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How can the aggregate demand curve be derived from the aggregate expenditures model?

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The aggregate demand curve is derived fr...

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When the price level decreases:


A) the demand for money falls and the interest rate falls.
B) holders of financial assets with fixed money values decrease their spending.
C) holders of financial assets with fixed money values have less purchasing power.
D) there is a decrease in consumer spending that is sensitive to changes in interest rates.

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

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The following table is for a particular country in which C is consumption expenditures,Ig is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars. The following table is for a particular country in which C is consumption expenditures,I<sub>g</sub> is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars. -Refer to the above table.The interest rate effect of changes in the price level is shown by columns: A) (1) and (4) of the table. B) (5) and (6) of the table. C) (1) and (3) of the table. D) (2) and (4) of the table. -Refer to the above table.The interest rate effect of changes in the price level is shown by columns:


A) (1) and (4) of the table.
B) (5) and (6) of the table.
C) (1) and (3) of the table.
D) (2) and (4) of the table.

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

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The long run aggregate supply:


A) is downward sloping.
B) is vertical.
C) is horizontal.
D) is upward sloping.

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

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A movement downward along an existing aggregate demand curve is equivalent to a(n) :


A) decrease in aggregate demand.
B) increase in aggregate demand.
C) upward shift in the aggregate expenditures schedule.
D) downward shift in the aggregate expenditures schedule.

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

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Productivity measures:


A) real output per unit of input.
B) per unit production costs.
C) the changes in real wealth caused by price level changes.
D) the amount of capital goods used per worker.

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

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In the below diagram assume that the aggregate demand curve shifts from AD1 in year 1 to AD2 in year 2,only to fall back to AD1 in year 3. In the below diagram assume that the aggregate demand curve shifts from AD<sub>1</sub> in year 1 to AD<sub>2</sub> in year 2,only to fall back to AD<sub>1</sub> in year 3. (a)Explain what will happen to the equilibrium price level and the equilibrium level of real GDP from year 1 to year 2. (b)Locate the new position in year 3 on the assumption that prices and wages are completely flexible downward.Label this position,P<sub>b</sub> and GDP<sub>b</sub> for the price level and real GDP respectively. (c)Locate the new position in year 3 on the assumption that prices and wages are completely inflexible downward.Label this position,P<sub>c</sub> and GDP<sub>c</sub> for the price level and real GDP respectively. (a)Explain what will happen to the equilibrium price level and the equilibrium level of real GDP from year 1 to year 2. (b)Locate the new position in year 3 on the assumption that prices and wages are completely flexible downward.Label this position,Pb and GDPb for the price level and real GDP respectively. (c)Locate the new position in year 3 on the assumption that prices and wages are completely inflexible downward.Label this position,Pc and GDPc for the price level and real GDP respectively.

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(a)Equilibrium price and quant...

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How is the short-run aggregate supply curve sloped and why is it sloped this way?

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The short-run aggregate supply (SRAS)cur...

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The passage of new legislation requiring more extensive government regulation of business will most likely:


A) increase aggregate demand.
B) increase aggregate supply.
C) decrease aggregate demand.
D) decrease aggregate supply.

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

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Which would increase aggregate supply?


A) an increase in business regulation
B) a decline in productivity
C) an increase in business subsidies
D) a decrease in the capital stock

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

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-In the above figure AD<sub>1</sub> and AS<sub>1</sub> represent the original aggregate supply and demand curves and AD<sub>2</sub> and AS<sub>2</sub> show the new aggregate demand and supply curves.The changes in aggregate demand and supply in the above diagram produce: A) a higher price level. B) an expansion of real output and a stable price level. C) an expansion of real output and a higher price level. D) a decline in real output and a stable price level. -In the above figure AD1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves.The changes in aggregate demand and supply in the above diagram produce:


A) a higher price level.
B) an expansion of real output and a stable price level.
C) an expansion of real output and a higher price level.
D) a decline in real output and a stable price level.

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

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Menu costs will:


A) increase the amount of training of workers.
B) result in price wars between businesses.
C) increase the legal minimum wage.
D) make prices inflexible downward.

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

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A decrease in aggregate demand is most likely to be caused by:


A) an increase in the wealth of consumers.
B) an increase in consumer confidence.
C) an increase in interest rates for home mortgages.
D) a decrease in tax rates on household income.

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

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Refer to the diagram below.Other things equal,a shift of the aggregate supply curve from AS0 to AS1 might be caused by a(n) : Refer to the diagram below.Other things equal,a shift of the aggregate supply curve from AS<sub>0</sub> to AS<sub>1</sub> might be caused by a(n) : A) increase in government regulation. B) increase in aggregate demand. C) increase in productivity. D) decline in nominal wages.


A) increase in government regulation.
B) increase in aggregate demand.
C) increase in productivity.
D) decline in nominal wages.

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

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Other things being equal,if the national incomes of our major international lending partners were to rise,our:


A) aggregate demand curve would shift to the right.
B) aggregate supply curve would shift to the left.
C) aggregate supply curve would shift to the right.
D) aggregate demand curve would shift to the left.

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

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An increase in the price level,other things equal,will shift the:


A) consumption,investment,and net exports schedules of the aggregate expenditures model downward.
B) consumption,investment,and net exports schedules of the aggregate expenditures model upward.
C) consumption,and investment schedules of the aggregate expenditures model upward,but the net exports schedule downward.
D) consumption,and net exports schedules of the aggregate expenditures model upward,but the investment schedule downward.

E) All of the above
F) None of the above

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-In the above figure AD<sub>1</sub> and AS<sub>1</sub> represent the original aggregate supply and demand curves and AD<sub>2</sub> and AS<sub>2</sub> show the new aggregate demand and supply curves.The change in aggregate supply from AS <sub>1</sub> to AS<sub>2</sub> could be caused by: A) a reduction in the price level. B) the increased availability of entrepreneurial talent. C) an increase in business taxes. D) the real balances,interest-rate,and foreign trade effects. -In the above figure AD1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves.The change in aggregate supply from AS 1 to AS2 could be caused by:


A) a reduction in the price level.
B) the increased availability of entrepreneurial talent.
C) an increase in business taxes.
D) the real balances,interest-rate,and foreign trade effects.

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

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Would increased downward price flexibility lead to less severe or more severe recessions? Explain.

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If prices were more flexible downward,a ...

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A movement upward along an existing aggregate demand curve that changes the price level is equivalent to a(n) :


A) decrease in aggregate demand.
B) increase in aggregate demand.
C) upward shift in the aggregate expenditures schedule.
D) downward shift in the aggregate expenditures schedule.

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

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The following list of items are related to aggregate demand and/or aggregate supply. The following list of items are related to aggregate demand and/or aggregate supply. -Refer to the above list.A change in which factor is most likely to change both aggregate demand and aggregate supply? A) 3 B) 5 C) 7 D) 9 -Refer to the above list.A change in which factor is most likely to change both aggregate demand and aggregate supply?


A) 3
B) 5
C) 7
D) 9

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

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