Macro exam 3

An increase in expected future income will:

Increase aggregate demand

An increase in productivity will:

Increase aggregate supply

If Congress passed new laws significantly increasing the regulation of business, this action would tend to:

Increase per-unit production costs and shift the aggregate supply curve to the left

The real-balances effect on aggregate demand suggests that a:

Lower price level will increase the real value of many financial assets and therefore cause an increase in spending

Wage contracts, efficiency wages, and the minimum wage are explanations for why:

Wages tend to be inflexible downward

In the diagram, a shift from AS2 to AS3 might be caused by a(n):

increase in business taxes and costly government regulation

Refer to the diagram. 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 fear of unwanted price wars may explain why many firms are reluctant to:

reduce prices when a decline in aggregate demand occurs.

Graphically, demand-pull inflation is shown as a:

rightward shift of the AD curve along an upsloping AS curve.

Refer to the diagram. If equilibrium real output is Q2, then:

the equilibrium price level is P2

In the figure, AD1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves. The change in aggregate supply from AS1 to AS2 could be caused by:

the increase in productivity.

Which of the diagrams best portrays the effects of a decrease in the availability of key natural resources?

B

A decrease in aggregate demand in the short run will reduce:

Both real output and the price level

The foreign purchases, interest rate, and real-balances effects explain why the:

Aggregate demand curve is downward-sloping

A decrease in consumer spending can be expected to shift the:

Aggregate expenditures curve downward and the aggregate demand curve leftward

Use the following diagrams for the U.S. economy to answer the following question.

D

An increase in personal income tax rates will cause a(n):

Decrease (or shift left) in aggregate demand

If the U.S. dollar appreciates in value relative to foreign currencies, then this will:

Decrease aggregate demand and increase aggregate supply

A decrease in government spending will cause a(n):

Decrease in aggregate demand

An increase in net exports will shift the:

aggregate expenditures curve upward and the aggregate demand curve rightward.

Minimum wage laws tend to make the price level more flexible rather than less flexible. true or false

false