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.Management Sciences
Category: The Aggregate Demand Aggregate Supply Model
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 ?
A. sticky-wage theory of the short-run aggregate supply curve
B. classical dichotomy theory of the short-run aggregate supply curve
C. misperceptions theory of the short-run aggregate supply curve
D. sticky-price theory of the short run aggregate supply curve
Which of the following would not cause a shift in the long-run aggregate supply curve ?
A. All of these answers shift the long-run aggregate supply curve
B. An increase in the available capital
C. An increase in the available labour
D. An increase in price expectations
Suppose the economy is initially in long-run equilibrium Then suppose there is an 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 ?
A. Output falls; prices are unchanged from the initial value
B. Price fall; output is unchanged from its initial value
C. Output and the price level are unchanged from their initial values
D. Prices rise; output is unchanged from its initial value
Stagflation occurs when the economy experiences ?
A. rising prices and rising output
B. rising prices and falling output
C. falling prices and falling output
D. falling prices and rising output
In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism is to ?
A. shift the short-run aggregate supply curve to the left
B. shift the aggregate demand curve to the right
C. shift the short-run aggregate supply curve to the right
D. shift the aggregate demand curve to the left
The natural rate of output is the amount of real GDP produced ?
A. When the economy is at the natural rate of unemployment
B. When the economy is at the natural rate of investment
C. When the economy is at the natural rate of aggregate demand
D. When there is no no unemployment
According to the interest rate effect aggregate demand slopes downward (negatively) because ?
A. lower prices increase money holdings decrease lending interest rates rise, and investment spending falls
B. lower prices increase the value of money holding and consumer spending increases
C. lower prices decrease the value of money holdings and consumers spending decreases
D. lower prices reduce money holdings increase lending interest rates fall, and investment spending increase
According to the model of aggregate supply and aggregate demand in the long run an increase in the money supply should cause ?
A. Prices to rise and output to rise
B. Price to fall and output to remain unchanged
C. Prices to fall and output to fall
D. prices to rise and output to remain unchanged
Refers to Exhibit 4. Suppose the economy is operating in a recession such as point B in Exhibit 4. If policy makers allow the economy to adjust to the long run natural rate on its own, ?
A. People will reduce their price expectations and the short run aggregate supply will shift right
B. People will raise their price expectations and aggregate demand will shift left
C. People will raise their price expectations and the short run aggregate supply will shift left
D. People will reduce their price expectations and aggregate demand will shift right
Suppose the economy is initially in long-run equilibrium Then suppose there is an 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 short run ?
A. Price fall; output rises
B. Price fall; output falls
C. Price rise; output fall
D. Price rise; output rise
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