Econ 8

Which of the diagrams best portrays the effects of an increase in resource productivity?

1

Which of the diagrams best portrays a recession as a result of an increase in the cost of production?

2

Answer the next question based on the following list of factors that are related to the aggregate demand curve.

2 & 4

Which of the following factors will shift AS1 to AS2?

A decrease in business taxes.

If current output is Q1 and full-employment output is Q2, then in the long run the short aggregate supply schedule is

AS2.

In which of the following sets of circumstances can we confidently expect inflation?

Aggregate supply decreases and aggregate demand increases.

Which of the following factors will shift AS1 to AS3?

An increase in input prices.

The intersection of the aggregate demand and aggregate supply curves determines the

equilibrium level of real domestic output and prices.

A decrease in business taxes will tend to

increase aggregate supply.

If the price level decreases from 200 to 100, the real output demanded will

increase by $200 billion.

Other things equal, a shift of the aggregate supply curve from AS0 to AS1 might be caused by a(n)

increase in government regulation.

Graphically, cost-push inflation is shown as a

leftward shift of the AS curve.

The aggregate demand curve or schedule shows the relationship between the total demand for output and the

price level.

Which would most likely shift the aggregate supply curve? A change in the prices of

resources.

An increase in production costs is most likely to shift the

short-run aggregate supply curve to the left.

At the price level of 150, there will be a general

shortage in the economy, and output demanded will decrease as the price level rises.

When the dollar appreciates relative to foreign currencies, it means that

the value of foreign currencies decreased relative to our dollar.

An increase in net exports will shift the aggregate expenditures curve

upward and the aggregate demand curve rightward.

In the aggregate demand-aggregate supply model, the economy's price level is assumed to be

variable, unlike in the aggregate expenditures model.

A decrease in production costs is likely to cause a movement from

point B to A.

If the price level decreases, then the aggregate expenditures schedule will shift and this translates into a

movement down along the aggregate demand curve.

The short-run equilibrium for this economy is at

point g.

The real-balance effect pertains to the effect of

price changes on aggregate demand, while the wealth effect refers to the impact of changes in wealth on aggregate demand.

Changes in which of the following would not shift the aggregate demand curve?

productivity rates

In the diagram, the economy's short-run AS curve is line ___ and its long-run AS curve is line ___.

2,1

If the quantity of real domestic output demanded increased by $1,000 at each price level, the new equilibrium price level and quantity of real domestic output would be

250 and $2,500.

The short-run aggregate supply curve would be represented by which line?

3

Which of the diagrams best portrays the effects of an increase in foreign spending on U.S. products and an expansion?

3

Which of the diagrams best portrays an expansion?

Graphs (1) and (3)

The economy's long-run AS curve assumes that wages and other resource prices

eventually rise and fall to match upward or downward changes in the price level.

In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to

increase aggregate demand.

The labels for the axes of the aggregate demand graph should be

real domestic output on the horizontal axis and the price level on the vertical axis.

[If the aggregate supply curve shifted from AS0 to AS1 and the aggregate demand curve remains at AD0, we could say that

aggregate supply has decreased, equilibrium output has decreased, and unemployment has increased.

An increase in the price level, other things equal, will shift the

consumption, investment, and net exports schedules of the aggregate expenditures model downward.

In the mid-1970s, changes in oil prices greatly affected U.S. inflation. When oil prices rose, the U.S. would experience

cost-push inflation and falling output.

When national income in other nations decreases, aggregate demand in our economy

decreases because our exports will decrease.

A shift from AD1 shifts to AD2 would be consistent with what economic event in U.S. history?

demand-pull inflation in the late 1960s

If the economy is operating at full employment when its aggregate demand curve is AD2, then a further increase in consumption and investment spending will cause

demand-pull inflation, and the new equilibrium output will be more than Q2.

The economy's long-run aggregate supply curve

is vertical.

Graphically, the full-employment, low-inflation, rapid-growth economy of the last half of the 1990s is depicted by a

rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve.