Question
False Investment spending is negatively related to changes in interest rates. Government spending is set by the federal authorities so that aggregate supply just equals aggregate spending. Refer to Figure 12.4. The combination of rising prices and falling output is known as stagflation. This phenomenon is represented by which of the following shifts? D2 to AD1 AD1 to AD2 The combination of LRAS1 to LRAS2 and AD1 to AD2 LRAS2 to LRAS1 LRAS1 to LRAS2 When we consider an upward-sloping aggregate supply curve and a downward-sloping aggregate demand curve, a decrease in aggregate expenditures is reflected as a leftward shift in the aggregate demand curve, which increases the equilibrium price level and decreases equilibrium income. leftward shift in the aggregate supply curve, which increases the equilibrium price level and decreases equilibrium income. leftward shift in the aggregate demand curve, which decreases both the equilibrium price level and equilibrium income. rightward shift in the aggregate supply curve, which increases both the equilibrium price level and equilibrium income. rightward shift in the aggregate demand curve, which increases both the equilibrium price level and equilibrium income. Which of the following statements concerning the long-run aggregate demand and supply model is true? An increase in aggregate demand increases real GDP only temporarily. Prices are fixed. A change in aggregate demand leads to a permanent change of higher output. Output change that results from a change in aggregate demand is a permanent effect. An increase in aggregate demand increases real GDP by a multiple of the initial increase in expenditures. According to the interest-rate effect, changes in the general price level are transmitted to the aggregate expenditures curve through changes in investment spending. Which of the following does not account for a movement along a given aggregate demand curve? The wealth effect The effect of an increase in government spending The interest-rate effect The international trade effect The real-balance effect Demand-pull inflation is caused by a(n) increase in aggregate supply. increase in the demand for a particular good. decrease in the supply of a particular good. decrease in aggregate demand. increase in aggregate demand. Aggregate supply could increase due to all of the following except: an improvement in technology none - all of these would cause aggregate supply to increase decrease in the price of resources increase in government spending optimistic producers' expectations
Explanation / Answer
1)True
2)False
3)AD1 to AD2
4)did not change
5)eftward shift in the aggregate demand curve, which decreases both the equilibrium price level and equilibrium income.
6)A change in aggregate demand leads to a permanent change of higher output.
7)True
8)The effect of an increase in government spending
9)decrease in the supply of a particular good
10)none - all of these would cause aggregate supply to increase
