Assignment 10 Macro

1.

1 point

The aggregate demand curve is:

downsloping because production costs decrease as real output rises.

horizontal when there is considerable unemployment in the economy.

vertical under conditions of full employment.

downsloping because of the interest-rate, real-balances, and foreign purchases effects

2.

1 point

The interest-rate effect suggests that:

a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending.

an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending.

an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.

an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending.

3.

1 point

The real-balances effect indicates that:

a higher price level will increase the real value of many financial assets and therefore increase spending.

a higher price level will decrease the real value of many financial assets and therefore reduce spending.

a lower price level will decrease the real value of many financial assets and therefore reduce spending.

an increase in the price level will increase the demand for money, increase interest rates, and reduce consumption and investment spending.

4.

1 point

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will:

increase U.S. exports and decrease U.S. imports.

shift the aggregate supply curve leftward.

decrease U.S. exports and increase U.S. imports.

shift the aggregate demand curve leftward.

5.

1 point

The real-balances, interest-rate, and foreign purchases effects all help explain:

shifts in the aggregate demand curve.

shifts in the aggregate supply curve.

why the aggregate demand curve is downsloping.

why the aggregate supply curve is upsloping.

6.

1 point

The determinants of aggregate demand:

explain shifts in the aggregate demand curve.

include input prices and resource productivity.

explain why the aggregate demand curve is downsloping.

demonstrate why real output and the price level are inversely related.

7.

1 point

If investment increases by $10 billion and the economy's MPC is .8, the aggregate demand curve will shift:

leftward by $50 billion at each price level.

rightward by $50 billion at each price level

rightward by $10 billion at each price level.

leftward by $40 billion at each price level.

8.

1 point

Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. A recession is depicted by:

panel (B) only.

panels (A) and (B).

panel (A) only.

panel (C) only.

9.

1 point

Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Cost-push inflation is depicted by:

panel (A) only.

panel (C) only.

panel (B) only.

panels (B) and (C).

10.

1 point

Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Other things equal, a decline in productivity is depicted by:

panels (B) and (C).

panel (C) only.

panel (A) only.

panel (B) only.