1. As the aggregate demand curve shifts to the right:A) the price level falls and real GDP rises.B) the price level and real GDP both fall.C) the price level and real GDP both rise.D) the price level rises and real GDP falls.2. The US experienced significant stagflation in the 1970s as a resultof:A) a sharp increase in oil prices.B) drastically bad growing weather caused by a drought.C) the expectation that inflation would be high.D) a sharp increase in steel prices.3.can bring about an inflationary recession.A) Demand-side inflationB) Supply-side inflationC) Neither demand-side inflation nor supply-side inflationD) Both demand-side inflation and supply-side inflation4. Suppose banks are currently charging a 4.5 percent nominal interestrate on mortgages because they expect inflation to average 3 percentover the life of the loan. If their expectations change so that theyinstead expect there to be DEFLATION of 2 percent over the life of theloan, can they still achieve the same real interest rate as before?A) Yes, by charging a nominal interest rate of 2.5 percentB) No, they will have to reduce the real interest rateC) No, they will have to raise the real interest rateD) Yes, by charging a nominal interest rate of 6.5 percentquestion 1:question 2:

Shift in aggregate demand will have effects on both price level and real GDP.

Answered: 1. As the aggregate demand curve shifts…

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1. As the aggregate demand curve shifts to the right:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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