SOLVED

23.6Â Â Aggregate Demand and Supply 1) The aggregate demand curve is negatively sloped because a lower price level A) reduces the real money supply. B) increases the real money supply. C) reduces aggregate income. D) increases aggregate income. 2) In the Keynesian world a rising real money supply causes GDP to __________ by __________ the real interest rate which causes a(n) __________ in investment. A) increase; increasing; increase B) increase; decreasing; increase C) decrease; increasing; increase D) decrease; increasing; decrease 3) In the Keynesian world a falling real money supply causes GDP to __________ by __________ the real interest rate which causes a(n) __________ in investment. A) increase; increasing; increase B) increase; decreasing; increase C) decrease; increasing; increase D) decrease; increasing; decrease 4) In terms of the aggregate demand and supply framework, a decrease in the money supply will shift the aggregate A) demand curve to the right. B) demand curve to the left. C) supply curve to the left. D) supply curve to the right. 5) In the aggregate demand and supply framework, an increase in the money supply will shift the aggregate A) demand curve to the right. B) demand curve to the left. C) supply curve to the left. D) supply curve to the right. 6) Which of the following will cause the aggregate demand curve to shift to the right? A) An increase in the price level B) An increase in the interest rate C) An increase in money demand D) An increase in investment expenditures 7) Which of the following will cause the aggregate demand curve to shift to the left? A) An increase in the price level B) An increase in the interest rate C) An increase in money demand D) An increase in investment expenditures 8) If the aggregate supply curve is horizontal, an increase in aggregate demand will A) increase both real and nominal GDP by the full multiplier effect. B) increase nominal GDP but not real GDP. C) increase the price level but not real GDP. D) increase real GDP by less than the full multiplier effect because of rising prices. 9) If the aggregate supply curve is vertical, an increase in aggregate demand will A) increase both real and nominal GDP by the full multiplier effect. B) increase real GDP but not nominal GDP. C) increase the price level but not real GDP. D) increase real GDP by less than the full multiplier effect because of rising prices. 10) A horizontal aggregate supply curve reflects the assumption that the A) price level is constant. B) velocity of money is constant. C) saving rate is equal to zero. D) economy is at full employment. 11) According to supply-siders the main consequence of reducing tax rates is A) increases aggregate demand and the price level. B) increases in aggregate supply. C) increases in aggregate supply and the price level.