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Which of the following is consistent with an increase in the price level?


A) Dollars become more valuable, and interest rates rise.
B) Dollars become more valuable, and interest rates fall.
C) Dollars become less valuable, and interest rates rise.
D) Dollars become less valuable, and interest rates fall.

E) B) and C)
F) A) and D)

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Scenario 14-1 The economy is in long-run equilibrium. Suddenly, due to improved international relations and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time. -Refer to the Scenario 14-1.In the long-run,how does the change in price expectations created by optimism change the aggregate demand and aggregate supply diagram?


A) The long-run aggregate-supply curve shifts left.
B) The long-run aggregate-supply curve shifts right.
C) The short-run aggregate-supply curve shifts right.
D) The short-run aggregate-supply curve shifts left.

E) A) and B)
F) B) and C)

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How do changes in the price of oil affect economies?


A) They lead to recession and deflation.
B) They do not contribute much to output fluctuations.
C) They change the economy principally by changing aggregate demand.
D) They may create both inflation and recession.

E) A) and B)
F) None of the above

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Which of the following does the downward slope of the aggregate-demand curve show?


A) that an increase in the money supply causes the aggregate quantity of goods and services demanded to increase
B) that an increase in the money supply causes the aggregate quantity of goods and services demanded to decrease
C) that an increase in the price level causes the aggregate quantity of goods and services demanded to increase
D) that an increase in the price level causes the aggregate quantity of goods and services demanded to decrease

E) B) and C)
F) None of the above

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Make a list of things that would shift the long-run aggregate-supply curve to the right.

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Examples in the text (or variations)incl...

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Suppose that a decrease in the demand for goods and services pushes the economy into recession.What happens to the price level? If the government does nothing,what ensures that the economy still eventually gets back to the natural rate of output?

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A decrease in aggregate demand causes th...

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Suppose a fall in stock prices makes people feel poorer.What are the effects of this decrease in wealth?


A) a decrease in consumption, shown as a movement to the left along a given aggregate-demand curve
B) an increase in consumption, shown as a movement to the right along a given aggregate-demand curve
C) a decrease in consumption, which shifts the aggregate-demand curve to the left
D) an increase in consumption, which shifts the aggregate-demand curve to the right

E) A) and D)
F) None of the above

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Increased uncertainty and pessimism about the future of the economy decreases investment spending,shifting aggregate demand to the left.

A) True
B) False

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According to the sticky-price theory,which of the following is consistent with an unexpected fall in the price level?


A) Some firms' prices are lower than desired, which increases their sales.
B) Some firms' prices are lower than desired, which depresses their sales.
C) Some firms' prices are higher than desired, which increases their sales.
D) Some firms' prices are higher than desired, which depresses their sales.

E) C) and D)
F) None of the above

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Which of the following expenditure items is responsible for the decrease in real GDP during a recession?


A) mostly investment spending
B) mostly consumption spending
C) mostly government spending
D) mostly exports

E) None of the above
F) All of the above

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Suppose a stock market boom makes people feel wealthier.What are the effects of this increase in wealth?


A) increased consumption, which shifts the aggregate-demand curve right
B) increased consumption, which shifts the aggregate-demand curve left
C) decreased consumption, which shifts the aggregate-demand curve right
D) decreased consumption, which shifts the aggregate-demand curve left

E) All of the above
F) B) and D)

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Which of the following government actions will shift the aggregate demand right?


A) a rise in personal income taxes
B) an increase in the money supply
C) a repeal of an investment tax credit
D) closing up a military facility to reduce costs

E) All of the above
F) A) and D)

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Which of the following best defines business cycles?


A) long-term trends in economic activity
B) regular, predictable fluctuations in GDP
C) the rise and fall of multinational companies
D) fluctuations in the economy

E) A) and B)
F) A) and C)

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How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?


A) The expected price level rises, shifting aggregate demand right.
B) The expected price level rises, shifting aggregate demand left.
C) The expected price level falls, shifting aggregate supply right.
D) The expected price level falls, shifting aggregate supply left.

E) None of the above
F) All of the above

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Which of the following parts of real GDP fluctuates most over the course of the business cycle?


A) consumption
B) government expenditures
C) investment
D) net exports

E) C) and D)
F) All of the above

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Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,what would we expect to happen?


A) In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be unaffected.
B) In the short run, real GDP will fall, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be unaffected.
C) In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be lower.
D) In the short run, real GDP will fall, and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same, but real GDP will be lower.

E) A) and B)
F) A) and C)

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Which of the following shifts aggregate demand to the left?


A) an increase in the price level
B) a decrease in the money supply
C) an increase in net exports
D) an investment tax credit

E) A) and B)
F) B) and C)

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Consider the following equation,where a is a positive number: quantity of output supplied = natural rate of output + a (actual price level - expected price level) .What does this equation represent?


A) an upward-sloping short-run aggregate-supply curve
B) a vertical long-run supply curve
C) a downward-sloping aggregate-demand curve
D) an upward-sloping aggregate-demand curve

E) A) and C)
F) A) and B)

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How does the aggregate demand and supply model reflect a decrease in taxes?


A) Consumption increases, so aggregate demand shifts right.
B) Consumption increases, so aggregate supply shifts right.
C) Consumption decreases, so aggregate demand shifts left.
D) Consumption decreases, so aggregate supply shifts left.

E) A) and D)
F) C) and D)

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In the mid-1970s the price of oil rose dramatically.What did this event cause?


A) It shifted aggregate supply left.
B) It caused Canadian prices to fall.
C) The aggregate demand increased because of an increase in the demand for gasoline.
D) Nominal GDP increased.

E) All of the above
F) A) and D)

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