1. If the government increases government spending, then the aggregate demand curve will:
  • become steeper.
  • become flatter.
  • shift to the left.
  • shift to the right.
  1. Aggregate demand curves slope downward because, all else equal,
  • More expert spending increases real output at all price levels
  • Weaker consumer confidence reduces real output at all price levels
  • Higher levels of government spending increase real output at all price levels
  • Higher price levels reduce savings, increase interest rates, and reduce investment spending
  1. Increases in the wage rate shifts
  • both the SRAS and LRAS curves leftward.
  • the LRAS curve rightward, but leave the SRAS curve unchanged.
  • the SRAS curve leftward, but leave the LRAS curve unchanged.
  • both the SRAS and LRAS curves rightward.
  1. Given a short-run aggregate supply curve, an increase in the price level will cause
  • An inward shift of the curve
  • A downward movement along the curve
  • An upward movement along the curve
  • An outward shift of the curve
  1. Which of the following factors does NOT shift the AD curve?
  • a change in the price level
  • a change in taxes
  • a change in government purchases
  • a change in the money supply
  1. In the Keynesian cross model, if the interest rate is constant and the MPC is 0.7, then the government purchases multiplier is:
  • 3.3.
  • 0.3.
  • 1.4.
  • 0.7.
  1. The quantity of real money demanded depends on:
  • the price level.
  • consumption.
  • nominal income.
  • real income.
  1. Long-run aggregate supply (LRAS) is the level of real GDP at which
  • prices are sure to rise
  • aggregate demand always equals short-run aggregate supply.
  • full employment occurs.
  • more than full employment occurs.
  1. If the central bank increased the amount of real money supply, then the LM curve would:
  • become flatter.
  • shift upward.
  • shift downward.
  • become steeper.
  1. Which of the following could cause inflation in the short run?
  • A decrease in consumer incomes
  • An increase in the price of an energy source such as natural gas
  • A decrease in the wage rate
  • An increase in the amount of imports
  1. Suppose the short-run aggregate supply curve shifts to the right. This means that
  • At any price level less real gross domestic product (GDP) will be supplied
  • At any price level more real GDP will be supplied
  • Higher price levels will be associated with higher levels of real GDP on the new curve only
  • Lower price levels will be associated with lower levels of real GDP
  1. Suppose that energy prices increase across the economy. How will this affect the short-run aggregate supply (SRAS) curve and the long-run aggregate supply (LRAS) curve?
  • SRAS: decrease; LRAS: no change
  • SRAS: no change; LRAS: no change
  • SRAS: increase; LRAS: decrease
  • SRAS: decrease; LRAS: decrease
  1. The relationship between interest rates and the level of income that brings the goods and services market into equilibrium is called the:
  • IS curve.
  • aggregate supply curve.
  • LM curve.
  • aggregate demand curve.
  1. Suppose that the government gets serious about saving the whales and increases spending considerably. What would the central bank have to do to keep interest rates constant, and what would happen to the level of income?
  • The central banks needs to increase the money supply; income remains unchanged.
  • The central bank needs to decrease the money supply; income remains unchanged.
  • The central bank needs to increase the money supply; income goes up.
  • The central banks needs to decrease the money supply; income goes down.
  1. Suppose that consumers are more optimistic about the job market and future incomes. All else held constant, this will
  • Cause a movement downward along the aggregate demand curve
  • Shift the aggregate demand curve to the right
  • Shift the aggregate demand curve to the left
  • Cause a movement upward along the aggregate demand curve
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