CH11 - CHAPTER 11 Aggregate Demand and Aggregate Supply...

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Unformatted text preview: CHAPTER 11 Aggregate Demand and Aggregate Supply Topic Question numbers ___________________________________________________________________________________________________ 1. Aggregate demand 1-16 2. AD in relation to the AE model 17-27 3. Aggregate supply 28-57 4. Equilibrium, changes in equilibrium 58-127 5. Downward wage and price inflexibility 128-136 6. Multiplier with price level change 137-140 7. AD-AS model in relation to AE model 141-148 Last Word 149-150 True-False 151-166 ___________________________________________________________________________________________________ Multiple Choice Questions Aggregate demand 1. The aggregate demand curve: A) is upsloping because a higher price level is necessary to make production profitable as production costs rise. B) is downsloping because production costs decline as real output increases. C) shows the amount of expenditures required to induce the production of each possible level of real output. D) shows the amount of real output that will be purchased at each possible price level. 2. The aggregate demand curve is: A) vertical if full employment exists. B) horizontal when there is considerable unemployment in the economy. C) downsloping because of the interest-rate, real-balances, and foreign purchases effects. D) downsloping because production costs decrease as real output rises. 3. The interest-rate effect suggests that: A) a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending. B) an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending. C) an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending. D) an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending. Page 1 4. The real-balances effect indicates that: A) an increase in the price level will increase the demand for money, increase interest rates, and reduce consumption and investment spending. B) a lower price level will decrease the real value of many financial assets and therefore reduce spending. C) a higher price level will increase the real value of many financial assets and therefore increase spending. D) a higher price level will decrease the real value of many financial assets and therefore reduce spending. 5. The interest-rate and real-balances effects are important because they help explain: A) rightward and leftward shifts of the aggregate demand curve. B) why fiscal policy cannot be used effectively to curb inflation....
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CH11 - CHAPTER 11 Aggregate Demand and Aggregate Supply...

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