Aggregate Demand and Aggregate Supply

Higher expected returns on investment will:

increase the demand for capital and shift the aggregate demand curve to the right

A decrease in the money supply is likely to cause a(n) ___________ in interest rates, and _________ in investments and aggregate demand.

increase; decreases

A decrease in aggregate demand with constant aggregate supply can result in:

recession

Productivity can be illustrated in the formula:

total output divided by total inputs

Investment spending refers to:

adding to physical capital

Raising business taxes shifts the:

aggregate demand curve to the left

An increase in government spending is likely to shift the:

aggregate demand curve to the right

- Changes in input prices - Changes in productivity - Changes in legal- Institutional environment are determinants of ?

aggregate supply

A wage decrease shifts the:

aggregate supply curve to the right

Which of the following statement best illustrate a decrease in domestic resource prices and associated shift of the AS curve? - A decrease in the price of steel and electronic components shift the AS curve rightward. - A substantial rise in immigration decrease wages shifting the AS curve rightward. - The supply of available land expands shifting the AS curve rightward.

all of them

A decline in aggregate supply, assuming constant aggregate demand, will result in __________.

an increase

A decrease in taxes will lead to:

an increase in aggregate demand

A business subsidy will ________ production costs and _______ short run aggregate supply

decrease; increase

When the price level rises, real GDP demanded ________.

falls

In the immediate short run, output prices are typically fixed because:

firms enter into supply contracts with their customers

In the long run of aggregate supply, input and output prices are both ________.

flexible

In the short run, output prices are _______ and input prices are ________.

flexible ; inflexible

Other things being equal, a change in the price level will change the amount of aggregate spending and therefore change the amount of real domestic _________.

income

Aggregate demand will rise if consumers expect prices to ______ in the future.

increase

Aggregate demand will rise if consumers expect pries to ________ in the future.

increase

An increase in consumer wealth prompts consumers to decrease savings and ________ spending.

increase

Demand -pull inflation, assuming constant aggregate supp;y, results in ____________ in the price level.

increase

If firms are optimistic about the business outlook, investment will -___________.

increase

New and improve technology, seen as investment spending by firms will lead to a(n) ___________ in aggregate demand.

increase

The aggregate demand (AD) curve will shift to the right when consumers expect their future incomes to _________.

increase

When price levels fall, real GDP demanded will __________.

increase

The downward aggregate demand curve indicates ________ relationship between the price level and real GDP.

an inverse

When firms realize that excess capacity is shrinking, investment spending

and aggregate demand will increase

Which of the following exemplify the reasons for the downward slope of the aggregate demand curve?

- A higher price level decrease the purchasing power of the public's accumulated savings balances. - A higher price level increases the demand for the money and inetrest rates, assuming a fixed money supply.

- Changes to income taxes - The spending multiplier contribute to shifts in the aggregate demand curve? yes or no

- Changes to income taxes - The spending multiplier

Which of the following describe why wages are flexible downward?

- Large parts of the labor force work under contracts prohibiting wage cuts for the duration of the contract. - Wages and salaries of non union workers are usually adjusted only once a year.

Identify factors other than the price level, that would cause net exports to change.

- National income abroad - Changes in exchange rates

summarize the effect of rising national income abroad on US exports?

- US exports rise - US aggregate demand curve shifts to the right - Foreigners are encouraged to buy more US products

- When the general price level is lower, there is not necessarily an increase in nominal income. - When the general price level falls there is no substitution for all domestically produced goods. Does ----- the downward sloping demand curve

Does not the downward sloping demand curve

__________ is the measure of the relationship between a nation's level of real output and the amount of resources used to produce that output.

Productivity

_______________ is the measure of the relationship between a nation's level of real output and the amount of resources used to produce that output.

Productivity

A decrease in investment and subsequent shift of the aggregate demand curve to the left is due to:

a decline in firms' expected return

The interest-rate effect creates a downward sloping aggregate demand curve because:

a higher price level increases money demand which increases interest rates and decreases the amount of real GDP

Efficiency wages are wages that are most often:

above equilibrium to encourage better performance

An increase in aggregate demand with constant aggregate supply will result in __________ employment levels

above-full

The determinants of aggregate supply are variables that:

cause the aggregate supply curve to shift

A decrease in aggregate supply, assuming constant aggregate demand, will in inflation.

cost- push

All else equal, a/n ______ in aggregate demand (AD), assuming constant aggregate supply, will result in a/an decrease in the quality demanded for the real GDP.

decrease

"Supply-side" economists argue that increased regulations on firms by the government will ____________.

decrease aggregate supply and increase prices

An increase in the price level will:

decrease consumption

A decline in the price level is called ________.

deflation

The "other things" that change and shift the aggregate demand curve are called the __________ of aggregate demand or aggregate demand shifters.

determinants

Change in foreign national incomes and exchange rates are two factors that might cause net ______ to change.

exports

- A decrease in the prices of steel and electronic components shift the AS rightward. - A substantial rise in immigration decrease wages shifting the AS curve rightward. - The supply of available land expands shifting the AS curve rightward. Which of the following statements best

illustrate a decrease in domestic resource prices and associated shift of the AS curve

The tree time horizons that influence how quickly output and input prices can change are ________ short run, short run and long run.

immediate

The interest-rate effect occurs when a higher price level ____________ the demand for money, thereby increasing the interest rate, assuming a fixed money supply.

increases

In the short run, output prices are flexible and _______ prices are sticky.

input

Productivity can be illustrated in the formula: total output divided by total ___________.

input

The relationship between the price level and total outputs is different in each of the three time horizons because :

input prices are stickier than output prices

In the short run, labor contracts that cover several months or years cause:

input prices to be sticky or slow to change

The downward sloping aggregate demand curve indicates that there is a(n) __________ relationship between the price level and real GDP.

inverse

If firms are pessimistic about future business conditions, they are more likely to reduce current ___________ spending.

investment

A decline in investment spending at each price level will shift the aggregate demand curve to the ________.

left

A decrease in borrowing by consumers for consumption purposes will shift the aggregate demand (AD) curve to the ___________.

left

If consumers increase their saving rate in order to pay off their debts the aggregate demand (AD) curve will shift to the _____________.

left

The aggregate demand curve will shift to the _________ when there is a reduction in government purchases.

left

The aggregate demand curve will shift to the __________ when US net exports decline.

left

Input and output prices are flexible in the ___________-run.

long

An increase in real interest rates will ________ investment spending and _________ aggregate demand.

lower ; reduce

An increase in the money supply will _________ the interest rate, __________ investment and __________ aggregate demand.

lower; increase; increase

An increase in real interest will __________ investment spending and ___________ aggregate demand.

lower; reduce

The minimum wage imposes a legal _______ on the wage of the least skilled workers.

price floor

For any increase in aggregate demand, the resulting increase in real output will be smaller the greater the increase in ____________.

price level

The determinants of aggregate supply raise or lower per unit __________ costs at each price level.

production

An input price is a(n) ________ price while an output price makes up the price level.

resource

An increase in exports relative to imports will shift the aggregate demand (AD) curve to the _____________.

right

An increase in investment spending at each price level will shift the aggregate demand (AD_ curve to the _________.

right

The increase in consumer spending that results from an increase in consumer wealth aggregate demand curve to the ____________.

right

The increase in consumer spending that results from an increase in consumer wealth will shift the aggregate demand curve to the _______.

right

The relationship between the price level and total output in aggregate _______ will be different in various time horizons.

supply

The dollar's exchange rate is the:

the price of foreign currencies in terms of the US dollar

- Higher prices mean higher profits when input costs are fixed. - Input costs are fixed, but output costs are variable explain the reason for the -------- aggregate supply curve?

up-sloping

An unexpected increase in asset values that results in an increase in consumer spending is called the _______ effect.

wealth

The total dollar value of all assets owned by consumers in the economy less the dollar value of their liabilities is called consumer _________.

wealth

- Change in consumer spending - Change in net export spending - Change in government spending - Change in investment spending Which of the following are determinants of aggregate demand? are determinants of aggregate demand?

yes