Chapter 12

Which of the following are determinants of aggregate demand?

* Change in consumer wealth * Change in investment spending

Which of the following are the four components or determinants of aggregate demand?

* Consumer spending * Investment spending * Government spending * Net export spending

Which of the following influence expected returns on investment projects?

* Expectations about future business conditions * Business taxes * Degree of excess capacity * Technology

Which of the following explain the reason for the up-sloping aggregate supply curve?

* Higher prices mean higher profits when input costs are fixed * Input costs are fixed, but output costs are variable

Which of the following are main sources of productivity?

* Improved production technology * Improved forms of business enterprises * Better educated workforce * Better trained workforce

Which of the following result from a reduction in personal income tax rates on consumers?

* Increasing consumer purchases at each possible price level * Increased take-home income

Identify factors other than the price level that would cause net exports to change.

* National income abroad * Changes in exchange rates

Which of the following best describe the effects of a depreciation of the U.S. dollar on production costs and aggregate supply (AS)?

* The dollar price of imported resources is higher * A decrease in imported resources * An increase in per-unit production costs from using imported resources * U.S. firms obtain less foreign currency with each dollar * A shift of the AS curve leftward

Which of the following describe why wages are inflexible downward?

* Wages and salaries of non-union workers are usually adjusted only once a year * Large parts of the labor force work under contracts prohibiting wage cuts for the duration of the contract

A decrease in the money supply is likely to cause a(n) _____ in interest rates, and subsequent _____ in investments and aggregate demand.

* increase * decreases

A wage increase will _____ per-unit productions costs and shift the aggregate supply curve to the _____.

* increase * left

A decrease in investment and subsequent shift of the aggregate demand curve to the left is due to:

a decline in firms' expected returns

Investment spending refers to:

adding to physical capital

The determinants of aggregate supply are variables that:

cause the aggregate supply curve to shift

Businesses and consumers will _____ investment spending and interest-sensitive consumption spending, respectively, when interest rates are higher.

decrease

"Supply-side" economists argue that increased regulations on firms by the government will _____.

decrease aggregate supply and increase prices

When the price level rises, real GDP demanded _____.

decreases

Aggregate _____ is a schedule or curve that shows the amounts of real output that buyers collectively desire to purchase at each possible price level.

demand

An increase in aggregate demand beyond the full-employment level of output that causes inflation is called:

demand-pull inflation

An increase in aggregate demand, assuming constant aggregate supply, will result in _____.

demand-pull inflation

Changes in foreign national incomes and exchange rates are two factors that might cause net _____ to change.

exports

In the long-run, output prices and input prices are:

flexible

Without a fall in the price level, any initial decrease in aggregate demand results in the multiplier being at _____.

full strength

An increase in consumer wealth prompts consumers to decrease savings and _____ spending.

increase

New and improved technology, seen as investment spending by firms will lead to a(n) _____ in aggregate demand.

increase

When price levels fall, real GDP demanded will _____.

increase

The foreign purchases effect occurs when the US price level _____ relative to foreign price levels and the quantity of US goods demanded as net exports decreases.

increases

The interest-rate effect is when a higher price level _____ the demand for money by increasing the interest rate, assuming a fixed money supply.

increases

In the short run, labor contracts that cover several months or years cause:

input prices to be sticky or slow to change

A decline in investment spending at each price level will shift the aggregate demand curve to the _____.

left

An increase in business taxes will shift the short-run aggregate supply (SRAS) curve to the _____.

left

The short-run is the period in which:

output prices are flexible but input prices are fixed or highly inflexible

Aggregate supply is represented as a schedule or curve showing the relationship between the nation's _____ level (index) and the amount of real domestic output that firms in the economy produce.

price

The minimum wage imposes a legal _____ on the wages of the least skilled workers.

price floor

The determinants of aggregate supply raise or lower per-unit _____ costs at each price level.

production

An increase in government purchases will shift the aggregate demand (AD) curve to the _____.

right

The aggregate demand curve would shift to the left if:

taxes were increased

The intersection of the aggregate demand and aggregate supply curve determine:

the equilibrium price level and equilibrium real GDP