1. Which of the following statements is true about shifts in aggregate demand: a) Shifts to the right when government spending decreases when aggregate supply is positively skewed and there is an increase in the real unit cost of materials, ceteris paribus b) Shift to the left when the price level increases, ceteris paribus c) Shift to the left when taxes decrease, ceteris paribus d) Shifts to the right when the nominal money supply increases, ceteris paribus

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

Problem 3QR

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(7) The size of the change in the quantity demanded of a good or service due to a change in its price is measured by the elasticity of demand. When the percentage change in the quantity demanded for a good or service is less than the percentage change in price, the demand for that good or service is ________ and the measured price elasticity is ________. Select one: a. inelastic; less than 1 b. unitary; equal to 1 c. elastic; greater than 1 (8) The principal goal of the aggregate demand and aggregate supply model is to explain the Select one: a. contractions and expansions in individual markets. b. shifts in the price level and the real GDP. c. two goals of economic policy which are economic growth and full employment.
8. Which of the following explain why the Aggregate Demand curve is downward sloping? a) An increase in the price level decreases the purchasing power of money denominated wealth, which in turn causes a decline in on consumption spending. b) An increase in the price level decreases the purchasing power of money, which means that more money is needed to purchase goods. This causes buyers of investment and durable goods to require bigger loans to finance their purchases. This, in turn, causes an increase in the demand for loanable funds which leads to a higher interest rate. A higher interest rate will reduce the real purchases of investment and durable goods. c) An increase in the price level makes goods relatively more expensive to foreigners causing them to buy less which means that net exports will decline. d) All of the above. e) None of the above. 9. Which of the following explain why the Aggregate Supply curve is upward sloping?…
E4 In the fall of 2021, the United States enacted a $1.2 trillion infrastructure bill that provided for replacement of drinking water systems; expansion of high-speed internet access; repair and rebuilding of roads, bridges, and power systems; and expanded passenger rail service. Select one of these projects and discuss the following. How might this project affect aggregate supply and aggregate demand over time? Review section 23-3b in the textbook and discuss which of the four factors presented explains the shift on aggregate demand the project may have. Review Table 2 in Section 23-4c in the textbook and discuss which of the four factors presented explains the shift on aggregate supply the project may have. After 10 years, do you believe that the project will result in a greater shift in demand or a greater shift in supply? Explain your reasoning.
Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run?a. An increase in aggregate demand.b. A decrease in aggregate supply, with no change in aggregate demand.c. Equal increases in aggregate demand and aggregate supply.d. A decrease in aggregate demand.e. An increase in aggregate demand that exceeds an increase in aggregate supply.
34 Which of the following will shift the aggregate demand curve to the right? a.A new technology is developed that will increase profits. b.Foreign economies fall into recession, reducing their demand for domestic exports. c.The government reduces purchases to balance the budget. d.Income taxes are raised e.Consumers become pessimistic about the future.
12 Because fluctuations in the world oil price make the U.S. short-run macroeconomic equilibrium fluctuate, someone suggests that the government should vary the tax rate on oil, lowering the tax when the world oil price rises and in- creasing the tax when the world oil price falls, to stabilize the oil price in the U.S. market. How would such an action influence aggregate demand?
5. Assume you built a new house, bought a used car, and bought some government bonds. Which of the following statements is true of the components of aggregate demand? A. consumption and government purchases went up since you bought a used car and government bonds B. investment went up since you built a new house C. investment and government purchases went up since you built a new house and bought government bonds D. consumption and investment went up since you bought a used car and government bonds E. consumption went up since you built a new house
1. In the following table, determine how each event likely effects potential output (a.k.a., long-run aggregate supply). Direction of Potential Output Shift Event Left Right No Shift The government allows more immigration of working-age adults. For environmental and safety reasons, the government requires that the country’s nuclear power plants be permanently shut down. An investment tax credit increases the rate at which firms acquire machinery and equipment. 2. In the following table, determine how each event affects the position of the aggregate demand curve. Direction of AD Curve Shift Event Left Right No Shift A decrease in consumer confidence (suggests people believe a contraction/recession coming) A decrease in individual income tax rates An increase in the value/price of housing 3. What effect would an increase in aggregate demand…
1. In the following table, determine how each event likely effects potential output (a.k.a., long-run aggregate supply). Direction of Potential Output Shift Event Left Right No Shift The government allows more immigration of working-age adults. For environmental and safety reasons, the government requires that the country’s nuclear power plants be permanently shut down. An investment tax credit increases the rate at which firms acquire machinery and equipment. 2. In the following table, determine how each event affects the position of the aggregate demand curve. Direction of AD Curve Shift Event Left Right No Shift A decrease in consumer confidence (suggests people believe a contraction/recession coming) A decrease in individual income tax rates An increase in the value/price of housing 3. What effect would an increase in aggregate demand…
13 Which of the following would increase aggregate demand? Increase in savings. Increase in taxation. Decrease in consumption spending. Increase in government spending.
4. The country of Merryville has an unemployment rate that is greater than the natural rate of unemployment.The president of Merryville is receiving advice from an economic adviser who advises the president to decrease personal income taxes. How would such a decrease in taxes affect aggregate demand? Explain.
As you have learned in Unit 8 (this week), monetary and fiscal policy play important roles in economic stimulation and or stabilization. In this regard: a. When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? b. When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy? c. What specific fiscal policy tools would you use to stimulate aggregate demand and how? d. What specific monetary policy tools would you use to stimulate aggregate demand and how? e. What is your conclusion, should policymakers use the monetary and or fiscal policy to stimulate aggregate demand? Explain briefly.