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WorksheetsAggregate Demand and Aggregate Supply
Total questions: 15
Worksheet time: 13mins
If the classical dichotomy and monetary neutrality hold in the long run, then the long-run aggregate supply curve should be vertical.
True
False
If a country’s central bank increases the money supply, the aggregate demand curve shifts to the left.
True
False
In the long run, an increase in government spending tends to increase output and prices.
True
False
According to the interest rate effect, aggregate demand slopes downward (negatively) because
lower prices increase money holdings, decrease lending, interest rates rise, and investment spending falls.
lower prices increase the value of money holdings and consumer spending increases
lower prices decrease the value of money holdings and consumer spending decreases.
lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases.
Which of the following would not cause a shift in the long-run aggregate supply curve?
An increase in the available capital
An increase in the available labourd
An increase in the available technologye
An increase in price expectations
All of these answers shift the long-run aggregate supply curve
Which of the following is not a reason why the aggregate demand curve slopes downward?
The exchange-rate effect
The wealth effect.
The classical dichotomy/monetary neutrality effects.
The interest-rate effect
In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism is to
shift the short-run aggregate supply curve to the left.
shift the aggregate demand curve to the right.
shift the short-run aggregate supply curve to the right.
shift the aggregate demand curve to the left.
According to the wealth effect, aggregate demand slopes downward (negatively) because
lower prices increase the value of money holdings and consumer spending increases.
lower prices decrease the value of money holdings and consumer spending decreases.
lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases.
lower prices increase money holdings, decrease lending, interest rates rise, and investment spending falls.
Suppose the price level falls but because of fixed nominal wage contracts, the real wage rises and firms cut back on production. This is a demonstration of the
sticky-wage theory of the short-run aggregate supply curve.
classical dichotomy theory of the short-run aggregate supply curve.
misperceptions theory of the short-run aggregate supply curve.
sticky-price theory of the short-run aggregate supply curve.
Suppose the price level falls but suppliers only notice that the price of their particular product has fallen. Thinking there has been a fall in the relative price of their product, they cut back on production. This is a demonstration of the
misperceptions theory of the short-run aggregate supply curve.
classical dichotomy theory of the short-run aggregate supply curve.
sticky-price theory of the short-run aggregate supply curve.
sticky-wage theory of the short-run aggregate supply curve.
Stagflation occurs when the economy experiences
rising prices and rising output.
rising prices and falling output.
falling prices and falling output.
falling prices and rising output.
Which of the following events shifts the short-run aggregate supply curve to the right?
a decrease in the money supply
a drop in oil prices
an increase in government spending on military equipmentd
an increase in price expectations
According to the model of aggregate supply and aggregate demand, in the long run, an increase in the money supply should cause
prices to rise and output to rise.
prices to fall and output to remain unchanged.
prices to fall and output to fall.
prices to rise and output to remain unchanged.
Suppose the economy is initially in long-run equilibrium. Then suppose there is a drought that destroys much of the wheat crop. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run?
Prices rise; output falls.
Prices fall; output rises.
Prices rise; output rises.
Prices fall; output falls.
Suppose the economy is initially in long-run equilibrium. Then suppose there is a increase in military spending due to rising international tensions. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the long run?
Output falls; prices are unchanged from the initial value.
Prices fall; output is unchanged from its initial value.
Output and the price level are unchanged from their initial values.
Prices rise; output is unchanged from its initial value.
Output rises; prices are unchanged from the initial value.
