Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 32.7, Problem 1QQ
To determine
Impact of decreasing price on interest rate.
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The AD curve shows that, as the price level falls the quantity of
a. GDP demanded increases.
b. GDP demand decreases.
c. Real GDP demanded increases.
d. Real GDP demanded decreases.
e. none of the above
1. Which of the following could cause a shift from AD to AD₁, ceteris
paribus?
PRICE LEVEL
a
a
Figure 10.1
REAL OUTPUT
($ billions per year)
B) an increase in exports
A) a decrease in investment
AD
OC) an increase in consumer confidence
OD) an increase in consumption
AS
4
28. Among the factors that might have led to the outbreak of the 2007-09 recession, which most likely caused a shift of the IA line instead of the AD curve?
O. Sharp increases in commodity prices.
O. Credit crunch.
O. Financial crisis.
O. Collapse of the housing bubble.
O. Stock market collapse.
29. If there is a sharp increase in oil prices, in the short run.
O. Consumption and investment will fall.
O. Consumption will fall, investment will increase, and net exports will fall.
O. Consumption, investment, and net exports will stay constant.
O. Consumption will fall while investment and net exports will stay constant.
O. Consumptionwill fall, net exports will increase, and investment will stay constant.
Chapter 32 Solutions
Economics (Irwin Economics)
Ch. 32.7 - Prob. 1QQCh. 32.7 - Prob. 2QQCh. 32.7 - Prob. 3QQCh. 32.7 - Prob. 4QQCh. 32.A - Prob. 1ADQCh. 32.A - Prob. 2ADQCh. 32.A - Prob. 1ARQCh. 32.A - Prob. 2ARQCh. 32.A - Prob. 1APCh. 32.A - Prob. 2AP
Ch. 32 - Prob. 1DQCh. 32 - Prob. 2DQCh. 32 - Prob. 3DQCh. 32 - Prob. 4DQCh. 32 - Prob. 5DQCh. 32 - Prob. 6DQCh. 32 - Prob. 7DQCh. 32 - Prob. 8DQCh. 32 - Prob. 9DQCh. 32 - Prob. 1RQCh. 32 - Prob. 2RQCh. 32 - Prob. 3RQCh. 32 - Prob. 4RQCh. 32 - Prob. 5RQCh. 32 - Prob. 6RQCh. 32 - Prob. 7RQCh. 32 - Prob. 8RQCh. 32 - Prob. 9RQCh. 32 - Prob. 1PCh. 32 - Prob. 2PCh. 32 - Prob. 3PCh. 32 - Prob. 4PCh. 32 - Prob. 5P
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- on Indicate whether the following factor will affect aggregate demand (AD) or aggregate supply (AS) and whether the effect would be an increase or a decrease. Then indicate what will happen to the price level and the level of Real GDP and what type of equilibrium will result assuming that the economy is initially in long-run equilibrium. a) A decrease in the nominal wage rate. b) A decrease in exports. c) A decrease in the exchange rate. d) The discovery of vast new oil field in AD no effect decrease + increase no effect AS increase no effect increase increase decrease decrease decrease Real GDP increase decrease increase increase Equilibrium recessionary gap ⇒ inflationary gap inflationary gap inflationary gap AP ? Q Firarrow_forwardPrice level (P) LRAS SRAS2 SRAS, В A AD2 AD, Real GDP (7) Based on the graph, a decrease in Point D to Point A could cause the economy to move from government spending exports on apples restrictions from the Environmental Protection Agency on car production in the U.S. inflation the demand for consumer goods Question 8 Suppose housing values fell during the recession of 2008. Therefore, O the price level will fall as the aggregate demand curve shifts to the left.arrow_forwardIf taxes are increased, the AD curve Select one: a. shifts rightward and aggregate demand decreases. b. shifts leftward and aggregate demand decreases. c. does not shift but there is a movement down along the curve. d. is not affected because a change in taxes is a nominal change not real change.arrow_forward
- Use the following graph to answer the next question. AS, Price Level CF E Multiple Choice AS O. A B C Real Domestic Output A shift of the aggregate demand curve from AD₁ to ADo might be caused by a(n) AD₁ Increase in aggregate supply. AD decrease in the amount of output suppiled. Increase in Investment spendling. decrease in net export spending.arrow_forwardSuppose an Increase in aggregate demand shifts the economy from equilibrium to P₁ and Y₁. Price Level LRAS P₁ #X Pt AD Yo Y₁ Real GDP a. Which of the following events would likely cause the Increase in aggregate demand? Exports decrease due to reduced foreign incomes. Personal consumption falls as workers become concerned with future employment prospects. Gross Investment increases as capital units become fully utilized. AS b. An increase in aggregate demand is of policy concern due to the Increase in the unemployment rate. price level. O productivity of workers c. Which policy action should the federal government enact? O Increase government spending on Infrastructure increase personal income tax rates O decrease real Interest rates d. The size of the policy acuon should result in an intersection of AD and AS that is greater than output Y O less than output Y Ooqual to output Yarrow_forward3)Show and explain the effects of an increase in aggregate demand in the long-run and short-run by using AD–AScurves.2)Show and explain by using a graph, what will happen to the price level and real GDP if the quantity of moneyincreases and the increase is not anticipated; that is, the price level is not expected to change.1)By using aggregate demand (AD) and aggregate supply (AS) curves, show and explain the effects of ananticipated increase in money supply on macroeconomic equilibrium according to Rational ExpectationsHypothesis.arrow_forward
- 4. The price rose. How would it shift the AD curve: Leftward, Rightward or No shift?arrow_forwardIn the diagram, the economy has Aggregate price level LRAS SRAS, P, Aggregate Demand Yp Y, Real GDP An inflationary gap, so in the long run wages will fall, causing AD curve ti shift to the left. An inflationary gap, so in the long run wages will rise, causing the SRAS curve to shift to the left. O A recessionary gap, so in the long run wages will fall, causing the AD curve to shift to the left. O A recessionary gap, so in the long run wages will fall, causing the SRAS curve to shift to the right.arrow_forwardAssume 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.arrow_forward
- IV. Suppose the economy begins with output equal to its natural level. Then, there is a reduction in income taxes. a. Using the AS-AD model, show the effects of a reduction in income taxes on the position of the AD, AS, IS, and LM curves in the short- and medium-run. b. What happens to output, the interest rate, and the price level in the medium run? What happens to consumption and investment in the medium run?arrow_forward4. The price rose. How would it change the investment: Decrease or Increase? How would it shift the AD curve: Leftward, Rightward or No shift? Investment: Shift of AD:arrow_forward1. Within the IS-LM and AD-AS model, show how income, interest rate and price level are affected by each of the following both in the fixed and flexible price cases: a. An autonomous increase in investment spending. b. A decline in taxes. c. A decline in the money supply. In each case, explain why the changes in income and the interest rate occur. Use IS-LM and AS-AD diagrams.arrow_forward
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