Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 29, Problem 3MCQ
To determine
To select:
The option that correctly explains the reason for an increase in the quantity of real GDP demanded.
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160
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100
PRICE LEVEL
Aggregate Demand
0
100
200 300 400 500 000 700 800
REAL GDP (Billions of dollars)
Which of the following are reasons the aggregate demand curve is downward sloping? Chelk all that apply.
A higher price level decreases consumption through the substitution effect.
A lower price level makes domestically produced goods less expensive than foreign goods.
A
higher price level decreases the real value of consumers' assets.
As the aggregate price level rises, the cost of borrowing money will
This phenomenon is known as the
8
90
Aggregate Demandi
80
causing the quantity of output demanded to:
effect.
13 Which of the following would increase aggregate demand?
Increase in savings.
Increase in taxation.
Decrease in consumption spending.
Increase in government spending.
2. Suppose an economy is described by the following aggregate demand and short-run aggregate supply curves. The potential level of output is $10 trillion.
Aggregate Quantity of Goods and Services
Price Level
Demanded
Supplied
3.0
$11.0 trillion
$9.0 trillion
3.4
$10.8 trillion
$9.2 trillion
3.8
$10.6 trillion
$9.4 trillion
4.2
$10.4 trillion
$9.6 trillion
4.6
$10.2 trillion
$9.8 trillion
5.0
$10.0 trillion
$10.0 trillion
5.4
$9.8 trillion
$10.2 trillion
5.8
$9.6 trillion
$10.4 trillion
6.2
$9.4 trillion
$10.6 trillion
6.6
$9.2 trillion
$10.8 trillion
7.0
$9.0 trillion
$11.0 trillion
Draw the aggregate demand and short-run aggregate supply curves.
What is the initial real GDP?
What is the initial price level?
What kind of gap, if any, exists?
After the increase in health-care costs, each level of real GDP requires an increase in the price level of o.8. For
example, producing $9.0 trillion worth of goods and services now requires a price level of 3.8. What is the short-
run equilibrium…
Chapter 29 Solutions
Foundations of Economics (8th Edition)
Ch. 29 - Prob. 1SPPACh. 29 - Prob. 2SPPACh. 29 - Prob. 3SPPACh. 29 - Prob. 4SPPACh. 29 - Prob. 5SPPACh. 29 - Prob. 6SPPACh. 29 - Prob. 7SPPACh. 29 - Prob. 8SPPACh. 29 - Prob. 9SPPACh. 29 - Prob. 10SPPA
Ch. 29 - Prob. 11SPPACh. 29 - Prob. 1IAPACh. 29 - Prob. 2IAPACh. 29 - Prob. 3IAPACh. 29 - Prob. 4IAPACh. 29 - Prob. 5IAPACh. 29 - Prob. 6IAPACh. 29 - Prob. 7IAPACh. 29 - Prob. 8IAPACh. 29 - Prob. 9IAPACh. 29 - Prob. 10IAPACh. 29 - Prob. 1MCQCh. 29 - Prob. 2MCQCh. 29 - Prob. 3MCQCh. 29 - Prob. 4MCQCh. 29 - Prob. 5MCQCh. 29 - Prob. 6MCQCh. 29 - Prob. 7MCQ
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- Exhibit 4 Interest Rate Amount of Money Demanded Asset $20 40 60 80 100 as an 10% 8 2 34. Refer to Exhibit 4. For transactions, households and businesses want to hold an amount of money equal to one-half of nominal GDP. The table shows the amounts of money they want to hold as an asset at various interest rates. If nominal GDP is $300 and the supply of money is $230, the equilibrium interest rate will be. a) 2 percent. 4 b) c) percent. 6 percent. d) 8 percent.arrow_forward11 ______ is the total quantity of goods and services that will be purchased at all possible price levels. a. Demand b. Aggregate supply c. Supply d. Aggregate demandarrow_forwardA country has 4 million units of goods and services within itself. While these goods and services remain constant, the government printed money and increased the amount of money in circulation from 10 million units to 12 million units. Under these conditions: a) Calculate the amount of increase in prices. b) Calculate the rate of decrease in the purchasing power of moneyarrow_forward
- A Moving to another question will save this response. Question 26 The accompanying table shows the aggregate demand and aggregate supply schedule for a hypothetical economy. Real Domestic Output Demanded Real Domestic Output Price Level (in Billions) (Index Value) Supplied $ 500 350 $ 3,500 1,000 300 3,000 1,500 250 2,500 2,000 200 2,000 2,500 150 1,500 3,000 100 1,000 a. If the quantity of real domestic output demanded increased by $1,000 at each price level, the new equilibrium price level and quantity of real domestic output would be? I b. At the price level of 150, what will happen to the levels of output supplied and output demanded? what will generally happen in the economy? For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). 自Qarrow_forwardIf the price level rises and the money wage rate remains constant, what happens to the quantity of real GDP supplied? How does the economy move? If the price level rises and the money wage rate remains constant, the quantity of real GDP supplied _______ and there is a movement up along the _______. A. increases; aggregate supply curve B. increases; potential GDP line C. does not change; aggregate supply curve D. does not change; potential GDP linearrow_forwardIf the price level rises and the money wage rate remains constant, what happens to the quantity of real GDP supplied? How does the economy move? If the price level rises and the money wage rate remains constant, the quantity of real GDP supplied _______ and there is a movement up along the _______. A. increases; aggregate supply curve B. increases; potential GDP line C. does not change; aggregate supply curve D. does not change; potential GDP line Thanks!!arrow_forward
- The total value of real GDP that all sectors of the economy (C + I + G + Xn) are willing to purchase at various price levels A. Aggregate Supply B. Aggregate Demand C. Equilibrium GDP D. Aggregate Purchasesarrow_forward10. Which of the following would cause the Aggregate Quantity Demanded to increase? a) An increase in the price level causing an increase in the purchasing power of the consumer's wealth b) A decrease in the price level making domestic prices less expensive relative to foreign prices c) An increase in the price level causing an increase in the market rate of interest d) A decrease in the price level causing a decrease in the purchasing power of the consumers' wealth e) None of the abovearrow_forwardQUESTION 1 Aggregate Demand (AD) Is drawn with price level, average price for everything in the economy relative to the base year price, (not the dollar price) on the vertical axis and Real GDP demanded on the horizontal axis. Use the numbers from the following table and calculate the Real GDP Demanded using expenditure approach of GDP, and plot all the points on the Aggregate Demand. Connect all the points to draw the aggregate demand. [Review Chapter 5 powerpoints, textbook and Internet source to find what numbers have tolbe added to get each of the points In the Aggregate Demand curve.] (国 Real GDP Demanded (AD): C+l+G+ (X-M) Real GDP Supplied: Ageregate Supply (AS) $680 Price Level 110 $400 $185 $150 $55 $50 115 390 180 150 50 50 720 120 380 175 150 45 50 750 125 370 170 150 40 50 780 130 360 165 150 35 50 810 8.arrow_forward
- 28. Which of the following is a determinant of the height of the aggregate supply curve? Select one: a. Consumption. b. Costs of production. c. Investment. d. The trade balance. e. Government expenditure.arrow_forwardQuestion 19 E) Listen If the nation's capital stock increases which of following will be affected? O Long Run Aggregate Supply O Investment Demand O A8gregate Demand Short Run Aggregate Supply Question 20 LIsten Regarding the question above, describe the short run result of the change? OPrice level increases and real gross domestic product decreases. Price level increases and real gross domestic product increases. Price level decreases and real gross domestic product increases. Price level decreases and real gross domestic product decreases.arrow_forwardIf households decide to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run?arrow_forward
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