output demanded decreases.
288.
An increase in the price level reduces the real value of financial assets with fixed
money values, and, as a result, the holders of these assets decrease their spending.
289.
The real-balance and interest-rate effects help explain why aggregate demand might
shift to the right or to the left.
290.
An increase in real interest rates will increase investment and aggregate demand.
291.
When the stock market crashed in 2008, the so-called reverse wealth effect caused
consumer spending to decrease.
292.
A decrease in personal and business taxes will cause government spending and
aggregate demand to decrease.
293.
Depreciation of the dollar relative to foreign currencies will tend to increase net
exports and thus aggregate demand of the U.S. economy.
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Blooms: Understand
Di ffi culty: 02 Medium
Learning Objective: 32-02 Explain the factors that cause changes shifts in AD.
Test Bank: II
Topi c: Changes in Aggregate Demand
294.
The real-balance effect explains a shift in aggregate demand, while the wealth effect
explains a movement along the AD curve.
295.
The long-run aggregate supply curve is upward sloping.
296.
The shape of the short-run aggregate supply curve indicates that as the general price
level rises, output will expand but not by much when the economy reaches full employment.
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Test Bank: II
Topi c: Aggregate Supply
297.
A change in business taxes and regulation can affect production costs and aggregate
supply.
298.
If productivity increases, then the per-unit production cost decreases.
299.
Macroeconomic equilibrium in the short run always occurs at full-employment GDP.
300.
If the cost of resources decreases, then real domestic output will increase.
301.
When there is an increase in aggregate demand in the short run, there will be an
increase in the price level but not in the level of output or employment.
302.
When the economy is experiencing demand-pull inflation, its real GDP tends to be
rising.
303.
The oil crises of the 1970s and 1980s can best be illustrated as a shift of the aggregate
demand curve to the left.
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Blooms: Understand
Di ffi culty: 02 Medium
Learning Objective: 32-06 Describe how the AD-AS model explains periods of demand-
pull inflation, cost-push inflation, and recession.
Test Bank: II
Topi c: Changes in Equilibrium
304.
Cost-push inflation can be described as a rightward shift of the aggregate supply curve.
305.
Minimum wage laws tend to make the price level more flexible rather than less
flexible.
Multiple Choice Questions
306.
An increase in the price level, other things equal, will shift the
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D.
consumption and net exports schedules of the aggregate expenditures model upward, but
the investment schedule downward.
307.
The relationship between the aggregate demand curve and the aggregate expenditures
model is derived from the fact that
308.
If the price level decreases, then the aggregate expenditures schedule will shift. This
translates into a
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Dif f i c ul t y : 01 Easy
Learning Objective: 32-07 (Appendix) Identify how the aggregate demand curve relates to
the aggregate expenditures model.
Test Bank: II
Topi c: The Relationship of the AD Curve to the Aggregate Expenditures Model
309.
A movement upward along a given aggregate demand curve is equivalent to a(n)
310.
An increase in the price level in the aggregate expenditures model would
311.
An increase in the aggregate expenditures schedule
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C.
decreases aggregate demand by the amount of the increase in aggregate expenditures.
D.
decreases aggregate demand by the amount of the initial increase in aggregate
expenditures times the multiplier.
312.
An increase in investment and government spending can be expected to shift the
313.
A decrease in consumer spending can be expected to shift the
True / False Questions
314.
The aggregate expenditures schedule relates total spending with the price level, while
the aggregate demand schedule relates total demand for output with income.
315.
The equivalent of the aggregate supply curve in the aggregate expenditures model is the
45-degree line.
316.
If the price level increases, then the aggregate expenditures schedule will shift down
and the aggregate demand curve will shift to the left.
317.
The aggregate expenditures model and the immediate-short-run aggregate supply have
similar assumptions regarding the economy‘s price level.