Because we have full employment at the level of potential output,
A) aggregate demand is downward sloping.
B) aggregate demand is upward sloping.
C) the long-run aggregate supply curve is upward sloping at potential output.
D) the long-run aggregate supply curve is vertical at potential output .
72) Suppose a country has no trade with other countries and people can borrow as much money as they want at the current interest rate. A decrease in the price level will generate
A) an increase in quantity demanded because of the real-balance effect.
B) an increase in quantity demanded because of the open-economy effect and the indirect effect.
C) an increase in quantity demanded because the real-balance effect will be stronger than the indirect effect and the open-economy effect.
D) an increase in quantity demanded because the indirect effect will be stronger than the real-balance effect.
73) A reduction in the quantity demanded of interest-rate-sensitive goods as a result of an increase in the price level, if other factors are held constant, is known as
A) the interest rate effect.
B) the real-balance effect.
C) the open-economy effect.an outward shift of the aggregate demand curve.
D) the open-money balance effect.
74) The horizontal axis for an aggregate demand curve measures
A) real GDP per year.
B) nominal GDP per year.
C) the price level.
D) real income.
75) An individual holds $10 000 in an interest-earning checking account, and the overall price level rises significantly. Other things constant, we would expect
A) the individual's real wealth to decrease and consumption to diminish.
B) the individual's stock of real wealth to decrease but real national income to increase.
C) no change in the individual's real wealth but a decline in real national product.
D) we cannot be sure since we do not know the magnitude of the interest earned relative to the increase in price level.
76) When the Harper government decreases the level of taxes in the economy, this has the effect of
A) increasing AD.
B) decreasing AD.
C) increasing AS in the long run.
D) decreasing AS in the long run.
77) Lower interest rates
A) increase the quantity of goods and services demanded because they decrease the cost of borrowing money.
B) increase the quantity of goods and services demanded because they increase the income of bankers and other creditors.
C) decrease the quantity of goods and services demanded because they decrease the incomes of all people in the economy.
D) decrease the quantity of goods and services demanded because they raise the costs of building new plants and equipment.
78) When the real interest rate rises,
A) AD shifts left..
B) the long-run aggregate supply curve shifts to the right.
C) the multiplier stays the same.
D) AD shifts right.
79) Which of the following statements is FALSE?
A) The aggregate demand curve is downward sloping.
B) The long run aggregate demand curve is upward sloping.
C) The short-run aggregate supply curve is upward sloping.
D) The long-run aggregate supply curve is vertical.
80) Which of the following statements best categorizes the LRAS curve.
A) Vertical at the current level of real output.
B) Depends on the position of the AD curve.
C) The full-employment and full adjustment level of real output of goods and services in the economy.
D) Depends on the aggregate price level in the economy.
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