Econ 13.1 13.2
The aggregate demand curve slopes downward for all of the following reasons except:
A lower price level makes imports from other countries less expensive, and U.S. citizens buy more imports.
Which of the following statements is correct if real GDP in the United States declined by more during the 2007minus−2009 recession than did real GDP in Canada, China, and other trading partners of the United States?
Imports to the United States fell more than the U.S. exports, leading to an increase in net exports.
Which of the following statements is true? Which of the following factors will cause the long-run aggregate supply curve to shift to the right
In the long run, changes in the price level do not affect the level of real GDP All of the above.
Why does the short-run aggregate supply curve slope upward Why does the failure of workers and firms to accurately predict the price level result in an upward-sloping aggregate supply curve?
Profits rise when the prices of the goods and services firms sell rise more rapidly than the prices they pay for inputs. All of the above
Source: Jon Hilsenrath, "Rising Dollar and Falling Oil Could Be Recipe For a U.S. Asset Boom," Wall Street Journal, December 11, 2014. A "strong dollar" means that the_____ "Weak growth overseas" means that_____ The combination of a strong U.S. dollar and weak growth overseas might result in lower U.S. exports because______ The result of a strong dollar will be____
U.S. dollar exchanges for more units of foreign currencies . foreign economies are growing more slowly than the U.S. economy. U.S. exports become more expensive for foreign buyers while income, and purchasing power, in other countries is rising only slowly a leftward shift of the U.S. aggregate demand curve because it reduces exports, a spending component of aggregate demand.
Which of the following factors does not cause the aggregate demand curve to shift?______ How can government policies shift the aggregate demand curve to the right?____
a change in the price level by increasing government purchases
What is the effect of an increase in the price level on the short-run aggregate supply curve?
a movement up along a stationary curve
Which of the following causes the short-run aggregate supply curve to shift to the right? Which of the following causes the short-run aggregate supply curve to shift to the left?
a positive technological change an increase in the expected price of an important natural resource
From August 2009 to August 2015, the Standard & Poor's Index of 500 stock prices more than doubled, while the consumer price index increased by just over 10 percent. These changes would have caused
an increase in the real value of household wealth, which shifted the aggregate demand curve to the right.
Consider the two aggregate demand curves in the graph at right. A movement from point A to point B on AD1 could be the result of a A movement from point A to point C could be the result of a
change in the price level. change in the expectations of households.
The long-run aggregate supply curve is vertical because in the long run,
changes in the price level do not affect potential GDP, as potential GDP depends on the size of the labor force, capital stock, and technology.
"It's easy to understand why the aggregate demand curve is downward sloping: When the price level increases, consumers substitute into less expensive products, thereby decreasing total spending in the economy." This statement is false because the aggregate demand curve is
downward sloping because as prices rise, consumer real wealth declines, interest rates rise, and exports become more expensive.
The aggregate demand curve slopes downward ____and the demand curve for an individual product slopes downward due to consumers substituting the more expensive product for cheaper goods____
due to the wealth effect, the interest-rate effect, and the international-trade effect due to consumers substituting the more expensive product for cheaper goods
The short-run aggregate supply curve slopes upward because of all of the following reasons except
in the short run, an unexpected change in the price of an important resource can change the cost to firms.
"the economy's potential to supply goods and services [is] determined by such things as labour force and capital stock, as well as inflation expectations." This list of the determinants of potential GDP is
incorrect since changes in the expected price level affect short run aggregate supply but not the long run aggregate supply.
Firms become more optimistic and increase their spending on machinery and equipment. Because this is a change in___ The federal government increases taxes in an attempt to reduce a budget deficit. Because this is a change in_____ . The U.S. economy experiences 4 percent inflation. Because this is a change in_____
investment, shift rightward consumption, shift leftward price level, movement along
"Why Railroads Can't Keep Enough Boxcars in Service," Wall Street Journal, June 21, 2015. The reduction in the number of trucks and boxcars will
likely increase transportation costs and shift the short-run aggregate supply curve to the left.
More capital accumulationMore capital accumulation will cause the long-run aggregate supply curve to
shift to the right
Consider the following information about menu costs. Menu costs are If menu costs were eliminated, the short-run aggregate supply curve will be
the costs to firms of changing prices upward sloping, wage price stickiness and slow wage adjustment by firms
What relationship is shown by the aggregate demand curve? The aggregate demand curve shows the relationship between The short run aggregate supply curve shows the relationship in the short run between
the price level and the quantity of real GDP demanded by households, firms, and the government. the price level and the quantity of real GDP supplied by firms
If the price level increases, then
there will be a movement up along a stationary aggregate demand curve
Increases in the interest rate will make the aggregate demand curve shift
to the left
Federal Reserve Bank of San Francisco Economic Letter, July 15, 2013. Employers are hesitant to cut workers' salaries because wage cuts
upset workers and lower their productivity
An increase in the price level will cause a____ An increase in the gov't purchases will cause a An increase in the state income taxes will cause a An increase in the interest rates will cause a A faster income growth in other countries will cause
upward right left left right
The wealth effect refers to the fact that_____ The interest rate effect refers to the fact that a higher price level results in_____ The international-trade effect refers to the fact that an increase in the price level will result in____
when the price level falls, the real value of household wealth rises, and so will consumption. higher interest rates and lower investment. a decrease in exports and an increase in imports.
Source: "Careful Now," Economist, April 11, 2015. During a recession, some firms lay off some of their workers, while not cutting the wages of the workers they continue to employ, because the workers they continue to employ Could these firms have reduced their labor costs by the same, or possibly more, if they laid off fewer workers while cutting wages? What does the article mean by firms reducing the "cash value" of workers' wages? If firms want to reduce workers wages over time, they have to reduce
would likely react by becoming less productive if their wages are cut. No, because workers would become disgruntled with wage cuts and reduce their productivity, resulting in higher production costs. It means firms found it difficult to cut nominal wages. the cash or nominal value, of wages