Problem 1
Which of the following help to explain why the aggregate demand curve slopes downward? a. When the domestic price level rises, our goods and services become more expensive to foreigners. b. When government spending rises, the price level falls. c. There is an inverse relationship between consumer expectations and personal taxes. d. When the price level rises, the real value of financial assets (like stocks, bonds, and savings account balances) declines.
Problem 2
Which of the following will shift the aggregate demand curve to the left? a. The government reduces personal income taxes. b. Interest rates rise. c. The government raises corporate profit taxes. d. There is an economic boom overseas that raises the incomes of foreign households.
Problem 3
Label each of the following descriptions as being either an immediate-short- run aggregate supply curve, a short-run aggregate supply curve, or a long-run aggregate supply curve. a. A vertical line. b. The price level is fixed. c. Output prices are flexible, but input prices are fixed. d. A horizontal line. e. An upsloping curve. f. Output is fixed.
Problem 4
Which of the following will shift the aggregate supply curve to the right? a. A new networking technology increases productivity all over the economy. b. The price of oil rises substantially. c. Business taxes fall. d. The government passes a law doubling all manufacturing wages.
Problem 5
At the current price level, producers supply \(\$ 375\) billion of final goods and services while consumers purchase \(\$355\) billion of final goods and services. The price level is: a. Above equilibrium. b. At equilibrium. c. Below equilibrium. d. More information is needed.
Problem 7
True or False: Decreases in AD normally lead to decreases in both output and the price level.
Problem 8
Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run? a. An increase in aggregate demand. b. A decrease in aggregate supply, with no change in aggregate demand. c. Equal increases in aggregate demand and aggregate supply. d. A decrease in aggregate demand. e. An increase in aggregate demand that exceeds an increase in aggregate supply.
