Chapter 12

Following best described the effects of depreciation of the US dollar on production costs and aggregate supply (AS)?

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

Following summarize the effect of rising national income abroad of US exports

-US exports rise -Foreigners are encouraged to but more US products -Us aggregate demand curve shift to the right

These statements summarize are why the income and substitution effects do not explain the downward sloping aggregate demand curve

-When the general price level is lower, there is not necessarily an increase in nominal income -when the general price level falls there is no substitution for all domestically produced goods

The foreign purchases effect occurs when:

-a decline in the us price level relative to a foreign price level, increases the quantity of us goods demand as exports -a rise in the us price level relative to a foreign price level, reduces the quantity of us goods demanded as exports

Are the following exemplify the reasons for the downward slope of aggregate demand cruve

-a higher price level increases the demand for money and interest rates, assuming a fixed money supply -a higher price level decreases the purchasing power of the public accumulated savings balances

Following are determinants of aggregate demand

-change in investment spending -change is consumer wealth -change in net export spending -change in government spending

Determinants of aggregate supply

-changes in legal-institutional environments -changes in productivity -changes in input prices

Following are contributes to shifts in the aggregate demand curve

-changes to income taxes -spending multiplier

Reason for the up-sloping aggregate supply curve

-higher prices means higher profits when input costs are fixed -input cost are fixed, but output costs are variable

Following are main sources of productivity

-improved production technology -better educated workforce -better trained workforce -improved forms of business enterprises

Following result from a reduction in personal income tax rates on consumers

-increasing consumer purchases at each possible price level -increase take-home income

Factors other than the price level, that would cause net exports to change

-national income abroad -changes in exchanges rates

Following statements best illustrate a decrease in domestic resources prices and associated shift of the AS curve

-supply of available land expends shifting the AS curve rightward -a substantial rise in immigration decrease wages shifting the As curve rightward -a decrease in the price of steel and electronic components shifts the AS Curve rightward

Deflation occurs when there is:

a decreasing aggregate price level

Productivity is the measure of the relationship between:

a national's level of real output and the amount of resources used to produce that output

Raise business taxed shift the:

aggregate demand curve to the left

Wage increases shift the:

aggregate supply curve to the left

Demand Pull Inflation

an increase in aggregate demand beyond the full employment level of output that causes inflation

Wealth effect

an unexpected increase in asset values that results in an increase in consumer spending

When firms realize that excess capacity is shrinking, investment spending

and aggregate demand will increase

A decrease in aggregate supply, assuming constant aggregate demand, will result in ____ inflation

cost-push

When interest rate are higher, business and consumers will:

decrease investment spending and interest- sensitive consumption spending, respectively

The "other things" that change and shift the aggregate demand curve are called:

determinants of aggregate demand or aggregate demand shifters

A decline in the rate of inflation

disinflation

The price of foreign currencies in terms of the US dollar is called:

dollar exchange rate

In the immediate short run, output prices are typically fixed because:

firms enter into supply contract with their customers

In the long run of aggregate supply, input and output prices are both _____

flexible

The three time horizons that influence how quickly output and input prices can change are:

immediate short run, short-run, and long-run

In the short run, output prices are flexible and ____ prices are sticky

input

In the short run:

input prices are fixed and output prices can vary

Productivity

is the measure of the relationship between a nation's level of real output and the amount of resources used to produce the output

A legal floor placed on wages is called:

minimum wage

Economists view investment spending on

physical capital

An input is a _____ price while an output price makes up the price level

resource

Two changes of the legal-institutional environment that will shift the aggregate supply curve

taxes and government regulations

Consumer wealth

total dollar value of all assets owned by consumers in the economy less the dollar value of their liabilities

Productivity can be illustrated in the formula:

total output divided by total inputs