Question

A decrease in the price level causes households to purchase more goods and services. This is illustrated on the AD/AS model as a shift of the aggregate demand curve to the right.

Select one:

True

False

A realistic unemployment rate in the U.S. that corresponds with a real GDP growth rate of 0.5 percent growth would be a rate that is above 5 percent.

Select one:

True

False

Suppose a stock market crash makes people feel less wealthy. The decrease in wealth would cause people to decrease consumption, which shifts the aggregate demand curve to the left.

Select one:

True

False

The aggregate demand curve slopes downward because lower prices cause real wealth to increase, interest rates to decrease, and consumption to increase.

Select one:

True

False

A decrease in the money supply will cause the long-run aggregate supply curve to shift to the left because of the presence of monetary neutrality.

Select one:

True

False

Answer 1

1. False. A decrease in price level would cause a downward movement in the AD curve and that would increase the quantity but there will be no shift in the curve.

2. True.

3. True.

4. True. With lower prices, people's purchasing power increases so people feel more wealthy, interest rates decrease and consumption increases.

5. False. Monetary neutrality states that a change in nominal money supply will only affect nominal variables and not real like GDP.