Question

Question 21 pts

A traditional expansionary gap is created when the aggregate demand curve moves to the:

right of the natural rate of output; inflation rises and unemployment falls.

left of the natural rate of output; inflation falls and unemployment rises.

right of the natural rate of output; inflation falls and unemployment rises.

left of the natural rate of output; inflation rises and unemployment falls.

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Question 31 pts

The aggregate supply curve

is vertical in the short run.

slopes downward because of sticky wages and prices.

is vertical in the long run.

slopes downward largely because of the trade effect and wealth effect.

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Question 41 pts

Along an aggregate demand curve, the real wealth effect says that as an economy’s price level rises:

its foreign and domestic customers are more likely to buy elsewhere.

the value of wealth kept in money form (like in the bank) decreases and therefore people are able to buy less.

higher prices attract more buyers.

real GDP rises and therefore people are able to buy more.

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Question 51 pts

Under what condition will an increase in aggregate demand result in little increase in the price level?

The aggregate demand curve is upward sloping.

The aggregate demand curve intersects the intermediate range of the aggregate supply curve.

The aggregate demand curve intersects the horizontal range of the aggregate supply curve.

The aggregate demand curve intersects a vertical range of the aggregate supply curve.

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Question 61 pts

In general, policy advocates consider cutting government spending as an expansionary policy.

True

False

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Question 71 pts

The long run AS curve is a horizontal line set at full employment.

True

False

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Question 81 pts

When the price level in the United States is high relative to the price level in other countries it tends:

to raise imports and exports.

to lower imports and exports.

to raise imports and lower exports.

to lower imports and raise exports.

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Question 91 pts

At equilibrium, the value of aggregate demand _______ the value of aggregate supply and AE _______ the 45 degree line.

is equal to; intersects

is not equal to; does not intersect

is equal to; does not intersect

is not equal to; intersects

Answer 1

(21) A traditional expansionary gap is created when the aggregate demand curve moves to the right of the natural rate of output; inflation rises and unemployment falls.

(22) The aggregate supply curve is vertical in the long run.

(23) Along an aggregate demand curve, the real wealth effect says that as an economy’s price level rises its foreign and domestic customers are more likely to buy elsewhere.

(24) Under what condition will an increase in aggregate demand result in little increase in the price level- The aggregate demand curve intersects the intermediate range of the aggregate supply curve

(25) In general, policy advocates consider cutting government spending as an expansionary policy- False.

(26) The long run AS curve is a horizontal line set at full employment.- False

(27) When the price level in the United States is high relative to the price level in other countries it tends to raise imports and lower exports.

(28) At equilibrium, the value of aggregate demand is equal to the value of aggregate supply and AE intersects the 45 degree line.