Which of the following did not contribute to the decline in aggregate demand during 2007? O A commodity price shock O A drop in stock prices O A change in monetary policy O A drop in consumer confidence O A decrease in lending from banks Once a zero interest rate has been reached, even though continuing to increase the money supply will not lower the interest rate, the process can stimulate the economy. True False

Which of the following did not contribute to the decline in aggregate demand during 2007? O A commodity price shock O A drop in stock prices O A change in monetary policy O A drop in consumer confidence O A decrease in lending from banks Once a zero interest rate has been reached, even though continuing to increase the money supply will not lower the interest rate, the process can stimulate the economy. True False

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter33: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 4CQQ

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This graph represents aggregate demand and aggregate supply with the economy in long-run equilibrium. PRICE LEVEL LRAS SRAS AD OUTPUT 6. Which of the following statements best explains the mechanism by which the economy will eventually return to long-run equilibrium after the decrease in transfer payments? Assume no other changes in government spending and taxation programs. O A. The reduction in the inflation rate due to the decrease in aggregate demand causes businesses to lower their expectations about the price level. This leads firms to produce more, shifting the short-run aggregate supply curve to the right, returning the economy to its natural rate of output. B. The reduction in the inflation rate due to the decrease in aggregate supply causes businesses to increase investment, shifting the aggregate demand curve to the right, returning the economy to its natural rate of output. C. The reduction in the inflation rate due to the increase in aggregate demand causes businesses to…
Which of the following are examples of monetary policy that decrease aggregate demand? O A. a decrease in the quantity of money and an increase in interest rates O B. a decrease in taxes and a decrease in interest rates O C. an increase in transfer payments and an increase in interest rates O D. an increase in the quantity of money and a decrease in interest rates 身

ans ences rations If in Year 1 the price level was 100 and real GDP was $20 trillion and in Year 2 the price level was 105 and real GDP was $21 billion, then the predominant change that occured in Year 2 was OA a decrease in aggregate demand. B. an increase (shift to the right) in short-run aggregate supply. OC. a decrease (shift to the left) in short-run aggregate supply OD. an increase in aggregate demand.
Suppose an economy is in long-run equilibrium. The centra bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. LRAS Aggregate Supply * Aggregate Demand Quantity of Output Aggregate Demand Aggregate Supply Now adjust the graph to show the new long-run equilibrium. What causes the economy to move from its short-run equilibrium to its long-run equilibrium? O Nominal wages, prices, and perceptions adjust upward to this new price level. The government increases spending to increase aggregate demand. The government increases taxes to curb aggregate demand. O Nominal wages, prices, and perceptions adjust downward to this new price level. Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in th money supply? Check all that apply. Nominal wages at the initial equilibrium are equal to nominal wages at…
Exhibit: Shift in Aggregate Demand LRAS SRAS AD CAD AD In this graph, initially the económy is at point E, with price Po and output Y aggregate demand is given by curve ADo, and SRAS and LRAS represent, respectively. short-run and long-run aggregate supply. Now suppose the Fed decides to reduce the money supply. The economy moves first 4o point in the short-run and then, in the long-run, to point O B: C OCB A:D O D. A
01 10 CO xp 381 In the figure, the economy is at an equilibrium with real GDP of $20 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the curve shifts, because 0 0 0 0 0 A. aggregate demand; leftward; the money wage rate rises B. aggregate supply: rightward; the money wage rate falls OC. potential GDP; leftward; the money wage rate falls D. aggregate demand; rightward; the money wage rate falls OE. aggregate supply; leftward; the money wage rate rises 130- 120- 110- 100- Price level (GDP price Index, 2012 = 100) Potential GDP 90- AS AD 19.0 19.5 20.0 20.5 21.0 21.5 22.0 Real GDP (trillions of 2012 dollars) ✓ ✓ 5
Refer to Figure 34-5. An increase in taxes will a. shift aggregate demand from AD1 to AD3. O b. cause movement from point A to point B along AD1. c. have no effect on aggregate demand. O d. shift aggregate demand from AD1 to AD2. PRICE LEVEL Figure 34-5 기 11 AD 3 QUANTITY OF OUTPUT AD₁ AD₂
Which of the following shifts aggregate demand to the left? Select one: a. an increase in imports Ob. a decrease in taxes c. None of the other choices are correct O d. a decrease in interest rates O e. an increase in exports
Aggregate demand is defined as O the relationship between the total quantity of goods and services demanded and the income level, all other determinants of spending unchanged. the relationship between the total quantity of goods and services demanded and the price level, all other determinants of spending unchanged. the demand for goods and services generated by all sectors in the economy, holding price level constant. O the relationship between the total quantity of goods and services demanded and the supply of factors of production, all other determinants of production unchanged.
Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy’s multiplier is 4. a. If household wealth falls by 5 percent because of declining house values, and the real interest rate falls by 3 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level?
Draw a short-run aggregate supply curve. Label it. As we move up along the short-run aggregate supply curve, O A. potential GDP increases OB. the money wage rate, the prices of other resources, and potential GDP remain constant OC. the money wage rate and the prices of other resources change by the same percentage OD. the real wage rate, the prices of other resources, and potential GDP remain constant 150 140- 130- 120- 110- 100- Click the graph, choose a tool in the palette and follow the instructions to create your graph. 90- Price level (GDP deflator, 2009=100) 12.0 12.5 13.0 13.5 14.0 14.5 Real GDP (trillions of 2009 dollars) >>> Draw only the objects specified in the question. WX 11.5 trend rise in velocity. Evi
O See Hin the nominal interest rate and cause a(n) movement along the aggregate demand curve. A increase in the price level will Choose one: O A not affect; downward • B. decrease; upward O C decrease; downward O D. increase; downward O E. not affect; upward OF. increase; upward