ECON - Aggregate Demand Smartbook

Increased government spending spurs a short-run expansion. Over time, aggregate supply eventually shifts to the left, returning the economy to the full-employment level of output. In this new long-run equilibrium, the distribution of output and resources in the economy changes. In this new long-run equilibrium, the distribution of resources changes but not output. In this new long-run equilibrium, neither the distribution of output nor resources changes. In this new long-run equilibrium, the distribution of output changes but not resources.

In this new long-run equilibrium, the distribution of output and resources in the economy changes.

Lower U.S. incomes tend to _______ (increase/decrease) U.S. imports and ______ (increase/decrease) net exports. (Use wording provided.)

decrease increase

A(n) _______ in output increases _______ as less labor is needed to produce the lower level of real GDP.

decrease unemployment

Equilibrium in the aggregate demand and supply model consists of a price ______ and a quantity of _______ _______.

level real GDP

As wages rise, firms cut back production in the ______ run and output falls.

long

Government policies, natural disasters, and a variety of other events can shift the aggregate supply and demand curves moving the economy away from its _______ -run full-employment level of real GDP.

long

The ______ -run aggregate supply curve is a vertical line originating at the full-employment level of real GDP.

long

The ______-run aggregate supply curve is a vertical line originating at the full-employment level of real GDP. (Enter one word for the blank.)

long

In the long run, the equilibrium price level is determined by the intersection of the _____ -run aggregate supply curve and the aggregate _____ curve.

long demand

In the long run, the equilibrium price level is determined by the intersection of the ______ -run aggregate supply curve and the aggregate _____ curve.

long demand

In the ______ run, the level of real GDP is determined by the long-run aggregate _____ curve.

long supply

Aggregate supply illustrates how the total amount of goods and services produced in an economy relates to the ______ level.

price

The equilibrium ______ level is determined by the intersection of the short-run aggregate supply curve and the aggregate demand curve.

price

In the short run, an increase in the ________ will increase the quantity of real GDP supplied. aggregate demand price level price unemployment rate

price level

A leftward shift of aggregate supply causes ______ to rise with _______ .

prices unemployment

Government _______ refer to all payments made by the government whether as transfer payments or as payments for final goods and services.

purchases

Aggregate demand and aggregate supply are connected to the business cycle through ______ GDP.

real

Aggregate demand relates the price level to _______ GDP (one word).

real

The income effect for an individual good is similar to the: foreign-purchases effect for the aggregate demand. interest rate effect for the aggregate demand. diminishing marginal utility for the aggregate demand. real balances effect for the aggregate demand.

real balances effect for the aggregate demand.

When the price level falls in the _____ run, output will contract because profit margins decrease.

short

If the short-run aggregate supply curve and the aggregate demand curve intersect at the full employment level of output the economy is in _____ -run and ______ -run equilibrium.

short long

Formal rules like minimum wage laws, insurance requirements, and worker safety requirements are examples of _______ institutions that influence the aggregate ______

social supply

Government ________ refer only to those payments made by the government for final goods and services that it consumes.

spending

Before the 1970s, rising inflation and unemployment called ______ was unknown in the U.S.

stagflation

The term ______ was coined in the 1970s during a period of high unemployment in the United States.

stagflation

______ is a combination of the words stagnation and inflation.

stagflation

A negative shock causes aggregate ____ to fall at every price level.

supply

A positive shock causes aggregate ______ to rise at every price level.

supply

As nominal wages and the costs of other resources fall during a recession, aggregate _______ shifts to the right.

supply

Generally changes to social institutions that inhibit production shift aggregate _____ to the left.

supply

In the classical model of aggregate demand and aggregate supply, it is aggregate _______ that adjusts in the long run to return the economy to its long run equilibrium.

supply

In the short run, the aggregate ______ curve slopes upward.

supply

Inflation that results from a decrease in aggregate ______ is called cost-push inflation.

supply

It doesn't matter what kind of shock an economy experiences, in the standard aggregate demand and aggregate supply model all long-run adjustments are made through changes in aggregate ______ .

supply

It doesn't matter what kind of shock an economy experiences, in the standard aggregate demand and aggregate supply model, all long-run adjustments are made through changes in aggregate _______ .

supply

Stagflation is caused by negative shocks such as rising input costs that shift aggregate ________ to the left.

supply

The aggregate ______ curve slopes upward in the short run because input prices are sticky and take time to adjust.

supply

The aggregate ______ shocks of the 70s caused by oil embargoes and domestic economic policies drove both inflation and unemployment higher.

supply

The short-run aggregate ________ curve slopes upward because input prices are sticky.

supply

When foreign incomes _______ ,aggregate demand shifts to the left.

fall

A negative shock causes aggregate demand or supply to fall at every _____ level.

price

A positive shock causes aggregate demand or supply to rise at every _____ level.

price

In the ______ run, the aggregate supply curve slopes upward.

short

According to the Phillips curve relationship, an increase in unemployment is coupled with: A decrease in the inflation rate A decrease in Real GDP. An increase in Real GDP. An increase in the inflation rate.

A decrease in the inflation rate

What might lead to an expansion in the business cycle? An increase in SRAS A decrease in SRAS An increase in business taxes A decrease in AD

An increase in SRAS

Which of the following will increase the aggregate demand curve? An increase in business taxes. A decrease in wages and other input prices. An increase in investment. A decrease in the price of valuable commodities. An increase in consumption spending.

An increase in consumption spending. An increase in investment.

GDP = C x (I + G + NX) C + (I - G - NX) C + I + G + NX C + I + G - NX

C + I + G + NX

Changes in government purchases and net exports directly affect the aggregate demand for real _______

GDP

Which of the following are the three broad categories of the determinants of aggregate supply? Productivity, Resource prices, Social institutions Population, Productivity, Resource prices Real balances, interest rates, foreign variables Income, Population, Consumption

Productivity, Resource prices, Social institutions

Short-run equilibrium occurs where ______ and _____ intersect. LRAS; AD SRAS; LRAS SRAS; AD AD; Phillips Curve

SRAS; AD

Suppose there is an economy-wide decrease in business taxes. What can we expect to see in the business cycle model? The business cycle enters a contraction. The business cycle reaches its trough. The business cycle enters an expansion. The business cycle reaches its peak.

The business cycle enters an expansion.

Suppose there is an economy-wide decrease in business taxes. What can we expect to see in the business cycle model? The business cycle reaches its peak. The business cycle enters a contraction. The business cycle reaches its trough. The business cycle enters an expansion.

The business cycle enters an expansion.

_______ is found at the intersection of the aggregate expenditures schedule and the equilibrium line. The investment schedule The equilibrium level of real GDP Aggregate supply Aggregate demand

The equilibrium level of real GDP

Which of the following explain why the Aggregate Demand (AD) curve slopes downward? The foreign-purchases effect The interest-rate effect The marginal effect The real-balances effect

The foreign-purchases effect The interest-rate effect The real-balances effect

Which of the following explain why the Aggregate Demand (AD) curve slopes downward? The interest-rate effect The marginal effect The foreign-purchases effect The real-balances effect

The foreign-purchases effect The real-balances effect The interest-rate effect

The short-run equilibrium level of real GDP is not necessarily the full-employment level of output that is consistent with the long run. (True or False) True False

True

Price level increasing, causing a movement along the aggregate demand curve, can be explained by: a decrease in net exports. the real value of savings increases. a decrease in interest rates. an increase in investment and consumption expenditure.

a decrease in net exports.

In deriving the aggregate demand curve from the aggregate expenditures model,: an increase in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is higher. a change in the price level will have no impact on the aggregate expenditures schedule. a decrease in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is higher. an increase in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is lower.

a decrease in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is higher.

If consumption or gross investment increase for any reason other than the price level, that's: both a shift of the aggregate demand and a movement along the aggregate demand. a shift of the aggregate demand. neither a shift of the aggregate demand nor a movement along the aggregate demand. a movement along the aggregate demand.

a shift of the aggregate demand.

If the amount of output firms are willing to produce at each possible price level increases, that's: a movement along the aggregate supply. both a shift of the aggregate supply and a movement along the aggregate supply. a shift of the aggregate supply. neither a shift of the aggregate supply nor a movement along the aggregate supply.

a shift of the aggregate supply.

The ______ demand and supply model can be used to describe changes in an economy's price level and real GDP in the short and the long run.

aggregate

The determination of the the long-run equilibrium price level and real GDP is found by using the long-run ______ supply curve.

aggregate

_______ demand includes the demand for goods and services as diverse as food clothing cars health care entertainment and housing.

aggregate

The equilibrium price level and real GDP are determined by the intersection of the: aggregate expenditure line and short-run aggregate supply curve. aggregate demand and short-run aggregate supply curves. aggregate expenditure line and the 45 degree line. short-run and long-run aggregate supply curves.

aggregate demand and short-run aggregate supply curves.

Indicate the likely effect of a wide-reaching cost-saving production technology on the AD-AS model. aggregate supply decreases. short-run aggregate supply decreases and aggregate supply increases. aggregate supply increases. aggregate demand decreases and aggregate supply increase.

aggregate supply increases.

The pressure on prices and nominal wages that results when an economy produces beyond its full-employment level of output is called: an expansionary policy. an inflationary gap. a recessionary gap. a contractionary policy.

an inflationary gap.

Along the short-run aggregate supply curve as price level rises the level of real GDP does not change. as price level decreases the level of real GDP supplied increases. as price level decrease the level of real GDP supplied increases. as price level increases the level of real GDP supplied also increases.

as price level increases the level of real GDP supplied also increases.

There is a(n) ______ correction mechanism in our economy which operates through the aggregate supply.

automatic

A decrease in aggregate demand: causes a rightward shift in the Phillips Curve. causes a movement down along the Phillips Curve. causes a movement up along the Phillips Curve. causes a leftward shift in the Phillips Curve.

causes a movement down along the Phillips Curve.

An increase in aggregate demand: causes a rightward shift in the Phillips Curve. causes a movement down along the Phillips Curve. causes a movement up along the Phillips Curve. causes a leftward shift in the Phillips Curve.

causes a movement up along the Phillips Curve.

A shift in the Aggregate Demand (AD) curve is due to: a change in determinants of demand. a change in aggregate supply. changes in the determinants of aggregate demand. changes in the price level.

changes in the determinants of aggregate demand.

A movement along the AD curve is due to: a change in determinants of demand. changes in the determinants of aggregate demand. changes in the price level. a change in aggregate supply.

changes in the price level.

When the dollar appreciates, foreign goods and services become ______ (cheaper/costly) to U.S. consumers and imports ______ (increase/decrease). (Choose from the wording provided.)

cheaper increase

If _______ -push inflation is occurring, it is because the aggregate ______ curve is shifting to the _______ resulting in lower output and higher prices.

cost demand left

Inflation that results from a decrease in aggregate supply is called _____ _____ inflation. supply side demand pull demand side cost push

cost push

Inflation that results from a decrease in aggregate supply is called _____ _____ inflation. supply side demand side cost push demand pull

cost push

A shock to aggregate supply that affects the economy in a positive way includes: an epidemic. rising oil prices. a blizzard. cost-saving technologies.

cost-saving technologies.

A(n) ________ in investment will shift the AE line downward and shift the AD curve to the left.

decline

Exports from the U.S. will tend to ______ when foreign incomes decrease.

decrease

Holding the price level constant, a(n) _______ in net exports causes aggregate demand to shift to the left.

decrease

If consumers the _______ amount of spending, aggregate demand shifts to the left.

decrease

Suppose every household decreases its consumption by 10% and consumption is roughly 70% of total output. A 10% decrease in consumption represents a 7% decrease in output. Aggregate demand will: decrease by more than 7% because of the expenditures multiplier. increase eventually because of the expenditures multiplier. decrease by less than 7% because of the expenditures multiplier. decrease by 7% because consumption is the largest component of aggregate demand.

decrease by more than 7% because of the expenditures multiplier.

In deriving the aggregate demand curve from the aggregate expenditures model, a(n) _______ in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is _______ before the price level change. increase; higher than decrease; lower than increase; the same as decrease; higher than

decrease; higher than

In the short run, a shift of the aggregate supply curve to the left indicates ______ production at every price level.

decreased

Holding the price level constant, a decrease in net exports _______ the aggregate demand for real GDP.

decreases

If the government _______ the amount of spending, aggregate demand shifts to the left.

decreases

One downside of increasing government expenditures is that they increase a budget ________

deficit

Increasing government purchases or decreasing taxes does have a downside in the form of a higher budget ______ , but it can also lessen the severity of the ____.

deficit recession

A decrease in consumer confidence causes aggregate ______ to fall.

demand

Inflation that results from an increase in aggregate ________ is called demand-pull inflation.

demand

Until the 1970s, most fluctuations in unemployment and inflation were due to changes in aggregate ______

demand

When aggregate ______ decreases, there is lower inflation and higher unemployment.

demand

When aggregate ______ increases, there is higher inflation and lower unemployment.

demand

The two main sources of inflation are ______ -pull and _____ -push which both result in a higher price level.

demand cost

The two main sources of inflation are ______ -pull and ______ -push which both result in a higher price level.

demand cost

If ________ -pull inflation is occurring, it is because the aggregate ______ curve is shifting to the ______ resulting in higher output and higher prices.

demand demand right

Inflation that results from an increase in aggregate demand is called: cost-pull, demand-pull inflation, demand-push inflation, cost-push inflation,

demand-pull inflation,

Inflation that results from an increase in aggregate demand is called: Multiple choice question. demand-pull inflation. demand-push inflation. cost-pull.

demand-pull inflation.

We use _______ to talk about the price and quantity of a single good or service produced in a specific market. We use _______ to describe the overall, or total, demand for all final goods and services produced in an economy. demand; aggregate demand demand; supply aggregate demand; demand aggregate demand; aggregate supply

demand; aggregate demand

Consider nominal or money wages for example. Wages tend to be stickier moving _____ -ward than ____ -ward.

down up

Consider nominal or money wages for example. Wages tend to be stickier moving ______ -ward than ______ -ward.

down up

Aggregate demand is: downward sloping. upward sloping. vertical. horizontal.

downward sloping.

Aggregate demand is: horizontal. downward sloping. vertical. upward sloping.

downward sloping.

Some of the challenges of using government expenditures to stimulate the economy are that: eventually spending will need to be cut, leading to inflation. taxes cannot be raised when spending is cut. eventually spending will need to be cut, leading to recession. increasing government expenditures can increase the deficit.

eventually spending will need to be cut, leading to recession. increasing government expenditures can increase the deficit.

The aggregate demand and supply model can be used to explain the business cycle. An initial increase in aggregate demand will cause the economy to ____. Then over time as input prices _____, the aggregate supply curve shifts to the left the economy is enters the contraction phase of the business cycle. contract; decrease contract; increase expand; increase expand; decrease

expand; increase

The equilibrium level of real GDP is found at the intersection of the aggregate _______ schedule and the equilibrium line

expenditure

The equilibrium level of real GDP is found at the intersection of the aggregate ________ schedule and the equilibrium line

expenditure

A decrease in consumer confidence causes aggregate demand to ______

fall

If the price level rises, aggregate expenditure: falls the aggregate expenditure line shifts down and there is a movement to a higher point along the aggregate demand line. rises the aggregate expenditure line shifts up and there is a movement to a lower point along the aggregate demand line. rises the aggregate expenditure line shifts up and there is a movement to a higher point along the aggregate demand line. falls the aggregate expenditure line shifts up and there is a movement to a lower point along the aggregate demand line.

falls the aggregate expenditure line shifts down and there is a movement to a higher point along the aggregate demand line.

Saving is important for long-run growth: When households save that money is available for: firms to borrow for investment; that borrowing leads to more capital and higher production in the future. households to borrow for investment; that borrowing leads to less capital and lower production in the future. firms to borrow for investment; that borrowing leads to less capital and higher production in the future. households to borrow for investment; that borrowing leads to more capital and higher production in the future.

firms to borrow for investment; that borrowing leads to more capital and higher production in the future.

When there is a negative demand shock, real GDP falls below the ______ -employment level and unemployment is higher than the _____ rate.

full natural

Lower U.S. incomes tend to decrease U.S. _______ and increase net ______

imports exports

A(n) _____ in resource costs will shift the aggregate supply curve to the left.

increase

Exports from the U.S. will tend to _______ when foreign incomes increase.

increase

Falling U.S. incomes tend to decrease U.S. imports and _______ net exports.

increase

If consumers ______ the amount of spending, aggregate demand shifts to the right.

increase

If consumers _______ the amount of spending, aggregate demand shifts to the right.

increase

When the price level increases in the short run, output will expand because profit margins _______

increase

According to the interest rate effect, when the price level ________ , people need more money to make the same number of purchases, so the demand for money _________ . As a result, interest rates increase, which lowers consumption and investment, causing the quantity of _______ real demanded to ________ .

increase increase GDP decrease

If consumers ______ the amount of goods and services they purchase given constant prices then aggregate ________ shifts to the right since more goods and services are being purchased at every ______ level. (Use one word per blank.)

increase rise demand

Increases in productivity mean ______ output or real GDP can be produced at every price level.

increased

If the purchasing power of the U.S. dollar _______ relative to other currencies, it is known as an appreciation of the U.S. dollar.

increases

Both recessions and expansions can cause _______ or a general increase in the level of prices.

inflation

Stagflation is used to describe an economy that is not growing, but has rising ______ together with high ______

inflation unemployment

Suppose the full-employment level of real GDP is $12 trillion and the economy is actually producing $13 trillion. In this case, the economy is in a(n) ______ gap.

inflationary

In the long run, as ______ prices adjust for all firms, _____ falls and the economy returns to the full-employment level of real GDP.

input output

Input prices tend to be sticky because: product prices do not change very often. input price elasticity of demand is low. labor contracts might commit firms to paying a certain wage over multiple years. labor contracts allow for wage adjustments several times a year.

labor contracts might commit firms to paying a certain wage over multiple years.

As nominal wages and the costs of other resources rise during an expansion, aggregate supply shifts to the ______

left

As nominal wages and the costs of other resources rise during an expansion, aggregate supply shifts to the _______ .

left

In the short run, a shift of the aggregate supply curve to the ______ indicates decreasing production at every price level.

left

In the long run, the equilibrium price level is determined by the intersection of the: short-run aggregate supply curve and the long-run aggregate supply curve. short-run aggregate demand curve and the aggregate supply curve. short-run aggregate supply curve and the aggregate demand curve. long-run aggregate supply curve and the aggregate demand curve.

long-run aggregate supply curve and the aggregate demand curve.

Full-employment real GDP is often used to describe: long-run aggregate supply. short-run aggregate supply. aggregate demand. frictional unemployment.

long-run aggregate supply.

The natural rate of real GDP is often used to describe: frictional employment. aggregate demand. short-run aggregate supply. long-run aggregate supply.

long-run aggregate supply.

If the economy is producing above equilibrium, unemployment is very _____ , wages will start to rise, which puts upward pressure on prices.

low

If the economy is producing above equilibrium, unemployment is very: low, wages will start to fall, which puts downward pressure on prices. high, wages will start to fall, which puts downward pressure on prices. high, wages will start to rise, which puts upward pressure on prices. low, wages will start to rise, which puts upward pressure on prices.

low, wages will start to rise, which puts upward pressure on prices.

The supply curve for an individual good or service is upward-sloping because: of the law of diminishing marginal returns. of sticky wages whereby higher price levels bring greater revenues so more labor can be employed and more output can be produced. marginal costs are increasing. prices and output always move together.

marginal costs are increasing.

According to the interest rate effect, when the price level rises, people need more money to make the same number of purchases, so the demand for ________ increases. As a result, interest rates _______ ,which ________ consumption and investment causing the quantity of real GDP demanded to ______.

money rise decrease decrease

According to the foreign purchases effect, if prices in the United States rise and prices in other countries remain stable without a corresponding adjustment in exchange rates, U.S. consumers will buy ________ foreign goods and services and _______ will rise. Foreigners will buy ________ goods and services produced in the United States and ________ will fall. The quantity of net exports will fall reducing the quantity of real GDP demanded.

more imports fewer exports

In the short run, the price level increases. Firms hire _______ workers and _______ production. The quantity of real GDP increases. As the demand for labor increases and labor contracts expire, workers will demand ______ wages. In the _____ run, output falls.

more increase higher long

If consumption gross investment or net exports are increasing because of the lower price level, there will be a: shift of the AS curve. movement along the AS curve. movement along the AD curve. shift of the AD curve.

movement along the AD curve.

If consumption, gross investment, or net exports are increasing because of a lower price level, there has been a: movement along the AD curve. shift of the AD curve. movement along the AS curve. shift of the AS curve.

movement along the AD curve.

If consumption, gross investment, or net exports are increasing because of a lower price level, there has been a: shift of the AD curve. movement along the AD curve. movement along the AS curve. shift of the AS curve.

movement along the AD curve.

A(n) _____ shock causes aggregate demand or supply to fall at every price level.

negative

Aggregate demand illustrates a(n) _____ relationship between the price level and the quantity of real GDP or output demanded.

negative

Aggregate demand illustrates a(n) _______ relationship between the price level and the quantity of real GDP or output demanded.

negative

Aggregate demand illustrates a(n) ________ relationship between the price level and the quantity of real GDP or output demanded.

negative

As _______ wages and the costs of other resources fall during a recession, aggregate supply shifts to the right.

nominal

The fact that ______ wages are sticky ______ -ward means the government has a stronger incentive to intervene in the economy in a(n) _____ .

nominal down recession

The short-run equilibrium level of real GDP is: not necessarily the full-employment level of output that is consistent with the long run. only determined by the level of long-run equilibrium GDP. the same as the full-employment level of output that is consistent with the long run. just a theoretical concept.

not necessarily the full-employment level of output that is consistent with the long run.

As wages rise, firms cut back production in the long run and ______ falls.

output

Productivity is defined as the total amount of _____ produced with a given level of ______.

output input

If many households in the economy try to increase their saving, overall saving in the economy won't increase. This describes the: confluence of saving. law of demand. paradox of thrift. law of diminishing marginal returns.

paradox of thrift.

A(n) ______ is the highest point in the business cycle.

peak

The downward-sloping line that represents the negative or inverse relationship between the rate of inflation and the unemployment rate in the short run is called the _____ curve.

phillips

A(n) ______ supply shock causes aggregate supply to rise.

positive

A movement along the aggregate supply curve is due to a change in the ______ level.

price

When the price level rises, the real value of savings falls and people are less willing or able to buy goods and services. As a result, consumption falls and the quantity of real GDP demanded decreases. This describes the: real balances effect. the foreign purchases effect. the interest rate effect. the income effect. the price effect.

real balances effect.

A decrease in aggregate demand may lead to a(n) _______ .

recession

If _______ costs rise, each additional unit of output will cost more to produce.

resource

Resource prices tend to adjust slowly in response to changes in the market. Another way to state this is to say that resource prices are sticky. resource prices are sluggish. resource prices are fixed. resource prices are flexible.

resource prices are sticky.

If the government increases the amount of spending, aggregate demand shifts to the _______

right

If consumers increase the amount of goods and services they purchase, given constant prices, then aggregate demand shifts to the ______ since ______ goods and services are being purchased at every ______ level.

right more price

If consumers increase the amount of goods and services they purchase, given constant prices, then aggregate demand shifts to the _____ since _____ goods and services are being purchased at every ________ level.

right more price

Recessions and expansions can cause inflation or a general ______ in the level of prices.

rise

According to the foreign purchases effect, if prices in the United States rise and prices in other countries remain stable without a corresponding adjustment in exchange rates, imports will ______ , exports will _____ , and net exports will reducing the quantity of real GDP demanded resulting in a(n) ________ sloping aggregate demand curve.

rise decline decline downward

If the price level falls, aggregate expenditure: rises the aggregate expenditure line shifts up and there is a movement to a higher point along the aggregate demand line. falls the aggregate expenditure line shifts down and there is a movement to a lower point along the aggregate demand line. falls the aggregate expenditure line shifts up and there is a movement to a lower point along the aggregate demand line. rises the aggregate expenditure line shifts up and there is a movement to a lower point along the aggregate demand line.

rises the aggregate expenditure line shifts up and there is a movement to a lower point along the aggregate demand line.

According to the real-balances effect, when the price level rises the real value of ________ falls and people are less willing or able to buy goods and services.

savings

If consumption gross investment or net exports are increasing because of some non-price change, there will be a: shift of the AS curve. movement along the AS curve. shift of the AD curve. movement along the AD curve.

shift of the AD curve.

If consumption, gross investment ,or net exports are increasing because of some non-price change, there will be a: movement along the AD curve. shift of the AD curve. movement along the AS curve. shift of the AS curve.

shift of the AD curve.

If consumption, gross investment ,or net exports are increasing because of some non-price change, there will be a: movement along the AS curve. shift of the AS curve. movement along the AD curve. shift of the AD curve.

shift of the AD curve.

If net exports are increasing because of some non-price change, there will be a: movement along the AS curve. shift of the AD curve. movement along the AD curve. shift of the AS curve.

shift of the AD curve.

Supply shocks cause a _____ the aggregate supply curve. movement along; shift of movement along; movement along shift of; movement along shift of; shift of

shift of; movement along

Supply shocks cause a(n) _____ the aggregate supply curve. movement along; movement along movement along; shift of shift of; movement along shift of; shift of

shift of; movement along

A decline in investment will: shift the AE line upward and shift the AD curve to the left. shift the AE line upward and shift the AD curve to the right. shift the AE line downward and shift the AD curve to the left. shift the AE line downward and shift the AD curve to the right.

shift the AE line downward and shift the AD curve to the left.

Changes in consumption and gross investment can: cause a movement along the aggregate demand curve. shift the aggregate demand curve. shift the aggregate supply. cause a movement along the aggregate supply curve.

shift the aggregate demand curve.

Assume that an economy is initially in equilibrium. If the level of investment falls, the aggregate demand curve will shift to the right. stay the same. shift to the left.

shift to the left.

Increased government spending spurs a short-run expansion. Over time, aggregate supply eventually __________, returning the economy to the full-employment level of output. In this new long-run equilibrium, the distribution of _________ in the economy changes. shifts to the right; only output shifts to the left; only resources shifts to the right; output and resources shifts to the left; output and resources

shifts to the left; output and resources

In the ______ run, input prices are fixed and do not adjust along with other prices in the economy.

short

Suppose that the government increases paperwork and raises fees for starting a business. This will cause aggregate: demand to increase, shifting to the left. supply to decrease, shifting to the right. supply to increase, shifting to the left. supply to decrease, shifting to the left. demand to decrease shifting to the right. demand to decrease, shifting to the left.

supply to decrease, shifting to the left.

Suppose that the the price of oil falls worldwide. This will cause aggregate: supply to decrease, shifting to the left. supply to decrease, shifting to the right. demand to decrease, shifting to the right. supply to increase, shifting to the right. demand to increase, shifting to the left. supply to increase, shifting to the left. demand to decrease, shifting to the left.

supply to increase, shifting to the right.

Generally changes to social institutions that inhibit production decrease aggregate: demand. consumption. investment. supply.

supply.

The long-run equilibrium occurs where: the AD and LRAS curves intersect. the AD and AS and LRAS curves intersect. the AS and LRAS curves intersect. the AD and AS curves intersect.

the AD and AS and LRAS curves intersect.

The downward-sloping line that represents the negative or inverse relationship between the rate of inflation and the unemployment rate in the short run is called: the Demand Curve. the Indifference Curve. the Supply Curve. the Phillips Curve.

the Phillips Curve.

Once an expansion occurs as nominal wages and the costs of other resources rise, eventually: the aggregate demand curve shifts to the right, the price level rises, and real GDP returns to the full employment level. the aggregate supply curve shifts to the right, the price level falls, and real GDP returns to the full employment level. the aggregate supply curve shifts to the left, the price level rises, and real GDP returns to the full employment level. the aggregate demand curve shifts to the left, the price level falls, and real GDP returns to the full employment level.

the aggregate supply curve shifts to the left, the price level rises, and real GDP returns to the full employment level.

The Phillips Curve refers to: the downward-sloping curve that represents the relationship between the price of a good and the quantity demanded. the downward-sloping line that represents the negative or inverse relationship between the rate of inflation and the unemployment rate in the short run. the upward-sloping curve that represents the relationship between the price of a good and the quantity supplied. the total potential output combinations of any two goods and services produced in an economy in one year.

the downward-sloping line that represents the negative or inverse relationship between the rate of inflation and the unemployment rate in the short run.

The Phillips Curve refers to: the upward-sloping curve that represents the relationship between the price of a good and the quantity supplied. the total potential output combinations of any two goods and services produced in an economy in one year. the downward-sloping line that represents the negative or inverse relationship between the rate of inflation and the unemployment rate in the short run. the downward-sloping curve that represents the relationship between the price of a good and the quantity demanded.

the downward-sloping line that represents the negative or inverse relationship between the rate of inflation and the unemployment rate in the short run.

If prices in the United States rise and prices in other countries remain stable, without a corresponding adjustment in exchange rates the real value of savings falls. U.S. consumers will buy more foreign goods and services and imports will rise; foreigners will buy fewer goods and services produced in the United States and exports will fall. The quantity of net exports will fall reducing the quantity of real GDP demanded. This describes the: the income effect. the interest rate effect. the price effect. the foreign purchases effect. real balances effect.

the foreign purchases effect.

The determination of the the long-run equilibrium price level and real GDP is found by using: the long-run aggregate supply curve. the production possibilities frontier the aggregate expenditures schedule. the long-run aggregate demand curve.

the long-run aggregate supply curve.

The inflation rate refers to: the percentage of workers in the labor force who are unemployed; a good indicator of the overall health of the economy. the relationship between the quantity of real GDP demanded in the economy and the price level all else held constant. the percentage increase in the overall price of goods and services in the economy from one time period to another. the total potential output combinations of any two goods and services produced in an economy in one year.

the percentage increase in the overall price of goods and services in the economy from one time period to another.

The inflation rate refers to: the total potential output combinations of any two goods and services produced in an economy in one year. the percentage increase in the overall price of goods and services in the economy from one time period to another. the percentage of workers in the labor force who are unemployed; a good indicator of the overall health of the economy. the relationship between the quantity of real GDP demanded in the economy and the price level all else held constant.

the percentage increase in the overall price of goods and services in the economy from one time period to another.

The unemployment rate refers to: the relationship between the quantity of real GDP demanded in the economy and the price level all else held constant. the percentage of workers in the labor force who are unemployed; a good indicator of the overall health of the economy. the percentage increase in the overall price of goods and services in the economy from one time period to another. the total potential output combinations of any two goods and services produced in an economy in one year.

the percentage of workers in the labor force who are unemployed; a good indicator of the overall health of the economy.

The percentage of workers in the labor force who are unemployed, a good indicator of the overall health of the economy, is called the unemployment rate. a monetary policy. the inflation rate. the interest rate.

the unemployment rate.

The percentage of workers in the labor force who are unemployed, a good indicator of the overall health of the economy, is called: the interest rate. the unemployment rate. a monetary policy. the inflation rate.

the unemployment rate.

This percentage increase in the overall price of goods and services in the economy from one time period to another is called: a monetary policy. the unemployment rate. the inflation rate. the interest rate.

the unemployment rate.

This percentage increase in the overall price of goods and services in the economy from one time period to another is called: the inflation rate. the interest rate. a monetary policy. the unemployment rate.

the unemployment rate.

This percentage increase in the overall price of goods and services in the economy from one time period to another is called: the interest rate. a monetary policy. the unemployment rate. the inflation rate.

the unemployment rate.

This percentage increase in the overall price of goods and services in the economy from one time period to another is called: the interest rate. the inflation rate. the unemployment rate. a monetary policy.

the unemployment rate.

A(n) ______ is the lowest point in the business cycle.

trough

The percentage of workers in the labor force who are unemployed, a good indicator of the overall health of the economy, is called the ______ rate.

unemployment

The term stagflation was coined in the 1970s during a period of high ______ in the United States.

unemployment

The aggregate supply shocks of the 70s caused by oil embargoes and domestic economic policies drove both inflation and unemployment _______

up

The aggregate supply shocks of the 70s caused by oil embargoes and domestic economic policies drove both inflation and unemployment _______ .

up

The long-run aggregate supply curve is a(n) _______ line originating at the full-employment level of real GDP.

vertical

One of the challenges of using government expenditures to stimulate the economy is that: it is hard to get all politicians to agree. when spending needs to be cut it can cause a recession. taxes cannot be raised when spending is cut. the amount to spend cannot be determined.

when spending needs to be cut it can cause a recession.