Warm up CHAP 12

The economy's long-run AS curve assumes that wages and other resource prices

eventually rise and fall to match upward or downward changes in the price level.

The determinants of aggregate demand

explain shifts in the aggregate demand curve.

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

a change in the price level

The aggregate demand curve

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

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

75

In which of the following sets of circumstances can we confidently expect inflation?

Aggregate supply decreases and aggregate demand increases.

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

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.

A decline in investment will shift the AD curve to the

left by a multiple of the change in investment.

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

multiplier effect.

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

productivity.

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.