Reference no: EM131095702
Handout 11-
[Q1] Everything else held constant, aggregate demand increases when
A) taxes are cut.
B) government spending is reduced.
C) animal spirits decrease.
D) the money supply is reduced.
[Q2] Everything else held constant, when output is ________ the natural rate level, wages will begin to ________, increasing short-run aggregate supply.
A) above; fall
B) above; rise
C) below; fall
D) below; rise
[Q3] Suppose the economy is producing at the natural rate of output. An open market purchase of bonds by the Fed will cause ________ in real GDP and ________ in the inflation in the short run, everything else held constant.
A) an increase; an increase
B) a decrease; a decrease
C) no change; an increase
D) no change; a decrease
[Q4] Suppose the U.S. economy is operating at potential output. A negative supply shock that is accommodated by an open market purchase by the Federal Reserve will cause ________ in real GDP and ________ in the inflation in the long run, everything else held constant.
A) no change; an increase
B) no change; a decrease
C) an increase; an increase
D) a decrease; a decrease
[Q5] A shift in tastes toward American goods ______ net exports in the US and causes the quantity of aggregate output demanded to ______ in the US, everything else held constant.
A) increase; fall
B) increases; rise
C) decreases; rise
D) decreases; fall
[Q6] Everything else held constant, a change in workers' expectations about the aggregate price level will cause ______ to change.
A) long-run aggregate supply
B) aggregate demand
C) short-run aggregate supply
D) the production function
[Q7] In the Keynesian cross diagram, a decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift ______ and the equilibrium level of aggregate output to ______, everything else held constant.
A) down; fall
B) up; rise
C) up; fall
D) down; rise
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Where an increase in money supply
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