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1. As the aggregate demand curve shifts to the right:

1. As the aggregate demand curve shifts to the right:

Brief Principles of Macroeconomics (MindTap Course List)
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter15: Aggregate Demand And Aggregate Supply
Section: Chapter Questions
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1. As the aggregate demand curve shifts to the right: A) the price level falls and real GDP rises. B) the price level and real GDP both fall. C) the price level and real GDP both rise. D) the price level rises and real GDP falls. 2. The US experienced significant stagflation in the 1970s as a result of: A) a sharp increase in oil prices. B) drastically bad growing weather caused by a drought. C) the expectation that inflation would be high. D) a sharp increase in steel prices. 3. can bring about an inflationary recession. A) Demand-side inflation B) Supply-side inflation C) Neither demand-side inflation nor supply-side inflation D) Both demand-side inflation and supply-side inflation 4. Suppose banks are currently charging a 4.5 percent nominal interest rate on mortgages because they expect inflation to average 3 percent over the life of the loan. If their expectations change so that they instead expect there to be DEFLATION of 2 percent over the life of the loan, can they still achieve the same real interest rate as before? A) Yes, by charging a nominal interest rate of 2.5 percent B) No, they will have to reduce the real interest rate C) No, they will have to raise the real interest rate D) Yes, by charging a nominal interest rate of 6.5 percent question 1: question 2:
Transcribed Image Text:1. As the aggregate demand curve shifts to the right: A) the price level falls and real GDP rises. B) the price level and real GDP both fall. C) the price level and real GDP both rise. D) the price level rises and real GDP falls. 2. The US experienced significant stagflation in the 1970s as a result of: A) a sharp increase in oil prices. B) drastically bad growing weather caused by a drought. C) the expectation that inflation would be high. D) a sharp increase in steel prices. 3. can bring about an inflationary recession. A) Demand-side inflation B) Supply-side inflation C) Neither demand-side inflation nor supply-side inflation D) Both demand-side inflation and supply-side inflation 4. Suppose banks are currently charging a 4.5 percent nominal interest rate on mortgages because they expect inflation to average 3 percent over the life of the loan. If their expectations change so that they instead expect there to be DEFLATION of 2 percent over the life of the loan, can they still achieve the same real interest rate as before? A) Yes, by charging a nominal interest rate of 2.5 percent B) No, they will have to reduce the real interest rate C) No, they will have to raise the real interest rate D) Yes, by charging a nominal interest rate of 6.5 percent question 1: question 2:
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