ECO Chpt 12 homework

An increase in exports that exceeds an increase in imports (not due to tariffs)

Aggregate demand will increase

The general expectation of coming rapid inflation

Aggregate demand will increase

A 12% increase in nominal wages (with no change in productivity)

Aggregate supply will decrease

A new national tax on producers based on the value added between the costs of the input and the revenue received from their output

Aggregate supply will decrease

A sizable increase in labor productivity (with no change in nominal wages)

Aggregate supply will increase

The complete disintegration of OPEC, causing oil prices to fall by one-half

Aggregate supply will increase

Immediate short run

-A horizontal line -The price level is fixed

Which of the following will shift the AS curve to the right?

-A new networking technology increases productivity all over the economy -Business taxes fall

Suppose the central bank causes real interest rates in the economy to increase

-AD curve shifts left -AS curve stays the same -After the change, short-run equilibrium quantity will decrease -Short-run equilibrium price level will decrease

Suppose a severe, widespread drought in the Midwest causes a poor grain crop

-AD curve stays the same -AS curve shifts left -The phenomenon is known as cost-push inflation -This phenomenon causes real domestic output to decrease and the price level to increase

Short run

-An upsloping curve -Output prices are flexible, but input prices are fixed

Which of the following will shift the AD curve to the left?

-Interest rates rise -The government reduces personal income taxes

Long run

-Output is fixed -A vertical line

The explanation for a downsloping AD curve differs from the explanation for the downsloping demand curve for a single product because

A downsloping, single-product demand curve assumes constant money income such that a lower price causes a substitution of the now relatively cheaper product for those whose prices have not changed

A widespread fear by consumers of an impeding economic depression

Aggregate demand will decrease

A 10% across-the-board reduction in personal income tax rates

Aggregate demand will increase

A major increase in spending for health care by the federal government

Aggregate demand will increase

A reduction in interest rates

Aggregate demand will increase

The multiplier

Causes an initial change in spending to generate an even larger change in the AD curve

A stock market crash reduces people's wealth

Demand decreases

Consumers become more pessimistic about the economy

Demand decreases

Government spending increases

Demand increases

The US enters into an arms race with China, resulting in a significant increase in military spending

Demand increases

The spread of democracy around the world increases consume confidence in the US

Demand increases

A hurricane destroys manufacturing plants

Supply decreases

A revolution in Iran results in a significant reduction in the world's supply of oil

Supply decreases

Employers are required to provide paid sick leave to part-time as well as full-time employees

Supply decreases

A new computer chip is developed that is faster and cheaper than previous chips

Supply increases

Manufacturing firms expect steel prices to decrease significantly

Supply increases

Technological changes enable workers to be more productive

Supply increases

The long-run AS curve is vertical because the economy's potential output is determined by

The availability and productivity of real resources, not by the price level

The downsloping aggregate demand curve can be explained by

The interest-rate effect, the real-balances effect, and the foreign purchases effect

A decrease in aggregate demand

The price level does not change, but real output declines

Equal increases in aggregate demand and aggregate supply

The price level does not change, but real output increases

An increase in aggregate demand that exceeds an increase in aggregate supply

The price level increases somewhat, with a relatively large change in output

A decrease in aggregate supply, with no change in aggregate demand

The price level rises and real output decreases

An increase in aggregate deman

The price level rises rapidly and there is little change in real output

The short-run AS curve is relatively flat to the left of the full-employment output because

There are large amounts of unused capacity and idle human resources

T or F: Unemployment can be caused by a decrease of aggregate demand or a decrease of aggregate supply

True, but the magnitude of the effect on the unemployment depends on the economic situation

The shape of the short-run AS curve is

Upsloping, because wages adjust more slowly than the price level