1. Declines in spending on residential construction are often due to increases i
ID: 1203065 • Letter: 1
Question
1. Declines in spending on residential construction are often due to increases in interest rates. The collapse in residential construction prior to and during the recession of 2007-2009 was due more to ________ than to higher interest rates.
This will shift the aggregate demand curve to the left.
This will move the economy up along a stationary aggregate demand curve.
This will move the economy down along a stationary aggregate demand curve.
This will shift the aggregate demand curve to the right.
3. Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?
Output will increase.
Prices will decline.
Unemployment will decline.
Short-run aggregate supply will shift to the left.
4. The real business cycle model focuses on how
wage and price stickiness explains fluctuations in real GDP.
the labor theory of value is the best measure of value of a good or service.
the Federal Reserve should adopt a monetary growth rule.
productivity shocks explain fluctuations in real GDP.
5. On the long-run aggregate supply curve,
an increase in the price level increases the aggregate quantity of GDP supplied.
an increase in the price level reduces the aggregate quantity of GDP supplied.
an increase in the price level has no effect on the aggregate quantity of GDP supplied.
an increase in the price level increases the level of potential GDP.
Explanation / Answer
1. Declines in spending on residential construction are often due to increases in interest rates. The collapse in residential construction prior to and during the recession of 2007-2009 was due more to ________ than to higher interest rates.
The correct option should be that the aggregate demand curve will shift to the left due to lower spending.
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