Econ 111 (Chapter 13)
Refer to the figure to the right. Ceteris paribus, an increase in productivity would be represented by a movement from (Graph)
SRAS1 to SRAS2.
Refer to the figure to the right. Ceteris paribus, an increase in the labor force would be represented by a movement from (Graph)
SRAS1 to SRAS2.
Refer to the figure to the right. Ceteris paribus, a decrease in the capital stock would be represented by a movement from (Graph)
SRAS2 to SRAS1.
Refer to the figure to the right. Ceteris paribus, an increase in the expected future price level would be represented by a movement from (Graph)
SRAS2 to SRAS1.
Japanese electronics exports were hurt in 2008 as a result of the recession. How would this decrease in exports have affected Japan's aggregate demand curve?
The aggregate demand curve would have shifted to the left.
Milovia is a small open economy. The general price level in the economy has been increasing at a rate of about 7.5 percent each year. Jane Wilson, an industry analyst, is of the opinion that such high inflation is adversely affecting aggregate demand in the economy and therefore its ability to grow. Her colleague, Harry Gomes, however, disagrees. According to Harry, some amount of inflation is unavoidable in a growing economy. Higher prices for products help to increase the level of corporate profits and induce firms to increase aggregate output. Jane's argument is based on which of the following assumptions?
The purchasing power of nominal assets declines with an increase in the price level.
How do lower taxes affect aggregate demand?
They increase disposable income, consumption, and aggregate demand.
Spending on the war in Afghanistan is essentially categorized as government purchases. How do increases in spending on the war in Afghanistan affect the aggregate demand curve?
They will shift the aggregate demand curve to the right.
The recession of 2007−2009 made many consumers pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve?
This will shift the aggregate demand curve to the left.
The "interest rate effect" can be described as an increase in the price level that raises the interest rate and chokes off
investment and consumption spending.
An increase in the price level will
move the economy up along a stationary aggregate demand curve.
Refer to the figure to the right. Ceteris paribus, an increase in the price level would be represented by a movement from (Graph)
point A to point B.
Refer to the figure to the right. Ceteris paribus, an increase in the price level would be represented by a movement from
point B to point A.
Full-employment GDP is also known as
potential GDP.
Which aggregate supply curve has a positive slope?
short run only
The basic aggregate demand and aggregate supply curve model helps explain ________ fluctuations in real GDP and the price level.
short−term
Suppose a developing country experiences a reduction in machinery and capital equipment as foreign entrepreneurs decrease the amount of investment in the economy. As a result,
the long−run aggregate supply curve will shift to the left.
The position of the long-run aggregate supply (LRAS) curve is determined by
the number of workers, the amount of capital, and the available technology.
If stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home countries,
the long-run aggregate supply curve will shift to the left.
Workers and firms both expect that prices will be 2.5% higher next year than they are this year. As a result,
the short-run aggregate supply curve will shift to the left as wages increase.
Economists Mary Daly, Bart Hobijn, and Timothy Ni of the Federal Reserve Bank of San Francisco argue that "employers hesitate to reduce wages and workers are reluctant to accept wage cuts, even during recessions." Employers are hesitant to cut workers' salaries because wage cuts
upset workers and lower their productivity.
An increase in the price level results in a(n) ___________ in the quantity of real GDP demanded because ___________.
decrease; a higher price level reduces consumption, investment, and net exports.
When the economy enters a recession, your employer is ___________ to reduce your wages because _______.
unlikely; lower wages reduce productivity and morale
The aggregate demand curve slopes downward for all of the following reasons except:
A lower price level makes imports from other countries less expensive, and U.S. citizens buy more imports.
Refer to the figure to the right. Ceteris paribus, a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from (Graph)
AD1 to AD2.
Refer to the figure to the right. Ceteris paribus, an increase in households' expectations of their future income would be represented by a movement from (Chart)
AD1 to AD2.
Refer to the figure to the right. Ceteris paribus, a decrease in government spending would be represented by a movement from (Graph)
AD2 to AD1.
Refer to the figure to the right. Ceteris paribus, a decrease in firms' expectations of the future profitability of investment spending would be represented by a movement from (Graph)
AD2 to AD1.
Refer to the figure to the right. Ceteris paribus, an increase in interest rates would be represented by a movement from (Graph)
AD2 to AD1.
Refer to the figure to the right. Ceteris paribus, an increase in the value of the domestic currency relative to foreign currencies would be represented by a movement from (Graph)
AD2 to AD1.
How does an increase in the price level affect the quantity of real GDP supplied in the long run? (Graph)
Changes in the price level do not affect the level of GDP in the long run.
The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation. What did this technological change do the short run supply curve?
It shifted the short run aggregate supply curve to the right.
n the diagram to the right, moving from point A to point B is called a _______ the AD curve. Moving from point A to point C is referred to as a _______ the AD curve. (Graph)
Movement along; shift in
Which of the following best describes the "wealth effect"?
When the price level falls, the real value of household wealth rises.
Which of the following would cause the short run aggregate supply curve to shift to the right?
a technological advance
From August 2009 to August 2015, the Standard & Poor's Index of 500 stock prices more than doubled, while the consumer price index increased by just over 10 percent. These changes would have caused
an increase in the real value of household wealth, which shifted the aggregate demand curve to the right.
Consider the short-run aggregate supply curves in the graph at right. A movement from point A to point B on SRAS1 could be the result of a A movement from point A to point C could be the result of a change in (Graph)
change in the price level. the labor force.
Changes in the price level
do not affect the level of aggregate supply in the long run.
Aggregate demand (AD) is comprised of expenditure components that include:
government spending, consumption, investment, and net exports.
The short-run aggregate supply curve slopes upward because of all of the following reasons except
in the short run, an unexpected change in the price of an important resource can change the cost to firms.