Which of the following would cause the price level to fall and output to rise in the short run?
a. an increase in the money supply
b. a decrease in the money supply
c. an adverse supply shock
d. a favorable supply shock
d
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A tax increase
A) decreases aggregate demand and the AD curve shifts leftward. B) increases aggregate demand and the AD curve shifts rightward. C) decreases the quantity of real GDP demanded and there is a movement up along the AD curve. D) increases the quantity of real GDP demanded and there is a movement down along the AD curve. E) does not shift or lead to a movement along the aggregate demand curve.
An increase in population growth in a country
A) always causes an increase in labor resources. B) may not necessarily cause an increase in per capita real GDP. C) may not cause an increase in labor resources in rich countries because employers will cut down on the number of hours required of workers. D) will always cause an increase in per capita real GDP.
Assume that the Fed increases the money supply when there is substantial unemployment in the economy. According to the quantity theory of money, if velocity is constant, then:
a. the price level will decrease. b. real GDP will decrease. c. nominal GDP will increase. d. nominal GDP will decrease. e. real GDP will remain constant while price level will decrease.
Coal and iron ore are complements in the manufacture of steel. An increase in the price of coal would lead to
A. no change in the demand for iron ore since the steel makers must use both iron ore and coal if they are to make steel. B. an increase in the demand for iron ore as producers substitute more iron ore for coal in the production process. C. an increase in the supply of iron ore as iron ore producers see an opportunity to expand their markets. D. a decrease in the demand for iron ore as steel manufacturers reduce production of steel.