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-In the above figure, the long-run equilibrium price level is A) 150. B) 130. C) 110. D) not displayed. -In the above figure, the long-run equilibrium price level is


A) 150.
B) 130.
C) 110.
D) not displayed.

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

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The aggregate demand curve gives the


A) planned purchases for all goods and services in the economy, holding other things such as the price level constant.
B) planned purchase rates for all goods and services in the economy at various price levels.
C) demand for goods and services by the government at various price levels.
D) amount of all goods everyone wants to buy at various income levels.

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

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Holding nominal money balances constant, a decrease in the price level


A) causes the real value of the money balances to increase, in turn increasing total planned real expenditures.
B) causes the real value of the money balances to decrease, in turn decreasing total planned real expenditures.
C) causes the real value of the money balances to increase, thereby increasing the interest rate.
D) generates a reduction in the value of the money balances, leading to higher interest rates and a decrease in total planned real expenditures.

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

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An increase in the amount of physical capital will cause


A) an increase in both aggregate demand and real GDP, but have no effect on the price level.
B) aggregate demand and aggregate supply to increase by the same amounts, causing real GDP to increase and the price level to remain constant.
C) an increase in both aggregate supply and real GDP, but have no effect on the price level.
D) an increase in both aggregate supply and real GDP and a reduction in the price level.

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

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What is one implication of the real-balance effect?


A) The part of your wealth that you hold in the form of cash loses some of its value as the price level rises.
B) When the price level rises, people have an incentive to work harder in order to earn a higher income.
C) When the price level falls, most consumers reallocate their spending so as to have an equal balance between necessities and luxuries.
D) Aggregate demand and aggregate supply can never reach long-run equilibrium.

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

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According to the interest rate effect, a decrease in the price level will


A) decrease the real value of money balances, which causes total planned real expenditures to increase.
B) cause interest rates to fall, which generates an increase in borrowing, so that total planned real expenditures increase.
C) lead to a decrease in net exports, which causes total planned real expenditures to decrease.
D) increase the real value of money balances, which causes interest rates to increase, thereby reducing total planned expenditures.

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

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The total of all planned real expenditures in the economy is called


A) aggregate demand.
B) aggregate spending.
C) aggregate GDP.
D) aggregate consumption.

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

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-Refer to the above figure. Suppose the economy's initial equilibrium is represented by the intersection of LRAS₁ and AD₁. Suppose there is a persistent reduction in labor force participation, which reduces total planned production at any given price level. The resulting change in the economy's long-run equilibrium position would be represented by a A) movement from A to C. B) movement from A to B. C) movement from B to C. D) movement from C to A. -Refer to the above figure. Suppose the economy's initial equilibrium is represented by the intersection of LRAS₁ and AD₁. Suppose there is a persistent reduction in labor force participation, which reduces total planned production at any given price level. The resulting change in the economy's long-run equilibrium position would be represented by a


A) movement from A to C.
B) movement from A to B.
C) movement from B to C.
D) movement from C to A.

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

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What information is provided by the aggregate demand curve?

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The aggregate demand curve relates total...

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When a higher price level generates an increase in the interest rate that induces consumers to borrow less and buy less, this chain of events is referred to as


A) the real-balance effect.
B) the interest rate effect.
C) the open economy effect.
D) the price level effect.

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

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Which of the following is the main cause of the persistent inflation that we have experienced in the United States?


A) supply-side inflationary factors
B) demand-side inflationary factors
C) a combination of supply- and demand-side inflationary factors
D) supply-side secularity factors

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

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How does aggregate demand curve (AD) differ from an individual demand curve (D) ?


A) AD is generally vertical while D is usually downward sloping.
B) D represents the price-quantity relationship for a single good or service while AD looks at the entire economic system.
C) Look for D in macroeconomic analyses and for AD in microeconomics.
D) AD is generally a downward sloping curve while D usually slopes upward.

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

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When the aggregate demand curve shifts ________ than the long-run aggregate supply shifts rightward, the result will be inflation.


A) rightward at a slower rate
B) leftward at a slower rate
C) rightward at a faster rate
D) leftward at the same rate

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

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Which of the following is NOT an explanation for the shape of the aggregate demand curve?


A) real balance effect
B) interest rate effect
C) open economy effect
D) investment effect

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

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In the long run, persistent inflation in the United States is caused by


A) leftward shifts in both the long-run aggregate supply curve and in the aggregate demand curve.
B) rightward shifts in the long-run aggregate supply curve and the leftward shift of the aggregate demand curve.
C) a faster rightward shift of the aggregate demand curve than the rightward shift of the long-run aggregate supply curve.
D) leftward shifts in the aggregate demand curve while the position of the long-run supply curve is unchanged.

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

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If aggregate demand is stable and there is economic growth, the economy will experience


A) secular degeneration.
B) secular deflation.
C) secular decline.
D) secular depreciation.

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

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-In the above figure, if the price level is 150 A) total planned production exceeds total expenditures. B) total expenditures exceed total planned expenditures. C) total planned production equals total expenditures. D) total planned production is less than total expenditures. -In the above figure, if the price level is 150


A) total planned production exceeds total expenditures.
B) total expenditures exceed total planned expenditures.
C) total planned production equals total expenditures.
D) total planned production is less than total expenditures.

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

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Long-run aggregate supply reflects


A) total production in the economy at full employment.
B) total spending in the economy at full employment.
C) both production and spending in the economy.
D) only foreign production from U.S. subsidiaries.

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

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If your income stays the same and the price level increases, you will buy fewer goods and services due to the


A) interest rate effect.
B) real-balance effect.
C) open economy effect.
D) aggregate balances effect.

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

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A fall in the price level


A) increases the real value of money balances, which causes borrowing to decrease, leading to a decrease in investment and total planned real expenditures.
B) causes exports to rise and imports to fall, leading to an increase in total planned real expenditures.
C) leads to an increase in total planned real expenditures because of the indirect effect.
D) causes total planned real expenditures to increase as long as the fall is less than the fall in the price level in other countries.

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

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