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Answer the question on the basis of the following information. 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. Refer to the information. The per-unit cost of production in this economy is:

$0.10

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. Answer the following question on the basis of this information. The per-unit cost of production in the economy described is:

$2

Suppose that technological advancements stimulate $20 billion in additional investment spending. If the MPC = .6, how much will the change in investment increase aggregate demand?

$50 billion

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. Answer the following question on the basis of this information. Refer to the information. The level of productivity is:

2

In the diagram, the economy's immediate-short-run aggregate supply curve is shown by line:

3

Answer the question on the basis of the following information. 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. Refer to the information. If the per-unit price of raw materials rises from $4 to $8 and all else remains constant, the per-unit cost of production will rise by about:

30 percent

In the diagram, the economy's immediate-short-run AS curve is line ______, its short-run AS curve is _____, and its long-run AS curve is line ______.

3; 2; 1

In the diagram, the economy's relevant aggregate demand and immediate-short-run aggregate supply curves, respectively, are lines:

4 and 3

What percentage of the average U.S. firm's costs are accounted for by wages and salaries?

75

The aggregate supply curve (short run) is upsloping because:

per-unit production costs rise as the economy moves toward and beyond its full-employment real output.

A rightward shift in the aggregate supply curve is best explained by an increase in:

productivity

In the diagram, a shift from AS3 to AS2 might be caused by an increase in:

productivity

Productivity measures:

real output per unit of input

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. Answer the following question on the basis of this information. Refer to the information. All else being equal, if the price of each input increased from $4 to $6, productivity would:

remain unchanged

An increase in net exports will shift the AD curve to the:

right by a multiple of the change in investment.

If investment increases by $10 billion and the economy's MPC is .8, the aggregate demand curve will shift:

rightward by $50 billion at each price level.

Other things equal, an improvement in productivity will:

shift the aggregate supply curve to the right.

The aggregate demand curve:

shows the amount of real output that will be purchased at each possible price level.

The aggregate supply curve:

shows the various amounts of real output that businesses will produce at each price level.

The aggregate supply curve (short run):

slopes upward and to the right.

Suppose that nominal wages fall and productivity rises in a particular economy. Other things equal, the aggregate:

supply curve will shift rightward.

If the price level increases in the United States relative to foreign countries, then American consumers will purchase more foreign goods and fewer U.S. goods. This statement describes:

the foreign purchases effect.

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. Answer the following question on the basis of this information. Refer to the information. Given an increase in input price from $4 to $6, we would expect the aggregate:

the supply curve to shift to the left

Per-unit production cost is:

total input cost divided by units of output.

The shape of the immediate-short-run aggregate supply curve implies that:

total output depends on the volume of spending.

The real-balances, interest-rate, and foreign purchases effects all help explain:

why the aggregate demand curve is downsloping.

Answer the question on the basis of the following information. 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. Refer to the information. If the per-unit price of raw materials rises from $4 to $8 and all else remains constant, the aggregate:

The supply curve would shift to the left

Which of the following is incorrect?

When the price level increases, real balances increase and businesses and households find themselves wealthier and therefore increase their spending.

Which one of the following would not shift the aggregate demand curve?

a change in the price level

In the diagram, a shift from AS1 to AS2 might be caused by:

a decrease in the prices of domestic resources.

The real-balances effect indicates that:

a higher price level will decrease the real value of many financial assets and therefore reduce spending.

Other things equal, if the national incomes of the major trading partners of the United States were to rise, the U.S.:

aggregate demand curve would shift to the right.

Other things equal, if the U.S. dollar were to depreciate, the:

aggregate supply curve would shift to the left.

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

an appreciation of the U.S. dollar

Which of the following would most likely shift the aggregate demand curve to the right?

an increase in stock prices that increases consumer wealth

Which of the following would not shift the aggregate supply curve?

an increase in the price level

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.

Which one of the following would increase per-unit production cost and therefore shift the aggregate supply curve to the left?

an increase in the price of imported resources

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 factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the:

determinants of aggregate demand

The aggregate demand curve is:

downsloping because of the interest-rate, real-balances, and foreign purchases effects.

Other things equal, a decrease in the real interest rate will:

expand investment and shift the AD curve to the right.

The determinants of aggregate demand:

explain shifts in the aggregate demand curve.

The immediate-short-run aggregate supply curve is:

horizontal

The determinants of aggregate supply:

include resource prices and resource productivity

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.

The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries will:

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

In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to:

increase aggregate demand

Other things equal, a reduction in personal and business taxes can be expected to:

increase both aggregate demand and aggregate supply.

In the diagram, a shift from AS2 to AS3 might be caused by a(n):

increase in business taxes and costly government regulation.

In the diagram, a shift from AS1 to AS3 might be caused by a(n):

increase in the prices of imported resources.

The aggregate supply curve (short run):

is steeper above the full-employment output than below it.

A decline in investment will shift the AD curve to the:

left by a multiple of the change in investment.

If investment decreases by $20 billion and the economy's MPC is .5, the aggregate demand curve will shift:

leftward by $40 billion at each price level.

The foreign purchases effect:

moves the economy along a fixed aggregate demand curve.

An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the:

multiplier effect


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