Chapter 13 The Aggregate DemandAggregate SupplyModel Concept Map I. Business Cycle II. Aggregate Demand A. Slope of the Aggregate Demand Curve 1. The Wealth Effect 2. The Interest Rate Effect 3. The International Trade Effect B. Shifts of the Aggregate Demand Curve III. Aggregate Supply A. Long-Run Aggregate Supply B. Short-Run Aggregate Supply IV. Equilibrium in the Aggregate DemandAggregate Supply Model A. Adjusting to Shifts in Long-Run Aggregate Supply B. Adjusting to Shifts in Short-Run Aggregate Supply C. Adjusting to Shifts in Aggregate Demand MULTIPLE-CHOICE QUESTIONS 1. Which of the following is true about recessions in the United States? a. They are more common today than in the past. b. They are rarer today than in the past. c. They occur predictably about every two years. d. They occur predictably about every eight years. e. They are often caused by changes in government policy. . 2. How many recessions have there been in the United States since 1982? a. none b. one c. two d. three e. four . 3. The term ___________ is a popular way to describe the recession-expansion pattern followed by the economy. a. business cycle b. output cycle c. inflation cycle d. unemployment cycle e. long-run cycle . 4. Business-cycle theory focuses on time horizons of less than: a. five years. b. ten years. c. two years. d. one year. e. one month. . 5. The model used to study business cycles is the: a. labor model. b. savings model. c. growth model. d. aggregate demandaggregate supply model. e. interest rate model. . 6. Unemployment rises and real gross domestic product (GDP) growth slows during the: a. expansion phase of a business cycle. b. recession phase of a business cycle. c. entire business cycle. d. recovery phase of a business cycle. e. short-run phase of a business cycle. . 7. Aggregate demand is determined by adding up the spending of: a. domestic consumers who buy goods and services produced in the United States. b. domestic consumers and firms that buy goods and services produced in the United States. c. domestic and foreign consumers who buy goods and services produced in the United States. d. domestic and foreign consumers and firms that buy goods and services produced in the United States. e. consumers, firms, the government, and foreigners that buy goods and services produced in the United States. I. 8. The aggregate demand curve is best represented by which of the following equations? a. b. c. d. e. 9. The aggregate demand curve illustrates the: a. positive relationship between the price level and the quantity demanded of real gross domestic product (GDP). b. positive relationship between the price level and the quantity demanded of nominal GDP. c. inverse relationship between the price level and the quantity demanded of real GDP. d. inverse relationship between the price level and the quantity demanded of nominal GDP. e. positive relationship between the level of spending and the level of real GDP. 10. The price index used to illustrate the aggregate demand curve is the: a. gross domestic product (GDP) deflator. (price level) b. consumer price index. c. producer price index. d. nominal price index. e. real price index. 11. Which of the following would cause an upward movement along the aggregate demand curve? a. There is an increase in expected income. b. An increase in the price level increases the value of real wealth. c. An increase in housing prices increases the value of real wealth. d. The value of the dollar increases. e. There is an increase in the expected price level. DIF: Difficult TOP: II. REF: The Slope of the Aggregate Demand Curve MSC: Applying 12. Which of the following would cause a downward movement along the aggregate demand curve? a. A rise in the price level makes U.S. goods relatively more expensive than foreign goods. b. The value of real wealth rises. c. There is a decline in the expected price level….
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