Match the cause for the negatively sloped aggregate demand curve with the correct term from the...
Question:
Match the cause for the negatively sloped aggregate demand curve with the correct term from the options.
1. As prices rise, the cost for businesses to finance new equipment increases, causing a drop in quantity demanded of real GDP.
2.The purchasing power of money held in savings accounts falls as prices rise.
3. As prices rise in the U.S., foreigners purchase fewer U.S. goods.
OPTIONS:
a.The Aggregate Demand Effect
b. The Wealth Effect
c. The Interest Rate Effect
d. The Export Effect
Aggregate Demand Curve:
Aggregate demand curve illustrates a correlation between the price level and the amount of real output demanded by businesses, government, households, and the rest of the world.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answer1.
c. The Interest Rate Effect
Higher interest rates imply that businesses incur higher costs on investments financed through loans. As a result,...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Aggregate Supply and Aggregate Demand (AS-AD) Model
from
Chapter 7 / Lesson 3
17K
Understand the aggregate demand-aggregate supply model and its features. Read more about the curve shifts of this and learn the AD-AS model through an example.
Related to this Question
- A decrease in the demand curve could be caused by a. increase in the input cost of the good. b. increase in the price of a substitute of the good. c. decrease in the number of firms selling the good. d. decrease in the number of buyers in the market for t
- Aggregate demand curves slope downwards for each of the following reasons except? (i) The substitution effect: As the price level falls, people buy more of the cheaper goods and less of other goods. (ii) The wealth effect: As the price level falls, the
- When the demand curve is vertical and the supply curve is upward sloping, a. a drop in the input price that lowers the marginal cost by $1, decreases the output price by $1. b. a rise in the input price that increases marginal cost by $1, decreases the f
- Ceteris paribus, a rightward shift of the short-run aggregate supply (SRAS) curve causes: a. an increase in the price level, which in turn causes quantity demanded to fall b. an increase in the price level, which in turn causes quantity demanded to rise c
- If a reduction in the supply of a good causes the price to rise and total revenue to fall, then we can infer that the price elasticity of demand is _______. (a) equal to one (b) None of the choices (c) less than one (d) greater than one.
- Supply curves are usually assumed to slope upward because a. profits fall as prices rise. b. a higher price leads to increases in demand. c. a higher price leads to decreases in demand. d. a higher price attracts resources from other less valued uses. e.
- The AD curve slopes downward because when the price level drops, people can afford to buy more and aggregate demand rises. When prices rise, people can afford to buy less and aggregate demand falls. I
- When the cost of producing a good rises, firms will want to charge a price, and this will. a. higher; shift the supply curve leftward b. lower; shift the supply curve rightward c. higher; shift the supply curve rightward d. higher; cause an upward movemen
- The kinked demand curve theory assumes A. that other firms will match price increases, but not price decreases B. that other firms will match price decreases, but not price increases C. that other firms will match both price increases and price decreases
- If aggregate supply is upward sloping, an increase in aggregate demand will result in an increase in prices and a decrease in output an increase in prices and an increase in output an decrease in pric
- If a firm faces a downward-sloping demand curve: A. it must reduce its price to sell more units. B. the demand for its product must be inelastic. C. it will always make a profit. D. it can control
- The aggregate demand curve shows the relationship between _ and _. The aggregate demand curve is downward sloping because a. as income increases it causes an increase in the amount of planned expendit
- If firms are losing money in a purely competitive industry, then in the long run this situation will shift the industry: A. demand curve to the right, and the market price will increase. B. supply curve to the left, and the market price will increase.
- Demand curves slope downward because, other things held equal, a) an increase in a product's price lowers MU. b) a decrease in a product's price lowers MU. c) a decrease in a product's price raises MU per dollar and makes consumers wish to purchase mor
- The aggregate demand curve slopes downward because: a. a higher price level reduces wealth. b. all demand curves slope downward. c. as price rises, consumers substitute cheaper goods for more expensive goods. d. a higher price level will increase purc
- The demand curve shift shown in the figure was caused by a(n): a. increase in the input cost of the good. b. increase in the price of a substitute of the good. c. decrease in the number of firms selling the good. d. decrease in the number of buyers in the
- The decrease in aggregate demand leads to a movement along the (Dickensian, horizontal, vertical) range of the aggregate supply curve, causing the equilibrium price level to (increase, decrease, remai
- In a market, where the demand curve is downward-sloping and the supply curve is upward-sloping, an increase in income (and the good is inferior) will cause? a. The equilibrium price to rise, and the equilibrium quantity to fall. b. The equilibrium price
- The downward slope of the aggregate demand curve shows that A. there can never be an equilibrium between aggregate supply and aggregate demand. B. a higher price level will cause real output demanded to be higher. C. a lower price level will cause real ou
- The AD curve slopes downward because when the price level is lower, people can afford to buy more and aggregate demand rises. When prices rise, people can afford to buy less and aggregate demand falls. Is this a good explanation of the shape of the AD cur
- The slope of the demand curve is negative because: a. the quantity of a good demanded decreases as income declines. b. the quantity of a good demanded increases as income declines. c. the quantity of a good demanded increases as the price declines. d. the
- If firms in a perfectly competitive market are incurring an economic loss, some firms will exit. This exit shifts the industry: A) supply curve leftward, and the market price rises. B) demand curve rightward, and the market price rises. C) demand curve
- The kinked oligopoly demand curve is a result of the assumption by an oligopolist that a. price increases will be matched, but price reductions will not. b. price increases will not be matched, but price reductions will. c. both price increases and pric
- The kinked oligopoly demand curve is a result of the assumption by an oligopolist that: a. price increases will be matched, but price reductions will not. b. price increases will not be matched, but price reductions will. c. both price increases and pr
- In the kinked demand curve model, if one firm increases its price, other firms will: a) reduce their price. b) compete on a non-price basis. c) raise their price. d) maintain their price constant. e) wage a price war.
- Sticky wages and sticky prices explain the sloped short-run aggregate supply curve because: a) higher prices are an advantage to suppliers, even if their costs increase. b) as the prices of a firm s products rise, they are willing to supply more if thei
- A movement to along the demand curve to the right may be caused by: a) a rise in income. b) an increase in supply. c) a fall in the price of a substitute good. d) a rise in the price of inputs.
- When the production possibilities curve increases, a corresponding? a. increase would take place with aggregate demand. b. decrease would take place with aggregate demand. c. decrease would take place with short-run aggregate supply. d. decrease would t
- The "kinked" oligopoly demand curve is a result of the assumption by an oligopolist that a. price increases will be matched, but price reductions will not. b. price increases will not be matched, but price reductions will. c. both price increases and p
- A firm facing a horizontal demand curve: a. cannot increase its output even if it wants to. b. can affect the price it receives for its output. c. faces a perfectly inelastic demand curve for its product. d. is likely to price its goods below market p
- An increase in production costs is most likely to shift the: a. short-run aggregate supply curve up (to the left). b. short-run aggregate supply curve down (to the right). c. aggregate demand curve to the left. d. aggregate demand curve to the right.
- 1. According to the aggregate demand/aggregate supply curve, when prices rise: a) businesses will cut back spending. b) businesses will increase spending by the amount of the price increase. c) b
- In the short run, an increase in the price level causes which of the following a. A rightward shift in the aggregate demand curve. b. A leftward shift in the short-run aggregate supply curve. c. A rightward shift in the short-run aggregate supply curve. d
- In the short run, an increase in the price level causes which of the following? a. A rightward shift in the aggregate demand curve. b. A leftward shift in the short-run aggregate supply curve. c. A rightward shift in the short-run aggregate supply curve.
- A decline in market demand in a competitive industry will result in a(n): a. economic profit for all firms in the industry. b. increase in the equilibrium price. c. decrease in the equilibrium quantity. d. rightward shift of the market supply curve in the
- A decline in market demand in a competitive industry will result in: a. an economic profit for all firms in the industry. b. an increase in the equilibrium price. c. a decrease in the equilibrium quantity. d. a rightward shift of the market supply curve i
- When aggregate demand (AD) increases or shifts to the right, the equilibrium price level (increases/decreases), equilibrium output (increases/decreases), and the rate of unemployment (increases/decreases), assuming aggregate supply is upward sloping.
- Which of the following characteristic lead to a downward-sloping demand curve? a) Increasing opportunity costs. b) Increasing marginal benefit. c) Diminishing preferences for a particular good. d) A decline in the price of a related good. e) Dimi
- If there is an increase in supply, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus _____.
- -Multiple Choice- 1. An increase in aggregate demand is seen as a(n) ................ the aggregate demand curve. A) Shift in the right in. B) Downward movement along. C) Upward movement along.
- In the short run, an increase in the price level causes which of the following: a) A rightward shift in the aggregate demand curve. b) A leftward shift in the short-run aggregate supply curve. c) A rightward shift in the short-run aggregate supply curv
- A "decrease in demand" means that a. the demand curve has shifted to the left. b. price has declined and consumers want to purchase more of the good. c. the demand curve has shifted to the right. d. the price of the good can be expected to decline, assumi
- 1. A decreasing-cost industry will have? a.a downward sloping supply curve in the long run. b.an upward-sloping demand curve in the long run. c.a perfectly elastic long-run supply curve. d.a perfectly inelastic long-run supply curve. 2. Which of the follo
- When a new firm enters a market: a. Pushes the equilibrium price upward b. Reduces the profits of existing firms c. Shifts the market supply curve to the left d. Shifts the market demand curve to the left
- The demand curve for a typical good has: A. a negative slope because some consumers switch to other goods as the price of the good rises. B. a negative slope because the supply of the good rises as demand rises. C. a negative slope because the good has le
- An oil price increase would: A. increase the aggregate demand curve B. decrease the short-run aggregate supply curve C. decrease the aggregate demand curve D. increase the short-run aggregate supply curve
- A monopolistic competitive firm: A. faces a perfectly inelastic demand curve. B. loses all of its business if it increases price slightly. C. faces a perfectly elastic demand curve. D. can increase the price without losing all of its business.
- All else equal, which of the following will cause the demand curve for a good to shift to the left (decrease)? a. an increase in the price of the good b. an expectation of a future price decline c. a decrease in the price of the good d. an increase in the
- An increase in aggregate spending that is caused by a factor other than the price level will lead to the: a) aggregate demand curve shifting to the right. b) aggregate supply curve shifting to the right. c) aggregate supply curve shifting to the left. d)
- The demand curve for a monopolistically competitive firm slopes downward but is very elastic because: a) quantity demanded drops to zero after a slight price increase. b) there are close, but not perfect, substitutes for the product. c) customers have no
- If a firm decreases its prices by 15% and its total revenue increases by 30%, which of the following is correct? A. The price elasticity of demand is unit elastic. B. The price elasticity of demand is inelastic. C. The price elasticity of demand is elasti
- The market for a normal good is characterized by demand curve D2 and supply curve S2. A decrease in income will cause A. the demand curve to shift D1 causing firms to earn economic profits. The supply curve will not change, so the price will rise, and fir
- If a firm in a monopolistic competitive market has a demand curve that is shifting to the right, it will stop shifting when: a) the firm rises its price. b) the firm lowers its price. c) firms stop entering the market. d) firms stop leaving the market
- A decrease in input costs to firms in a market will result in a(n): a) decrease in equilibrium price and an increase in equilibrium quantity. b) decrease in equilibrium price and a decrease in equilibrium quantity. c) increase in equilibrium price and
- The budget constraint has a: a) negative slope, because the law of demand says that when price rises, quantity demanded falls. b) positive slope, because if prices rise consumers will need a larger budget to afford a given combination of goods. c) nega
- Which of the following will cause the demand curve for a normal good to shift to the right? A. An increase in the price of a complementary good B. A decrease in income C. A decrease in the price of the good D. An increase in the price of a substitute
- A decrease in price: A. causes a decrease in revenue due to the quantity effect. B. causes an increase in revenue due to the price effect. C. does not necessarily have to experience a quantity effect when the demand curve is downward sloping. D. None
- A price taker firm faces a: a. perfectly elastic demand curve. b. declining marginal revenue. c. perfectly elastic supply curve. d. declining market demand curve.
- A price-taking firm faces a: A) perfectly inelastic demand. B) downward-sloping marginal revenue curve. C) downward-sloping supply curve. D) perfectly elastic demand. E) downward-sloping demand curve.
- In a competitive market with a downward sloping demand curve and an upward sloping supply curve, a decrease in demand, with no change in supply, will lead to {Blank} in equilibrium quantity and {Blank} in equilibrium price. a. an increase; a decrease b.
- The downward slope of the aggregate demand curve shows an increase in
- With an upward-sloping supply curve, which of the following is true? a. An increase in price results in a decrease in quantity supplied. b. An increase in price results in an increase in supply. c. A decrease in price results in a decrease in quantity sup
- When aggregate demand meets aggregate supply in the horizontal portion of the aggregate supply curve: a. a decrease in demand will cause output to rise but no change in prices. b. a decrease in demand will cause prices to fall but no change in output. c.
- If the aggregate demand curve shifts rightward, a. the price level increases and output decreases. b. the resulting increase in the price level is usually called cost-push inflation. c. the resulting increase in the price level is usually called demand-pu
- The absolute value of the price elasticity of demand for a straight-line downward-sloping demand curve: a. decreases as price decreases b. increases as prices decreases c. is zero at all prices d.
- If a firm is in the inelastic range of its demand curve, an increase in price will lead to : A. a decrease in revenue B. an increase in revenue C. no change in revenue D. an indeterminate change i
- The tendency of firms to substitute away from a factor whose relative price has risen and toward a factor whose relative price has fallen is called the: A. input-substitution effect. B. derived demand effect. C. diminishing returns effect. D. output e
- The law of increasing relative costs, depicted by the concavity of the production opportunity frontier, is most closely related to the: A. downward slope of the demand curve B. upward slope of the demand curve C. downward slope of the supply curve D. upwa
- If a firm decreases the price of a good and total revenue decreases, then A. the demand for this good is price elastic. B. the demand for this good is price inelastic. C. the cross-price elasticity is negative. D. the income elasticity is less than 1.
- If products C and D are close substitutes, an increase in the price of C will: A) tend to cause the price of D to fall. B) shift the demand curve of C to the left and the demand curve of D to the right. C) shift the demand curve of D to the righ
- The decrease in the supply of a product will cause the equilibrium price to _____ (increase/decrease) and the quantity to _____ (increase/decrease) if the demand curve does not shift.
- Does an increase in the price of an object affect the supply or demand curve (ceteris parabus)?
- An increase in the expected price level shifts the a) short-run and long-run aggregate supply curves left. b) the short-run but not the long-run aggregate supply curve left. c) the long-run but not
- Consider a firm's price elasticity of supply. If firms' costs rise rapidly as output increases, the: a. supply curve will tend to be flat. b. demand curve will tend to be steep. c. elasticity of demand will tend to be low. d. price elasticity of supply wi
- An upward sloping supply curve shows that: a. supply increases when price rises b. supply declines when input prices fall c. quantity supplied rises when prices rise, ceteris paribus d. quantity s
- The demand curve for a typical good has a(n): a. negative slope because some consumers switch to other goods as the price rises. b. negative slope because consumer incomes fall as the price of the good rises. c. negative slope because the good has less
- A technological boom that creates an increased demand for new equipment can: a. Decrease aggregate demand but increase long-run aggregate supply, b. Increase both aggregate demand and long-run aggregate supply, c. Decrease both aggregate demand and long-r
- An upward shift in the supply curve of good Y, a complement of some good X, will tend to cause: a) the price of X to increase even though the demand curve for X is unaffected. b) the demand curve for X to shift to the right. c) the price of X to fall even
- The demand for a good increases when the price of a substitute Blank and also increases when the price of a complement Blank. Select one: a. falls; falls. b. rises; falls. c. rises; rises. d. falls; rises.
- When new firms enter a perfectly competitive market, the market supply curve shifts and the price. a. leftward; rises b. leftward; falls c. rightward; rises d. rightward; falls
- There will be a shortage of a product when A. price is above the equilibrium level. B. the supply curve is downward sloping and the demand curve is upward sloping. C. the demand and supply curves fail to intersect. D. consumers are willing to buy more tha
- An "increase in demand" means that a. the demand curve has shifted to the left. b. price has declined and consumers want to purchase more of the good. c. the demand curve has shifted to the right. d. the price of the good can be expected to decline, assum
- A firm that has a kinked demand curve assumes that, if it raises its price, of its competitors will raise their prices and that, if it lowers its price, of its competitors will lower their prices. a) all; all b) none; all c) all; none d) none; none
- An increase in oil prices may cause a) demand to curve to the right. b) a reduction in the quantity of oil demanded. c) market equilibrium. d) market price reductions.
- An increase in the price level will: a. move the economy up along a stationary aggregate demand curve. b. move the economy down along a stationary aggregate demand curve. c. shift the aggregate demand curve to the right. d. shift the aggregate demand curv
- An increase in technology affects the aggregate supply/aggregate demand model by causing the _____ curve to _______. A. AD increase B. AD decrease C. AS increase D. AS decrease
- Which of the following illustrates the demand curve facing an oligopolist when rival firms follow a price decrease but not a price increase? A. Perfectly horizontal demand curve B. Highly elastic demand curve C. Highly inelastic demand curve D. A demand c
- A sudden crash in the stock market shifts A. the aggregate-demand curve. B. the short-run aggregate supply curve, but not the long-run aggregate supply curve. C. the long-run aggregate supply curve, but not the short-run aggregate supply curve. D. both th
- A sudden crash in the stock market shifts: a. the aggregate-demand curve. b. the short-run aggregate-supply curve, but not the long-run aggregate-supply curve. c. the long-run aggregate-supply curve, but not the short-run aggregate-supply curve. d. bo
- Using a short run aggregate supply curve and aggregate demand curve, illustrate what impact each of the following would have on the price level and the equilibrium level of aggregate output. a) what i
- Cost-push inflation occurs when: a. the aggregate supply curve shifts rightward. b. the aggregate demand curve shifts leftward while the aggregate supply curve is fixed. c. the aggregate supply curve shifts leftward while the aggregate demand curve is fix
- A demand curve will shift out for any of the following reasons except: a) preference for a good increases. b) price of a substitute falls. c) income rises. d) price of a complement falls.
- Which of the following best describes why the aggregate demand curve is downward sloping? a. As the aggregate price level decreases, the stock of existing physical capital increases. b. As the aggre
- A demand curve in a product market has a negative slope, in large part because of the substitution effect. Does the aggregate demand curve have a negative slope for the same reason? Explain.
- In the kinked demand curve model of oligopoly, if the marginal cost curve shifts upward, then output A. will always decrease. B. will stay the same if the shift is small, but decrease if the shift is large. C. will always stay the same. D. will decrease i
- If the demand for a good is price-elastic, a cut in price will: a. lead to a fall in the firm's revenue but an increase in quantity demanded. b. lead to a decrease in quantity demanded. c. not affect the total revenue of the firm. d. lead to a decreas
- A sudden crash in the stock market shifts the _______. a. the aggregate-demand curve. b. the short-run aggregate-supply curve, but not the long-run aggregate-supply curve. c. the long-run aggregate-supply curve, but not the short-run aggregate-supply curv
- A firm's demand for labor always: a) increases when the prices of other factors fall. b) decreases when the price of the firm's output falls. c) increases when the price of the firm's output falls. d) decreases when the wage rate decreases.
- A decrease in the price level might cause: A. an increase in the quantity of aggregate demand because of the substitution effect. B. an increase in the quantity of aggregate demand because of the weal
- If the price of a good increases and is above the equilibrium price, then: a) Suppliers' inventories will build up, they will reduce output, and lower prices. b) Demand will exceed supply and there will be a shortage in the market. c) The demand curve wil
Explore our homework questions and answers library
Browse
by subject