Test 2

Use the following graph to answer the next question. Which of the following factors will shift AD1 to AD3?

A decrease in consumer wealth

Which combination of factors would most likely increase aggregate demand?

An increase in consumer wealth and a decrease in interest rates.

Use the following graph to answer the next question. Which of the following factors will shift AS1 to AS3?

An increase in input prices

Which of the following effects best explains the downward slope of the aggregate demand curve?

An interest rate effect

The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation?

Business costs and wage rates have decreased.

Congress's passage of new laws significantly increasing the regulation of business would tend to _____.

Congress's passage of new laws significantly increasing the regulation of business would tend to _____.

Use the following diagrams for the U.S. economy to answer the next question. Which of the diagrams best portrays the effects of an increase in resource productivity?

Graph 1

Use the following diagrams for the U.S. economy to answer the next question. If the economy is initially at full employment, which of the diagrams best portrays a recession as a result of an increase in the cost of production?

Graph 2

Use the following diagrams for the U.S. economy to answer the next question. Which of the diagrams best portrays the effects of an increase in foreign spending on U.S. products and an expansion?

Graph 3

Use the following diagrams for the U.S. economy to answer the next question. Which of the diagrams best portrays the effects of a substantial reduction in government spending?

Graph 4

Use the following figures to answer the next question. In the diagrams, AD1 and AS1 are the "before" curves. Stagflation is depicted by _____.

Panel B (only)

When the general price level in our economy increases, which of the following effects does NOT occur?

The purchasing power of people's savings will increase.

Which would most likely increase aggregate supply?

an increase in productivity

If the dollar appreciates in value relative to foreign currencies, aggregate demand _____.

decreases because net exports decrease

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

A decrease in the price of crude oil would most likely _____.

increase aggregate supply in the U.S.

If the national incomes of our trading partners increase, then our aggregate demand _____.

increases because net exports increase

The short-run aggregate supply curve is most likely to shift to the right if _____.

input prices decrease

The economy experiences an increase in the price level and a decrease in real domestic output. Which of the following is a likely explanation?

input prices have increased

If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium _____.

output would necessarily rise

Which of the following would not shift the aggregate demand curve?

productivity rates

Suppose that oil prices increase sharply while the rate of growth in labor productivity declines. The combination of these two factors should ______.

shift the short-run aggregate supply curve to the left