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The aggregate demand curve is downward sloping because a higher inflation rate leads the
central bank to ____ real interest rates, thereby ____ the level of equilibrium aggregate
output., everything else held constant.
A) raise; lowering
B) raise; raising
C) reduce; lowering
D) reduce; raising
Answer: A
Diff: 2 Type: MC Page Ref: 563
Skill: Recall
Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
the interest rate
Everything else held constant, an increase in government spending will cause ____.
A) aggregate demand to increase
B) aggregate demand to decrease
C) the quantity of aggregate demand to increase
D) the quantity of aggregate demand to decrease
Answer: A
Diff: 2 Type: MC Page Ref: 564
Skill: Recall
Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
the interest rate
Everything else held constant, an autonomous easing of monetary policy will cause
____.
A) the quantity of aggregate demand to increase
B) the quantity of aggregate demand to decrease
C) aggregate demand to decrease
D) aggregate demand to increase
Answer: D
Diff: 2 Type: MC Page Ref: 566
Skill: Recall
Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
the interest rate
Everything else held constant, an autonomous tightening of monetary policy will cause
____.
A) the quantity of aggregate demand to increase
B) the quantity of aggregate demand to decrease
C) aggregate demand to increase
D) aggregate demand to decrease
Answer: D
Diff: 2 Type: MC Page Ref: 566
Skill: Recall
Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
the interest rate