【正文】 s Economic Pulse Question ID: 12383 When the expenditure approach is used to measure GDP, the major ponents are: A. consumption, investment, government purchases, and exports. B. employee pensation, corporate profits, depreciation, and indirect business taxes. C. consumption, investment, indirect business taxes, and depreciation. D. employee pensation, rents, interest, corporate profits, and exports. A Consumption = the largest part of GDP, includes purchases of households, such as durable goods, nondurable goods, and services. Investments = are important because it is an indicator of the economy39。s wealth to increase or decrease. C Fixedrate borrowers win because they are paying the loan in the future with dollars that are worth less. : Preliminary Reading: Working with Our Basic Aggregate Demand/Aggregate Supply Model Question ID: 12441 Which potential factor will shift the aggregate demand curve to the left? A. Positive business expectations. B. An increase in the real rate of interest. C. An increase in real wealth. D. Expectations of future inflation. B The increased cost of borrowing will make it more expensive for consumers to purchase goods and for businesses to invest. Question ID: 12439 Which of the following will NOT cause a shift in the demand curve? 19 A. Changes in real wealth. B. Changes in the real rate of interest. C. A change in the expected rate of inflation. D. Changes in resource prices. D Changes in resource prices will cause a shift in the supply curve. Question ID: 21245 Which of the following statements regarding supply and demand is TRUE? A. An unexpected supply shock will impact both short run aggregate supply (SRAS) and longrun aggregate supply (LRAS). B. An unexpected temporary positive supply shock will result in a new longterm economic equilibrium. C. In the long run, an unexpected shift in AD will impact only output levels. D. An unexpected shift in aggregate demand (AD) will result in a new longterm economic equilibrium. D An unexpected shift in AD will disturb the existing longrun equilibrium (E) and will lead to a new longrun (E). For example, if consumers bee more pessimistic about the economy, they will likely cut back on spending, shifting AD down and to the left. Inventories accumulate, production decreases and layoffs occur. (Short run result: lower prices and output.) As workers adjust to lower wages and suppliers adjust to lower resource prices, aggregate supply (AS) shits up and left, resulting in a new equilibrium point where output is at preshift levels and prices have decreased. If the supply shock is temporary, then prices, employment, output, and interest rates return to preshock levels. The SRAS can shift right or left without shifting the LRAS curve. Some events do not affect the longrun productive capacity of the nation but affect the SRAS. Circumstances that will shift the SRAS curve but not necessarily the LRAS include: drought, hurricanes, and changes in input 20 prices. The LRAS is impacted by improvements in technology and productivity and an increase in the supply of resources. In the long run, an unexpected AD shift will impact prices only. Question ID: 12444 Which one of the following is most likely to acpany an unanticipated reduction in aggregate demand? A. An increase in the price level. B. An increase in real GDP. C. A decrease in employment. D. A decrease in the unemployment rate. C As demand decreases inventories will accumulate, production will be cut and workers will be laid off. Question ID: 21246 If the price of oil decreased by 70 percent today, what would be the shortrun impact on output, prices (consumer perspective), and real interest rates? Assume that oil remains a major resource. (The answers are listed in the following order: Output, Prices, Interest Rates.) A. Decrease, Increase, Increase B. Increase, Rises, Decrease C. Decrease, Decrease, Increase D. Increase, Decrease, Decrease D The decrease in oil prices will shift SRAS down and to the right, resulting in lower prices. In response, output will increase, causing unemployment to fall. In the shortrun, the new economic equilibrium is at a level of higher output and lower prices. The lower price level and higher employment will increase ines. According to the permanent ine hypothesis, if 21 consumers perceive this increase as temporary, they will save most of it. A higher level of savings increases the supply of loanable funds in the financial markets. As with any modity, as the supply rises the price (represented here by interest rates) falls. Question ID: 21247 Assume that consumers and businesses unexpectedly decide to increase their current spending. What is the longrun impact on output and prices? (The answers are listed in the following order: Output, Prices.) A. Increase, Increase B. No Change, Increase C. Decrease, Decrease D. Increase, No Change B If consumers and businesses decide to consume more today, the AD curve temporarily shifts up and right. Inventory levels fall as sales increase and businesses increase production and employ more workers. In the short run, the economy is at a new equilibrium of higher prices and output. The increase in demand places upward pressure on wage rates and resource prices. In response, output will eventually fall back to preshift levels. In the long run, the economy is at new equilibrium where prices are higher, but output is unchanged. Question ID: 24997 Mark Goodwin and Cathy Laumann, CFA candidates, are discussing the relationship between moary policy and interest rates. Goodwin, who has only studied for one week, makes the following statements. Which statement should Laumann agree with?