Chapter 10

A rise in the price of oil would be most likely to cause which of the following in the United States?

an economic slowdown or recession

Which of the following will most likely accompany an unanticipated increase in aggregate demand?

an increase in real output

Which of the following will most likely result from an unanticipated decrease in aggregate supply due to unfavorable weather conditions in agricultural areas?

an increase in the general level of prices

Which is most likely to cause a temporary spurt in the growth of GDP that cannot be maintained in the long run?

An unanticipated increase in aggregate demand.

Suppose there was a sharp reduction in stock prices and a sharp increase in the world price of crude oil. Within the framework of the AD/AS model, how would these two changes influence the U.S. economy?

The lower stock prices would reduce AD, and the higher crude oil prices would reduce SRAS; as a result, output would tend to decline.

Which of the following will most likely occur in the short run when the long-run equilibrium of an economy is disturbed by an unanticipated decrease in aggregate demand?

a decrease in output and a lower price level

Which of the following will cause an increase in aggregate demand within the AS/AD model?

a decrease in the real interest rate

Which of the following will most likely cause an increase (shift to the right) in both the long-run and short-run aggregate supply curves?

a technological improvement in robotics that substantially increases labor productivity

During an economic contraction, housing and stock prices generally

fall, leading to a reduction in aggregate demand.

Which of the following reduced aggregate demand and thereby contributed to the crisis of 2008?

falling of housing and stock prices.

From mid-year 2006 to year-end 2008, housing prices

fell by approximately 30 percent, leading to a sharp reduction in aggregate demand.

If European economies experience strong economic growth, U.S. net exports will

increase and AD will shift rightward.

With regard to the business cycle, most modern economists believe that

lower real interest rates and reductions in real resource prices will help direct an economy out of recession.

If a market economy was in a recession, which of the following would help direct it back toward the full employment rate of output?

lower resource prices and lower real interest rates

If the general level of prices is lower than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources, which of the following is most likely to occur?

output less than the economy's long-run potential

An increase in the long-run aggregate supply curve indicates that

potential real GDP has increased.

When output is less than the economy's long-run capacity, which of the following is most likely to occur?

reductions in real interest rates and real resource prices

Which of the following would be most likely to cause an increase in current aggregate demand in the United States?

sharp increase in the value of stocks owned by Americans

When an economy is experiencing an economic boom and operating beyond its long-run capacity,

strong demand for investment funds will push interest rates upward.