting the SRAS curve leftward.
-This would cause an increase in the price level and a decrease in short-run Real GDP
A rise in personal income taxes would discourage individuals form purchasing goods and services, shifting the AD curve leftward, lowering both the price level and short-run Real GDP
-Since the shift of the AD curve is noted to be equal to the shift of the SRAS curve, the net impact would be a decrease in short-run Real GDP and the price level would remain the same
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