Exam 33: Aggregate Demand and Aggregate Supply

A) Businesses have not adjusted their prices yet after an economic shock.
B) This is the price ceiling for the economy.
C) Production has returned to potential GDP levels.
D) This is the price level consistent with the Federal Reserve's inflation target.

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A) a leftward shift of the aggregate demand curve
B) a rightward shift of the aggregate supply curve.
C) a rightward shift of the aggregate demand curve.
D) movement along a curve, not a shift in a curve.

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A) All prices adjust, and the economy returns to long-run potential.
B) There is a slow fall in prices as the short-run aggregate supply begins to have a positive slope, and the initial decline in output will moderate.
C) There is a sharp fall in prices as business hurriedly lower prices to try to boost sales.
D) There is a recession as output falls sharply, and prices will not have had time to adjust.

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A) an increase in investment spending following optimistic GDP forecasts
B) an increase in investment spending following optimistic GDP forecasts.
C) a decrease in investment spending following pessimistic GDP forecasts
D) a decrease in investment spending following pessimistic GDP forecasts.
E) a decrease in taxes paid by businesses
F) a decrease in taxes paid by businesses.
G) lower interest rates.
H) lower interest rates

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A) movement up and to the left along the same aggregate demand curve.
B) movement down and to the right along the same aggregate demand curve.
C) right shift of the aggregate demand curve.
D) left shift of the aggregate demand curve.

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A)

B)

C)

D)

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A) increase taxes.
B) place a ceiling on interest rates.
C) raise interest rates.
D) lower interest rates.

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A) Real interest rates rise, and this decreases consumption and aggregate expenditures.
B) The real value of wealth decreases, leading to a decrease in consumption and a decrease in aggregate expenditure.
C) The real value of wealth increases, leading to an increase in consumption and an increase in aggregate expenditure.
D) The real value of debt increases, and this increases consumption and aggregate expenditure.

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A) the GDP deflator and the real GDP
B) the real GDP and the real interest rate
C) nominal interest rates and the real GDP
D) the real interest rate and consumption

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A) increases; boosts; raises
B) decreases; boosts; raises
C) increases; lowers; lowers
D) decreases; lowers; lowers

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A) downward sloping.
B) downward sloping
C) upward sloping.
D) upward sloping
E) horizontal at the natural rate of unemployment
F) horizontal at the natural rate of unemployment.
G) vertical at potential output
H) vertical at potential output.

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A) Figure A
B) Figure B
C) Figure C
D) Figure D

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A)

B)

C)

D)

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A) an increase in government spending
B) an increase in government spending.
C) a decrease in government spending
D) a decrease in government spending.
E) an increase in personal income taxes.
F) an increase in personal income taxes
G) a decrease in consumer wealt
H) a decrease in consumer wealt.

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A) right shift of the aggregate demand curve.
B) left shift of the aggregate demand curve.
C) movement up and to the left along the same aggregate demand curve.
D) movement down and to the right along the same aggregate demand curve.

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