ECON 1015 EXAM 3 QUESTIONS AND ANSWERS
Would this cause the short-run aggregate supply to increase, decrease or neither:
The price level increases - CORRECT ANSWER✅✅neither, it's a movement along the curve;
Would this cause the short-run aggregate supply to increase, decrease or neither:
Input prices decrease - CORRECT ANSWER✅✅increase; because costs of production fall
Would this cause the short-run aggregate supply to increase, decrease or neither:
Firms and workers expect the price level to fall. - CORRECT ANSWER✅✅increase because employers
will negotiate lower wages
Would this cause the short-run aggregate supply to increase, decrease or neither:
The price level decreases. - CORRECT ANSWER✅✅neither, it's a movement along the supply curve
Would this cause the short-run aggregate supply to increase, decrease or neither:
New policies increase the cost of meeting government regulations - CORRECT ANSWER✅✅decreases
because costs of production increase;
Would this cause the short-run aggregate supply to increase, decrease or neither:
The number of workers in the labor force increases. - CORRECT ANSWER✅✅increases LRAS, thus
increases SRAS
Would this cause the aggregate demand to increase, decrease or neither:
The price level increases - CORRECT ANSWER✅✅neither, it's a movement along the curve
Would this cause the aggregate demand to increase, decrease or neither:
Investment decreases - CORRECT ANSWER✅✅decreases, since I is part of AD;
Would this cause the aggregate demand to increase, decrease or neither:
, Imports increase and exports decreased. - CORRECT ANSWER✅✅decreases since NX=exports-imports
and NX is a part of AD
Would this cause the aggregate demand to increase, decrease or neither:
Consumer optimism improves. - CORRECT ANSWER✅✅increases since C, consumption spending
increases
Would this cause the aggregate demand to increase, decrease or neither:
Government increases infrastructure spending - CORRECT ANSWER✅✅increases since G is a part of AD
Would this cause the aggregate demand to increase, decrease or neither:
Stock market crashes. - CORRECT ANSWER✅✅decreases since C and I decrease.
Land, labor and capital are considered - CORRECT ANSWER✅✅resources
The wealth effect can help explain - CORRECT ANSWER✅✅The negative slope of the AD curve
According to the wealth effect, all else equal, a lower price level leads to - CORRECT ANSWER✅✅higher
real-wealth values and a higher AD
According to the interest rate effect, all else equal, a lower price level leads to - CORRECT
ANSWER✅✅more savings, lower interest rates and a higher AD.
Consider just the AD curve. Suppose interest rates fall due to changing economic conditions. This will
cause - CORRECT ANSWER✅✅the AD curve to shift outward.
If real-estate prices in the United States fall, this leads to - CORRECT ANSWER✅✅a decline in U.S.
wealth and an increase in AD.
Would this cause the short-run aggregate supply to increase, decrease or neither:
The price level increases - CORRECT ANSWER✅✅neither, it's a movement along the curve;
Would this cause the short-run aggregate supply to increase, decrease or neither:
Input prices decrease - CORRECT ANSWER✅✅increase; because costs of production fall
Would this cause the short-run aggregate supply to increase, decrease or neither:
Firms and workers expect the price level to fall. - CORRECT ANSWER✅✅increase because employers
will negotiate lower wages
Would this cause the short-run aggregate supply to increase, decrease or neither:
The price level decreases. - CORRECT ANSWER✅✅neither, it's a movement along the supply curve
Would this cause the short-run aggregate supply to increase, decrease or neither:
New policies increase the cost of meeting government regulations - CORRECT ANSWER✅✅decreases
because costs of production increase;
Would this cause the short-run aggregate supply to increase, decrease or neither:
The number of workers in the labor force increases. - CORRECT ANSWER✅✅increases LRAS, thus
increases SRAS
Would this cause the aggregate demand to increase, decrease or neither:
The price level increases - CORRECT ANSWER✅✅neither, it's a movement along the curve
Would this cause the aggregate demand to increase, decrease or neither:
Investment decreases - CORRECT ANSWER✅✅decreases, since I is part of AD;
Would this cause the aggregate demand to increase, decrease or neither:
, Imports increase and exports decreased. - CORRECT ANSWER✅✅decreases since NX=exports-imports
and NX is a part of AD
Would this cause the aggregate demand to increase, decrease or neither:
Consumer optimism improves. - CORRECT ANSWER✅✅increases since C, consumption spending
increases
Would this cause the aggregate demand to increase, decrease or neither:
Government increases infrastructure spending - CORRECT ANSWER✅✅increases since G is a part of AD
Would this cause the aggregate demand to increase, decrease or neither:
Stock market crashes. - CORRECT ANSWER✅✅decreases since C and I decrease.
Land, labor and capital are considered - CORRECT ANSWER✅✅resources
The wealth effect can help explain - CORRECT ANSWER✅✅The negative slope of the AD curve
According to the wealth effect, all else equal, a lower price level leads to - CORRECT ANSWER✅✅higher
real-wealth values and a higher AD
According to the interest rate effect, all else equal, a lower price level leads to - CORRECT
ANSWER✅✅more savings, lower interest rates and a higher AD.
Consider just the AD curve. Suppose interest rates fall due to changing economic conditions. This will
cause - CORRECT ANSWER✅✅the AD curve to shift outward.
If real-estate prices in the United States fall, this leads to - CORRECT ANSWER✅✅a decline in U.S.
wealth and an increase in AD.
