Explain how each of the following events would affect the aggregate demand curve
a. Lower interest rates
b. A decrease in net exports
c. A decrease in the price level
d. Slower income growth in other countries
e. A decrease in imports
a. Lower interest rates would increase investment spending and consumer spending, particularly on durable goods, which would cause the aggregate demand curve to shift to the right.
b. A decrease in net exports would cause the aggregate demand curve to shift to the left.
c. A decrease in the price level would cause a movement down along the aggregate demand curve.
d. Slower income growth in other countries would decrease U.S. exports, which would cause the aggregate demand curve to shift to the left.
e. A decrease in imports would cause net exports to be greater, causing the aggregate demand curve to shift to the right.
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If the Federal Reserve targets the money supply, and the money demand curve shifts to the left, then the Fed
A) can maintain the money supply target, but at a lower interest rate. B) can maintain the money supply target with no change in the interest rate. C) can maintain the money supply target, but at a higher interest rate. D) cannot maintain the money supply target.
An important lesson of the Chilean crisis was that
a. inflows of foreign capital should be strictly regulated b. governments should ensure that the current account balance is kept close to 0 c. governments need to maintain regulation and oversight of the banking sector d. government intervention in financial matters leads to capital flight e. none of the above
Why is the market supply curve of labor positively sloped though individual supply curves are backward-bending beyond a certain wage rate?
a. People tend to work less when wage rate increases. b. Every individual laborer has equal trade offs between labor and leisure. c. People tend to substitute labor for leisure. d. People work more for the fear of losing their jobs and becoming unemployed. e. All the individual supply curves do not bend backward at one particular wage rate.
Suppose two economists agree about who would be helped or hurt by certain legislation, but disagree about whether the legislation would be a good idea. These disagreements
a. are positive in nature b. are minor and rarely lead to different policies or conclusions c. are normative in nature d. occur as the result of a mistake made by an economist e. occur because economic models are more complex, and subject to error, than the real world