3. Which of the following is incorrect? A) Aggregate Demand is the demand for and hence money spent on all goods and services by all the sectors in the economy.. B) Aggregate demand is the same as (planned) aggregate expenditure. C) Aggregate Supply is the supply of all goods and services by all the firms in the economy. D) Aggregate supply depends on changes in interest rate but not on changes in exchange rates

3. Which of the following is incorrect? A) Aggregate Demand is the demand for and hence money spent on all goods and services by all the sectors in the economy.. B) Aggregate demand is the same as (planned) aggregate expenditure. C) Aggregate Supply is the supply of all goods and services by all the firms in the economy. D) Aggregate supply depends on changes in interest rate but not on changes in exchange rates

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Introduction To Macroeconomics

Section: Chapter Questions

Problem 3.3P

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13 Which of the following would increase aggregate demand? Increase in savings. Increase in taxation. Decrease in consumption spending. Increase in government spending.
12.5 The Aggregate Demand Curve 1) The ________ illustrates the relationship between the price level and the quantity of planned aggregate expenditure, holding constant all other factors that affect aggregate expenditure. A) aggregate demand curve B) savings line C) 45-degree line D) consumption function 2) Which of the following is a reason why increases in the price level result in a decline in aggregate expenditure? A) Price level increases raise real wealth, which causes consumption spending and aggregate expenditure to decline. B) Price level increases cause firms and consumers to hold more money, which raises the interest rate. Higher interest rates lower consumption and planned investment expenditures, which lowers aggregate expenditure. C) Price level increases in the United States relative to other countries raise net exports, which lowers aggregate expenditure. D) As the price level rises, government spending falls, which lowers aggregate…
10. Which of the following would cause the Aggregate Quantity Demanded to increase? a) An increase in the price level causing an increase in the purchasing power of the consumer's wealth b) A decrease in the price level making domestic prices less expensive relative to foreign prices c) An increase in the price level causing an increase in the market rate of interest d) A decrease in the price level causing a decrease in the purchasing power of the consumers' wealth e) None of the above
5. How is the aggregate supply curve different from the supply curve for a single good, like pizza?
8) Suppose for reasons unrelated to your income, you decide to spend $1000 (in real terms) more this month than usual: a. The aggregate demand is likely to shift rightward by more than $1000 b. The aggregate demand is likely to shift rightward by $1000 c. GDP is likely to increase by $1000 d. The aggregate demand is likely to shift rightward by less than $1000
2. Explain why the IS curve slopes downward and why the economy heads to a goods market equilibrium.
Refer to the table below. Real Output Demanded, Billions Price Level Real Output Supplied, Billions $ 506 108 $ 513 508 104 512 510 100 510 512 96 507 514 92 502 Instructions: Enter your anwers as whole numbers. A). What is the equilibrium level of output? What is the equilibrium price level? B). Suppose that aggregate demand increases such that the amount of real output demanded rises by $ 7 billion at each price level. Insert the new values for real output demanded in the table below. Real Output Demanded, Billions New Real Output Demanded, Billions Price Level Real Output Supplied, Billions $ 506 108 $ 513 508 104 512 510 100 510 512 96 507 514 92 502 What is the new equilibrium level of output? What is the new equilibrium price level? By what percentage will the price level increase? Will this inflation be demand-pull inflation or will it be cost-push inflation? C) If potential real GDP ( that is, full-employment GDP) is $ 510…
On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because the product in question is now relatively less expensive than substitute products. Explain why aggregate demand does not increase for the same reason in response to a decrease in the aggregate price level. In other words, what causes total spending to increase if it is not because goods are now cheaper?
Describe the mechanism by which demand creates its own supply.
How would a dramatic increase in the value of the stock market shift the AD curve? What effect would the shift have on the equilibrium level of GDP and the price level?
Use Table 26.3 to answer the following questions. Sketch an aggregate supply and aggregate demand diagram. What is the equilibrium output and price level? If aggregate demand shifts right, what is equilibrium output? If aggregate demand shifts left, what is equilibrium output? In this scenario, would you suggest using aggregate demand to alter the level of output or to control any inflationary increases in the price level?