AP Macro Chapter 30 Larsen
A shift from AS2 to AS3 might be caused by a:
B. increase in business taxes and costly government regulation
A shift from AS1 to AS3 might be caused by a:
B. increase in the prices of imported resources
The aggregate supply curve (short-run):
B. is steeper above the full-employment output than below it
A rightward shift in the aggregate supply curve is best explained by an increase in:
B. productivity
The fear of unwanted price wars may explain why many firms are reluctant to:
B. reduce PRICES when a decline in aggregate demand occurs
The interest-rate and real-balances effects are important because they help explain:
C. the shape of the aggregate DEMAND curve
If investment decreases by $20 billion and the economy's MPC is .5, the aggregate demand curve will shift:
A. LEFTWARD by $40 BILLION at each price level
(word problem) Given an increase in input price from $4 to $6, we would expect the AGGREGATE:
A. SUPPLY curve to shift to the left
Which one of the following would not shift the aggregate demand curve?
A. a change in the price level
Efficiency wages are:
A. above-market wages that bring forth so much added work effort that per-unit production costs are lower than at market wages.
Other things equal, if the national incomes of the major trading partners of the US were to rise, the US:
A. aggregate DEMAND curve would shift to the RIGHT
The size of the multiplier associated with an initial increase in spending will be:
B. diminished if inflation occurs
When aggregate demand declines, the price level may remain constant, at lease for a time, because:
A. firms individually fear that their price cut may set off a price war
A decline in investment will shift the AD curve to the:
A. left by a multiple of the change in investment
When aggregate demand declines, some firms may reduce employment rather than wages because wage reductions may:
A. not be possible due to minimum wage law
Which of the above diagrams best portrays the effects of DECLINES in the PRICES of IMPORTED RESOURCES?
A. supply curve shifts to the right
Which of the above diagrams best portrays the effects of an INCREASE in RESOURCE PRODUCTIVITY?
A. supply curve shifts to the right
(double-shifted diagram) Refer to the above diagram. Suppose that aggregate demand increased from AD1 to AD2. For the price level to stay constant:
A. the aggregate SUPPLY curve would have to shift RIGHTWARD
The real-balances, interest-rate, and foreign purchases effects all help explain:
A. why the aggregate DEMAND curve in down slopping
The determinants of aggregate demand:
B. explain shifts in the aggregate demand curve
The foreign purchases effect suggests that an INCREASE in the US price level relative to other countries will:
B. INCREASE us imports and DECREASE us exports.
Other things equal, a decrease in the real interest rate will:
B. REDUCE investment and shift the AD curve to the LEFT
Other things equal, if the US dollar were to depreciate, the:
B. aggregate SUPPLY curve should shift to the LEFT
(double-shifted diagram) Refer to the above diagram. Which of the following would shift the aggregate demand curve from AD2 to AD1?
B. an increase in the international value of a dollar
Which of the above diagrams best portrays the effects of a DECREASE in the availability of KEY NATURAL RESOURCES?
B. supply curve shifts to the left
Which of the above diagrams best portrays the effects of a dramatic INCREASE in ENERGY PRICES?
B. supply curve shifts to the left
(double-shifted diagram) Refer to the above diagram. At the equilibrium price and quantity:
B. the amount of real output demanded and supplied are equal
(word problem) All else being equal, if the price of each input increased from $4 to $6, PRODUCTIVITY would:
D. remain unchanged
(word problem) The per unit cost of production in the economy described as above is:
C. $1
If investment increases by $10 billion and the economy's MPC is .8, the aggregate demand curve will shift:
C. RIGHTWARD by $50 BILLION at each price level
When aggregate demand declines, wage rates may be inflexible downward, at least for a time, because of:
C. Wage contracts
Which is the following is incorrect?
C. When the price level increases, real balances increase, business and households find themselves wealthier and therefore increase their spending.
The interest-rate effect suggests that:
C. an increase in the price level will INCREASE the demand for moeny, INCREASE interest rates, and DECREASE consumption and investment spending.
Which one of the following would increase per unit production cost and therefore shift the aggregate supply curve to the left?
C. an increase in the price of imported resources
Menu costs:
C. are the costs to firms of changing prices and communicating them to customers
A shift from AS1 to AS2 might be caused by a:
C. decrease in the prices of domestic resources
Which of the above diagrams best portrays an IMPROVEMENT in EXPECTED RATES OF RETURN on investment?
C. demand curve shifts to the right
Which of the above diagrams best portrays the effects of an INCREASE in COSUMER SPENDING?
C. demand curve shifts to the right
Which of the above diagrams best portrays the effects of an INCREASE in FOREIGN SPENDING on Us products?
C. demand curve shifts to the right
The factors that affect the amounts that consumers, businesses, governement, and foreigners wish to purchase at each price level are the:
C. determinants of aggregate DEMAND
The aggregate demand curve is:
C. down sloping because of the interest-rate, real balances, and foreign purchases effects.
The aggregate supply curve (short-run) is up-sloping because:
C. per-unit production costs rise as the economy moves toward and beyonf its full-employment real output.
A substantial appreciation of the US dollar with no immediate change in the US price level would result in a:
C. rightward shift of the aggregate supply curve, such as from AS1 to AS2
Other things equal, an improvement in productivity will:
C. shift the aggregate supply curve to the right
The aggregate supply curve:
C. shows the various amounts of real output that businesses will produce at each price level
The aggregate supply curve (short-run):
C. slopes UPWARD and to the right
An increase in net exports will shift the AD curve to the:
D. right by a multiple of the change in investment
The aggregate demand curve:
D. shows the amount of real output that will be purchased at each possible price level.
(word problem) The level of productivity is:
D. 2
The most favorable shift of the aggregate supply curve for the economy would be from:
D. AS3 to AS2 (productivity)
Prices and wages tend to be:
D. Flexible UPWARD, but inflexible DOWNWARD
The real-balances effect indicated that:
D. a HIGHER price level will DECREASE the real value of many financial assets and therefore REDUCE spending.
Which of the following is a true statement?
D. a decline in aggregate demand will primarily affect real output and employment if prices are inflexible downward.
The graphical relationship between the price level and the amount of real GDP that businesses will offer for sale is known as the:
D. aggregate SUPPLY curve
Which of the following explains why the aggregate demand schedule is downwrad slopping:
D. all of the above
Which of the above diagrams best portrays the effects of a substantial REDUCTION in GOVERNMENT SPENDING?
D. demand curve shifts to the left
Which of the above diagrams best portrays the effects of DECLINES in the INCOMES OF US TRADING PARTNERS?
D. demand curved shifts to the left
The foreign purchases effect suggests that a DECREASE in the US price level relative to other countries will:
D. increase US exports and decrease US imports
The foreign purchases effect:
D. moves the economy along a fixed aggregate demand curve
An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the:
D. multiplier effect
Shifts in the aggregate supply curve are caused by changes in:
D. one or more of the determinants of aggregate supply
(double-shifted diagram) Refer to the above diagram. If the equilibrium price level is P1, then:
D. producers will supply output level Q1
A shift from AS3 to AS2 might be caused by an increase in:
D. productivity
When aggregate demand declines, many firms may reduce employment rather than wages because wage reductions may:
B. reduce worker morale and work effort, and thus lower productivity
If the price level increases in the US relative to foreign countries, then American consumers will purchase more foreign goods and fewer US goods. This statement describes:
B. the foreign purchases effect
(double-shifted diagram) Refer to the above diagram. If equilibrium real output is Q2, then:
D. the equilibrium price level is P2
The aggregate supply curve (short-run) slopes upwards and to the right because:
D. wages and other resources prices adjust only slowly to changes in the price level
