question
During recessions which type of spending falls?
answer
consumption and investment
question
Which of the following is correct concerning recessions?
answer
They tend to be associated with rising unemployment rates.
question
The aggregate-demand curve shows the
answer
quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level.
question
A decrease in the price level
answer
increases the quantity of goods and services demanded.
question
Aggregate demand shifts right when the Federal Reserve
answer
increases the money supply.
question
At a given price level, an increase in which of the following shifts aggregate demand to the right?
answer
a. consumption
b. investment
c. government expenditures
b. investment
c. government expenditures
question
When taxes increase, consumption
answer
decreases as shown by a shift of the aggregate demand curve to the left.
question
Which of the following shifts aggregate demand to the right?
answer
increases in the profitability of capital due perhaps to technological progress.
question
According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had
answer
decreased, so it would decrease production
question
The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have
answer
lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied.
question
The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if
answer
the price level is higher than expected making production more profitable.
question
Which of the following shifts short-run, but not long-run aggregate supply right?
answer
a decrease in the expected price level
question
From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made people feel wealthier, then it would have shifted
answer
aggregate demand right.
question
If the dollar depreciates because of speculation or government policy, U.S.
answer
aggregate demand shifts right. U.S. aggregate demand shifts left if other countries experience a decrease in real GDP.
question
Other things the same, an increase in the price level induces less spending on
answer
investment and net exports.
question
Other things the same, continued increases in the money supply lead to
answer
continued increases in the price level but not continued increases in real GDP
question
The long-run aggregate supply curve shifts left if
answer
there is a natural disaster.
question
The misperceptions theory of short-run aggregate supply curve says that quantity of output will decrease if the price level
answer
decreases by more than expected so that firms believe the relative price of their output has decreased.
question
The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,
answer
production is more profitable and employment rises.
question
Historical evidence for the U.S. economy indicates that
answer
changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle.
question
When we say that economic fluctuations are "irregular and unpredictable," we mean that
answer
recessions do not occur at regular intervals.
question
Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to
answer
decrease consumption, shown by shifting the aggregate-demand curve to the left.
question
When the Fed buys bonds
answer
the supply of money increases and so aggregate demand shifts right.
question
The long-run aggregate supply curve shifts right if
answer
technology improves.
question
The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,
answer
production is less profitable and employment falls.
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