The Keynesian aggregate expenditure model makes what major assumption?

Resource market prices are fixed.

Which of the following explains the downward sloping nature of aggregate demand?

As Price Level increases, the value of assets (wealth) falls.

Which of the following will shift the short run aggregate supply curve to the left?

a computer virus that lowers productivity

If the economy is currently in a recession, what will happen in the long run?

wages will decrease and the SRAS will increase.

If an economy is currently producing more than the full employment level of GDP, what will happen in the long run?

Wages will increase and SRAS will decrease.

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AS AD Review

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Questions 10

Answers

1
Which line shows the fixed nature of input prices in the short run?
1
3
4
2
2
The Keynesian aggregate expenditure model makes what major assumption?
Product market prices are fixed.
Product market prices are flexible.
All prices are flexible.
Resource market prices are fixed.
3
Which of the following explains the downward sloping nature of aggregate demand?
As US price level rises, foreign buyers will purchase more of our products.
All are reasons for the nature of demand.
As Price Level increases, the value of assets (wealth) falls.
As US price levels rise, real interest rates will fall equals more buying.
4
Which of the following will shift the short run aggregate supply curve to the left?
government spending less on the military
a computer virus that lowers productivity
government lowering business taxes
an optimistic view about the lowering of inflation
5
If an economy had an increase in consumers spending, then on the Phillips curve...
shift from PC1 to PC2
move from a on PC1 to e on PC2
move from a to b on PC1
move from c to e on PC2
6
If the economy is currently in a recession, what will happen in the long run?
wages will increase and SRAS will decrease
consumption will increase and AD will increase
wages will decrease and the SRAS will increase.
productivity will fall and SRAS will shift right
7
If an economy is currently producing more than the full employment level of GDP, what will happen in the long run?
Wages will increase and SRAS will decrease.
Wages will decrease and SRAS will increase.
Government will spend less and AD will decrease.
the LRAS will shift to the right
8
Which curve represents the efficient full employment level of real output?
2
3
4
1
9
Which line, according to Keynes, represents the immediate short run of AS?
4
2
1
3
10
Which of the following will shift the AD curve to the left?
Foreign trade partners increase their wealth.
interest rates rise
Government reduces personal income tax rates.
Investment increases.

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