eco 111 quiz 7

Inflation tends to

reduce the strength of the multiplier.

Refer to the diagrams, in which AD 1 and AS 1 are the "before" curves and AD 2 and AS 2 are the "after" curves. Other things equal, an increase in investment spending is depicted by

C

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.

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. The per-unit cost of production in the economy described is

$2.

In the accompanying graph, the long-run aggregate supply curve would be represented by which line?

4 (vertical line)

Suppose that an economy produces 2,400 units of output, employing 60 units of input, and the price of the input is $30 per unit. The level of productivity in this economy is

40

1Real-Balances Effect 2Household Expectations 3Interest-Rate Effect 4Personal Income Tax Rates 5Profit Expectations 6National Incomes Abroad 7Government Spending 8Foreign Purchases Effect 9Exchange Rates 10Degree of Excess Capacity Answer the question based on the accompanying list of factors that are related to the aggregate demand curve. A change in net export spending would most likely be caused by changes in

6 and 9

Refer to the diagrams, in which AD 1 and AS 1 are the "before" curves and AD 2 and AS 2 are the "after" curves. A recession is depicted by

A and B.

Refer to the diagrams, in which AD 1 and AS 1 are the "before" curves and AD 2 and AS 2 are the "after" curves. Other things equal, inflation is absent in

A and C

Refer to the graph. Which of the following factors will shift AD 1 to AD 3?

a decrease in consumer wealth

In the diagram, a shift from AS 1 to AS 2 might be caused by

a decrease in the prices of domestic resources.

Refer to the diagram. If the aggregate supply curve shifted from AS 0 to AS 1 and the aggregate demand curve remains at AD 0, we could say that

aggregate supply has decreased, equilibrium output has decreased, and the price level has increased.

Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)?

an appreciation of the U.S. dollar

The interest-rate effect suggests that

an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.

The immediate-short-run aggregate supply curve represents circumstances where

both input and output prices are fixed.

Other things equal, appreciation of the dollar

decreases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources.

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will

increase U.S. exports and decrease U.S. imports.

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift

rightward by $50 billion at each price level.

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each unit of labor, $3. If the per-unit price of raw materials rises from $4 to $8 and all else remains constant, the aggregate

supply curve would shift to the left.

In the figure, AD 1 and AS 1 represent the original aggregate supply and demand curves, and AD 2 and AS 2 show the new aggregate demand and supply curves. The change in aggregate supply from AS 1 to AS 2 could be caused by

the increase in productivity.