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Unformatted text preview: f the following alone can explain the change in the price level and output during World War II?
a. aggregate demand shifted right
b. aggregate demand shifted left
c. aggregate supply shifted right
d. aggregate supply shifted left 10. According to the misperceptions theory of the short‐run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had
a. increased, so it would increase production.
b. increased, so it would decrease production.
c. decreased, so it would increase production.
d. decreased, so it would decrease production.
Suppose the economy is in long‐run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time. 11. Refer to Pessimism. In the short run what happens to the price level and real GDP?
a. Both the price level and real GDP rise.
b. Both the price level and real GDP fall.
c. The price level rises and real GDP falls.
d. The price level falls and real GDP rises. 12. Other things the same, a decrease in the U.S. interest rate
a. induces firms to invest more.
b. shifts money demand to the left.
c. makes the U.S. dollar appreciate.
d. increases the opportunity cost of holding dollars. 13. Aggregate demand shifts left when the government
a. decreases taxes.
b. cuts military expenditures.
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This test prep was uploaded on 03/03/2014 for the course ECON 252 taught by Professor Robertholand during the Spring '08 term at Purdue University-West Lafayette.
- Spring '08