3.3 Short-Run Aggregate Supply (SRAS)

If Short Run Aggregate Supply shifts left, then inflation increases. What is the term that identifies the phenomenon where inflation rises and unemployment increases due to a decrease in SRAS?

Cost-Push

Which part of the SRAS is identified as the Keynesian Range?

Horizontal

Besides more and better education, Human Capital expansion can also mean: I. Immigrant worker increase II. Better health and nutrition for the population III. Increased population of retirees

I and II Only

In the Long Run, an economy will not stay working beyond full employment output levels because

higher wages cause a Short Run Aggregate Supply shift to the left.

One reason why wages remain fixed in the short run is because

of fixed-wage contracts.

Suppose a program that gave tax credits to domestic oil manufacturers expired and the credits pertained to oil exploration and extraction. Ceteris paribus, which of the following is true of aggregate supply?

Aggregate supply will decrease since production costs will effectively increase.

Suppose the U.S. government decided to put tighter environmental regulations on automobiles and trucks and that such a move would add an average of an additional $1,000 cost per vehicle. What effect would that have on aggregate supply?

Aggregate supply will decrease.

Which of the following situations would not shift the short-run aggregate supply curve to the right?

An increase in the price of oil.

Which of the following events would cause short-run aggregate supply to shift to the left?

An increase in the price of steel and other commodities.

Which of the following statements are valid for explaining why the price level starts to increase with output in the intermediate range? I. Resources are abundant. II. Firms may have to use outdated equipment. III. Workers become more scarce.

II and III only.

The Keynesian idea that prices are "sticky" is best summarized by which of the following statements?

In the short run, output prices tend to change more quickly than input prices.

Suppose the minimum wage was not changed for 8 years and during that time, the short run aggregate supply curve had shifted left. Which of the following must be true?

Minimum wage workers have less purchasing power than before the shift.

In the Keynesian range of the aggregate supply curve, which of the following results from increases in output?

No changes in price level.

What is the "catch-up" effect?

Poor countries tend to grow more rapidly than rich countries.

Which of the following is a characteristic of short run aggregate supply?

Positive slope on a normal macroeconomics AD/AS graph.

Which of the following is NOT a part of per-unit production cost?

Price level.

Which of the following is NOT one of the factors of the aggregate supply curve?

Price level.

Which of the following statements best explains the shape of the short-run aggregate supply (SRAS) curve?

SRAS is upward-sloping because input prices are sticky in the short run, making it profitable to supply more goods at higher price levels.

A hurricane threat causes most of the US oil rigs in the Gulf of Mexico to shut down for a week but the hurricane hits Cuba instead. Which of the following is the MOST accurate depiction of what happens to Aggregate Supply in the US?

Short run aggregate supply shifts left.

How would an increase in nominal wages affect a country's short-run aggregate supply?

Short-run aggregate supply will decrease and shift to the left.

Which of the following is NOT a determinant of worker productivity?

Taxes per worker.

Which of the following is the BEST example of the term "Sticky Wages"?

The average hourly pay does not decrease during a recession.

The key consideration when determining the difference between nominal and real wages is

inflation

Short run aggregate supply

is a period of time where nominal wages remain fixed in spite of price level increases.

An unplanned increase in inventories would suggest that Short Run Aggregate Supply

is increasing relative to demand.

When the FED targets nominal income as a way of dealing with a negative supply shock it is a favorable decision because

it splits the negative effects between income loss and price level increases.

Wages and salaries

make up about 80% of all business costs.

A general increase in health insurance costs will

most likely decrease aggregate supply.

Market power is a determinant of the Aggregate Supply curve. Identify the situation that BEST exemplifies the determinant.

Aggregate Supply curve shifts right when OPEC loses its grip on oil production and cheaper oil prices result in higher output.

Which of the following things would NOT cause short-run aggregate supply to shift?

An increase in the level of wealth.

If a population grows rapidly, this can be detrimental to Aggregate Supply because

capital resources may be stretched thin.

If net investment rises then

capital stock increases.

If the productivity of workers falls, then

the Aggregate Supply curve shifts left indicating decreased supply.

Consider an open economy where the country Xanadu trades for at least half of the input resources needed for production. If that country's unit of currency underwent temporary depreciation, then

the change will likely impact short-run aggregate supply and not long-run aggregate supply.