Figure 14-1 Quantity of money, M bitions of dollaors) 14) Refer to Figure 14-1.

Question

Figure 14-1 Quantity of money, M bitions of dollaors) 14) Refer to Figure 14-1. In the figure, the money dermand curve would move from MD1 to MD2 ir A) the interest rate increased. B) real GDP increased C) the price level decreased. D) the Federal Reserve sold Treasury securities. 15) A negative supply shock in the short run causes 15) A) the aggregate supply curve to shift to the left. B) the price level to fall. C) equilibrium real GDP to rise. D) unemployment to fall. 16) If an increase in investment spending of $50 million results in a $400 million increase in 16) equilibrium real GDP, then A) the multiplier is 0.125. C) the multiplier is 8 B) the multiplier is 3.5 D) the multiplier is 50 17) The international trade effect states that 17) A) an increase in the price level will lower net exports B) an increase in the price level will raise net exports C) an increase in the price level will lower imports D) an increase in the price level will raise exports

Explanation / Answer

14. The correct option is b. real GDP increased

15. supply shock may be causes stagflation due to a combination of rising prices and falling output. In the short run, an economy-wide positive supply shock will shift the aggregate supply curve rightward, increasing output and decreasing the price level.

Hence the correct option is a. the aggregate supply curve to shift to the left.

16. the multiplier is 8

17. the international trade effects states that an increase in the price level will lower net exports

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