Chapter 33 Problem Set #3

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

• increased consumption, which shifts the aggregate demand curve right.

• increased consumption, which shifts the aggregate demand curve left.

• decreased consumption, which shifts the aggregate demand curve right.

• decreased consumption, which shifts the aggregate demand curve left.

Suppose a stock market crash makes people feel poorer, this decrease in wealth would induce people to

• decrease consumption, which shifts aggregate supply left.

• decrease consumption, which shifts aggregate demand left.

• increase consumption, which shifts aggregate supply right.

• increase consumption, which shifts aggregate demand right.

The Central Bank of Libertina increases the money supply at the same time the Parliament of Libertina passes a new investment tax credit. Consider the effects of these policies on the Libertinian economy. The money supply increase

• and the investment tax credit each cause aggregate demand to shift right.

• and the investment tax credit each cause aggregate demand to shift left.

• causes aggregate demand to shift right, while the investment tax credit causes aggregate demand to shift left.

• causes aggregate demand to shift left, while the investment tax credit causes the aggregate demand curve to shift right.

The initial impact of the repeal of an investment tax credit is to shift

• aggregate demand right.

• aggregate demand left.

• aggregate supply right.

• aggregate supply left.

Consumption would decrease and aggregate demand would shift

• right if taxes increased.

• right if taxes decreased.

• left if taxes increased.

• left if taxes decreased.

Which of the following shifts aggregate demand to the right?

• a decrease in the money supply

• increases in the profitability of capital due perhaps to technological progress.

• the repeal of an investment tax credit

• a decrease in the price level

Which of the following shifts aggregate demand to the right?

• Congress reduces purchases of new weapons systems.

• The Fed buys bonds in the open market.

• The price level falls.

• Net exports fall.

Aggregate demand would shift right if either

• the price level decreased, or government expenditures increased.

• the price level decreased, or the government instituted an investment tax credit.

• government expenditures or the money supply increased.

• All of the above are correct.

Aggregate demand shifts right if

• taxes rise or stock prices rise.

• taxes rise or stock prices fall.

• taxes fall or stock prices rise.

• taxes fall or stock prices fall.

If people want to save more for retirement

• or if the government raises taxes, aggregate demand shifts right.

• or if the government raises taxes, aggregate demand shifts left.

• aggregate demand shifts right. If the government raises taxes, aggregate demand shifts left.

• aggregate demand shifts left. If the government raises taxes, aggregate demand shifts right.