Supply and Demand and Stationary Aggregate Demand

Macroeconomics, (Hubbard/O’Brien)
Chapter 24 Aggregate Demand and Aggregate Supply Analysis 1)

The static aggregate demand and aggregate supply curve model helps explain
A)

short term fluctuations in real GDP and the price level.
B)

long term growth.
C)

price fluctuations in an individual market.
D)

output fluctuations in an individual market.

2)

The aggregate demand curve shows the relationship between the ________ and ________.
A)

inflation rate; quantity of real GDP demanded
B)

real interest rate: quantity of real GDP supplied
C)

nominal interest rate; quantity of real GDP demanded
D)

price level; quantity of real GDP demanded

3)

Because of the slope the aggregate demand we can say that
A)

a decrease in the price level leads to a lower level of aggregate spending
B)

a decrease in the price level leads to a higher level of aggregate supply.
C)

a decrease in the price level leads to a higher level of aggregate spending.
D)

an increase in the price level leads to a higher level of aggregate spending. 4)

Which of the following would NOT be considered a positive addition to household wealth?
A)

the equity in one's home
B)

1000 shares of Microsoft stock
C)

a credit card balance
D)

the balance in your checking account

5)

The wealth effect is defined as
A)

when the price level falls, the real value of household wealth falls.
B)

when the price level falls, the nominal value of household wealth falls.
C)

when the price level falls, the nominal value of household wealth rises.
D)

when the price level falls, the real value of household wealth rises.

6)

The interest rate effect is described as
A)

an increase in the price level raises the interest rate and chokes off government spending.
B)

an increase in the price level lowers the interest rate and chokes off government spending.