Reading 23: Aggregate Supply and Aggregate Demand - LOS b,

答案和详解如下：

1.Patch Grove Analytics is evaluating candidates for an economic analyst internship. To demonstrate his grasp of the effects of consumer behavior on aggregate demand, a candidate makes the following statements during his interview:

Statement 1:  The wealth effect occurs when consumers feel wealthier at higher price levels because their wages will also increase, and spend more in the current period as a result.

Statement 2:  Intertemporal substitution accounts for consumers’ tendency to increase their planned purchases in the current period and decrease planned future purchases when interest rates increase.

Are these two statements correct?

< >>

A)                   Incorrect                              Incorrect

B)                   Incorrect                               Correct

C)                   Correct                                Incorrect

D)                   Correct                                 Correct

The correct answer was A)

Both statements are incorrect. The wealth effect causes real consumption spending to decrease at higher price levels because consumers have less wealth in real terms, and consequently spend less. When interest rates increase, consumers spend less in the current period as they delay purchases until future periods. They substitute purchases later for purchases now (intertemporal substitution).

2.Which of the following is most likely to occur in the short run if there is an unanticipated decrease in aggregate demand due to a reduction in business and consumer optimism?

A)   An increase in the rate of unemployment.

B)   An increase in real GDP.

C)   A higher rate of inflation.

D)   An increase in nominal GDP.

The correct answer was A)

If business and consumer optimism wanes, consumers will spend less and defer current consumption and save more of their disposable income. With reduced product demand, businesses will reduce their capital expenditures and investments. These actions will lead businesses to reduce their number of employees, thereby increasing the rate of unemployment. Moreover, current output will decrease and the price level will fall.

3.Which of the following choices best describes the effects on consumption, investment, and net exports that would result from an increase in the price level, other factors held constant?

A)                   Decrease                           Decrease                            Decrease

B)                   Decrease                           Increase                              Increase

C)                   Increase                            Decrease                            Decrease

D)                   Increase                            Increase                              Increase

The correct answer was A)

At higher price levels, consumption, investment, and net exports all decrease. A rising price level decreases consumers’ real wealth, so they consume less. The higher price level will increase interest rates, which causes business investment to decrease. Rising domestic prices will also reduce foreign purchases of the country’s goods, decreasing net exports.

4.Which of the following factors is most likely to increase aggregate demand?

A)   Increasing real interest rates.

B)   An expected decrease in future prices.

C)   Expected lower future profits.

D)   An increase in real wealth.

The correct answer was D)

While an increase in real wealth will shift the AD curve to the right, an increase in the real rate of interest will shift the AD curve to the left as consumers and businesses reduce their borrowing and spending. An expected decrease in prices will shift the AD curve to the left as households and businesses postpone their consumption in anticipation of lower prices in the future. An expected decline in profits will cause firms to decrease investment.

5.When incomes in foreign countries increase, aggregate demand in the U.S. is likely to:

A)   increase because foreign consumers will tend to buy more U.S. export goods.

B)   decrease because U.S. interest rates will tend to increase.

C)   increase because U.S. interest rates will tend to decrease.

D)   decrease because foreign consumers will tend to buy fewer U.S. export goods.

The correct answer was A)

When incomes in foreign countries increase, it is unlikely to have a direct effect on interest rates in the U.S. However, increased foreign income is likely to result in greater foreign purchases of U.S. exports. Thus, aggregate demand in the U.S. is likely to increase.

6.An increase in the expected rate of inflation is most likely to cause aggregate demand and short-run aggregate supply to:

A)                    Increase                            Increase

B)                    Increase                            Decrease

C)                    Decrease                           Increase

D)                    Decrease                           Decrease

The correct answer was B)

Increasing inflation expectations lead to higher money wage rates, which causes a decrease in short-run aggregate supply (SAS curve shifts to the left). Higher expected inflation will also encourage consumers to make purchases sooner than they otherwise would have, which increases aggregate demand (shifts the AD curve to the right).