12.5 The Aggregate Demand Curve 1) The ________ illustrates the relationship between the price level and the quantity of planned aggregate expenditure, holding constant all other factors that affect aggregate expenditure. A) aggregate demand curve B) savings line C) 45-degree line D) consumption function
12.5 The Aggregate
1) The ________ illustrates the relationship between the
A) aggregate demand curve
B) savings line
C) 45-degree line
D) consumption function
2) Which of the following is a reason why increases in the price level result in a decline in aggregate expenditure?
A) Price level increases raise real wealth, which causes consumption spending and aggregate expenditure to decline.
B) Price level increases cause firms and consumers to hold more money, which raises the interest rate. Higher interest rates lower consumption and planned investment expenditures, which lowers aggregate expenditure.
C) Price level increases in the United States relative to other countries raise net exports, which lowers aggregate expenditure.
D) As the price level rises, government spending falls, which lowers aggregate expenditure.
3) An increase in the price level ________ real wealth, which causes consumption to ________.
A) lowers; increase
B) lowers; decrease
C) raises; increase
D) raises; decrease
4) A decrease in the price level results in a(n) ________ in household consumption spending and a(n) ________ in investment spending.
A) increase; decrease
B) increase; increase
C) decrease; decrease
D) decrease; increase
5) What impact does an increase in the price level in the United States have on net exports and why?
A) An increase in the price level decreases net exports because higher prices decrease the value of the dollar.
B) An increase in the price level decreases net exports by increasing the relative cost of American goods.
C) An increase in the price level increases net exports because higher prices lower the value of the dollar.
D) An increase in the price level increases net exports because higher prices decrease American spending on imports.
6) An increase in the price level in the United States will have what effect on the aggregate expenditure line?
A) Aggregate expenditure will shift downward.
B) Aggregate expenditure will become steeper.
C) Aggregate expenditure will shift upward.
D) Aggregate expenditure will not be affected by an increase in the price level in the United States.
7) A decrease in aggregate expenditure has what result on equilibrium GDP?
A) Equilibrium GDP rises.
B) Equilibrium GDP is not affected by a decrease in aggregate expenditure.
C) Equilibrium GDP falls.
D) Equilibrium GDP may rise or fall depending on the size of the decrease in aggregate expenditure relative to the initial level of GDP.
8) A rising price level decreases consumption by decreasing the real value of household wealth.
9) An decrease in the price level in the United States will shift the aggregate expenditure line downward.
10) What is the difference between aggregate expenditure and aggregate demand?
11) What impact does a higher price level have on interest rates, wealth, and investment sp
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