When the central bank controls the interest rate, the aggregate demand (AD) curve is downward sloping because:
a reduction in the money supply (M) will cause an increase in the interest rate, a reduction in investment, and a reduction in output.
a reduction in the aggregate price level (P) will cause the central bank to reduce the interest rate and thus increase output.
a reduction in P will cause an increase in the real wage, a reduction in employment, and a reduction in output.
as P increases, goods and services become relatively more expensive and individuals respond by reducing the quantity demanded of goods and services.
Which of the following would cause an increase in the natural level of output?
a decrease in government spending
a decrease in the money supply
an increase in taxes
a decrease in taxes
none of the above
An individual is considered unemployed if he or she:
works only part-time.
works full-time in a family business, but is not paid.
is not working and is not looking for work.
all of the above
none of the above
Which of the following is associated with high unemployment rate?
rising long term unemployment ratio with a lag
declining proportion of unemployment finding a job
rising rate of separations through lay-off
all of the above
Assume product markets become less competitive in Australia. Given this information, we would expect to observe which of the following?
no shift in the wage setting curve
an increase in unemployment
a decrease in the real wage
a downward shift in the price setting curve
all of the above
Which of the following statements about the adjustment process in the economy is incorrect?
Output in excess of the natural level leads to higher prices.
Higher prices increase demand.
An increase in demand increases output.
An increase in output increases employment.
An increase in employment decreases unemployment.