which of the following would cause the aggregate expenditure line to shift downward? A Congress passes additional unemployment benefits. B Following the Covid 19 pandemic, households are pessimistic about their future income levels. C The government raises income taxes. D Housing prices rise. E Actions by the Federal Reserve cause real interest rates to rise. F An increase in income in Asia leads to growth of U.S. exports.

which of the following would cause the aggregate expenditure line to shift downward? A Congress passes additional unemployment benefits. B Following the Covid 19 pandemic, households are pessimistic about their future income levels. C The government raises income taxes. D Housing prices rise. E Actions by the Federal Reserve cause real interest rates to rise. F An increase in income in Asia leads to growth of U.S. exports.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter23: The Aggregate Expenditure Model

Section: Chapter Questions

Problem 3P

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Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve. a. True b. False
Which of the following would not increase Aggregate Demand? a. Increased Consumption b. Increased Government Expenditure c. Increased Investment Expenditure d. Decrease in the overall price level
Which of the following will most likely cause movement along the consumption function? a. A change in tastes b. A change in consumers’ expectations c. A change in interest rates d. A change in disposable income
Which of the following correctly describes how a decrease in the price level affects consumption spending? Select one: a. A decrease in the price level raises real wealth, which causes consumption to increase. b. A decrease in the price level decreases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. c. A decrease in the price level increases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. d. A decrease in the price level lowers real wealth, which causes consumption to decrease.
Which of the following is most likely to cause a decrease in the aggregate expenditure (AE) curve? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. A decrease in wealth a b A government stimulus check An increase in unemployment benefits d An increase in education spending
Which of the following would be most likely to increase consumption spending? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A reduction in consumer credit card debt A drop in stock prices A higher interest rate C d The expectation of lower future prices
Which of the following is an example of an expenditure-increasing policy? a. a decrease in import quotas b. an increase in the money supply c. an increase in import tariffs d. higher income taxes
If the aggregate expenditure line shifts in response to a decrease in real wealth, describe the process of moving back to equilibrium.
If the aggregate expenditure line shifts in response to an increase in real wealth, describe the process of moving back to equilibrium.
Which of the following events would cause the aggregate expenditure line to shift upward? Select all that apply. 1 The stock market rises. 2 Income taxes rise. 3 Expectations about future income prospects become more rosy. 4 The real interest rate rises. 5 Transfer payments increase 6 Rising incomes in Europe cause net exports to rise.
Which of the following components of aggregate expenditure is most subject to crowding out? a. Consumption expenditures b. Government purchases of goods and services c. Imports d. Investment spending e. National saving
When the economy is in equilibrium it must be true that Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an am total spending equals total output. the economy is at full employment. net exports are equal to zero d all of the above.

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A		Congress passes additional unemployment benefits.
B		Following the Covid 19 pandemic, households are pessimistic about their future income levels.
C		The government raises income taxes.
D		Housing prices rise.
E		Actions by the Federal Reserve cause real interest rates to rise.
F		An increase in income in Asia leads to growth of U.S. exports.