If the price level decreases, the output level decreases and the interest rate increases, are you...
If the price level decreases, the output level decreases and the interest rate increases, are you in a recession or an expansion? Which kinds of shocks would lead to this?
Homework Answers
The chain of events can be as follows.
When interest rate increases, borrowing becomes costlier, so firms reduce their investment demand. As investment demand falls, aggregate demand decreases, shifting AD curve leftward which decreases price level and decreases output (real GDP). This is a negative demand shock which leads to a recession.
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If the price level decreases, the output level decreases and the interest rate increases, are you...
1. Other things equal, a decrease in the price level ________ the equilibrium interest rate and ________ equilibrium output. a. increases; increases b. increases; decreases c. decreases; increases d. decreases; decreases
1. Other things equal, a decrease in the price level ________ the equilibrium interest rate and ________ equilibrium output. a. increases; increasesb. increases; decreasesc. decreases; increasesd. decreases; decreases
The exchange rate effect of a price increase is: if the US price level increases, then the Fed increases interest rate i...
The exchange rate effect of a price increase is: if the US price level increases, then the Fed increases interest rate in order to stabilize the price level. As a result US dollar appreciates causing US exports to decreases. a. False b. True If the Fed increases money supply, then: a. the value of money decreases. b. the price level increases. c. Both of the above d. none of the above Which of the following will the Aggregate Demand curve...
1. What occurs during a negative demand shock? Output increases and the price level decreases. Output...
1. What occurs during a negative demand shock? Output increases and the price level decreases. Output and price level decrease. Output and price level increase. Output decreases and the price level increases. 2. In the equation of exchange, the term P × Q is the same as: the money supply. nominal GDP. national income. real GDP. 3. Expansionary monetary policy shifts the _____ curve to the _____. AD; right SRAS; left SRAS; right AD; left 4. The Taylor rule suggests...
1. Which list contains only things that would make people want to hold more money? a. Interest rates decrease, the price level increases. b. Interest rates decrease, the price level decreases. c. Interest rates increase, the price le
1. Which list contains only things that would make people want to hold more money? a. Interest rates decrease, the price level increases.b. Interest rates decrease, the price level decreases.c. Interest rates increase, the price level increases.d. Interest rates increase, the price level decreases.
If the price level increases, then which of the following will happen? a. Interest rates will...
If the price level increases, then which of the following will happen? a. Interest rates will increase and hence investment will decrease b. Interest rate will decreases and investment will increase c. Both Interest rate and consumption will increase d. Both Interest rate and investment will decrease
The drop down menu for B is price level (decreases, increases, returns to initial value) and...
The drop down menu for B is price level (decreases, increases,
returns to initial value) and output (decreases, increases, returns
to initial value)
The drop down menu for D is price level (decreases, increases,
returns to initial value) and output (decreases, increases, returns
to initial value)
Use the AD/AS model below to answer the following questions. In each case, assume the economy starts In long- and short-run equilibrium. The Macroecono in long- and short-run equilibrium LRAS SRAS 100.0... AD Real...
If the equilibrium price decreases and the equilibrium output increases then what must have happened? a....
If the equilibrium price decreases and the equilibrium output increases then what must have happened? a. Demand decreased b. Supply decreased c. Supply increased d. None of these because an increase in output would not happen if price increases e. Demand Increased
Keynesian theory of sticky wages primarily applies to in the price level during As a result...
Keynesian theory of sticky wages primarily applies to in the price level during As a result of sticky wages, O both prices charged by firms, and input prices, change at the same rate. O prices charged by firms increase slower than input prices, including wages. salaries paid to workers do not rise to compensate for increases in the price level. salaries paid to workers do not fall at the same rate as decreases in the price level. Sticky wages lead...
If aggregate demand decreases and aggregate supply increases, the price level ________.
If aggregate demand decreases and aggregate supply increases, the price level ________.
2. If the economy's price level increases from an initial level, Po, to a higher level,...
2. If the economy's price level increases from an initial level, Po, to a higher level, P1, what would be its effect on equilibrium level of output and the interest rate? Answer this question using both the IS-LM analysis and the corresponding aggregate demand curve.
The drop down menu for B is price level (decreases, increases,
returns to initial value) and output (decreases, increases, returns
to initial value)
The drop down menu for D is price level (decreases, increases,
returns to initial value) and output (decreases, increases, returns
to initial value)
Use the AD/AS model below to answer the following questions. In each case, assume the economy starts In long- and short-run equilibrium. The Macroecono in long- and short-run equilibrium LRAS SRAS 100.0... AD Real...
Keynesian theory of sticky wages primarily applies to in the price level during As a result of sticky wages, O both prices charged by firms, and input prices, change at the same rate. O prices charged by firms increase slower than input prices, including wages. salaries paid to workers do not rise to compensate for increases in the price level. salaries paid to workers do not fall at the same rate as decreases in the price level. Sticky wages lead...
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