Chapter 12 Aggregate Demand and Supply
The economy experiences an increase in the price level and a decrease in real domestic output. Which is a likely explanation?
Government regulations have increased substantially
If the prices of imported resources decrease, then this event would most likely:
Increase aggregate supply
The aggregate demand curve shows the:
Inverse relationship between the price level and real GDP purchased
Other things being equal, a reorganization of the OPEC cartel to permit it to increase world oil prices by 70 percent would most likely have which effect?
It would shift the aggregate supply curve left
Cost-push inflation occurs because of a:
Leftward shift in the aggregate supply curve
An aggregate supply curve shows the:
Level of real domestic output which will be produced at each possible price level
Which would increase aggregate supply?
Lower business taxes
Which would shift the aggregate demand curve? A change in:
Net export spending
The labels for the axes of the aggregate demand graph should be:
Real domestic output on the horizontal axis and the price level on the vertical axis
A fall in the price of capital goods will shift the aggregate:
Supply curve rightward
A rise in prices of imported resources will cause aggregate:
Supply to decrease
An increase in aggregate demand will cause:
The price level to drop and have no effect on real domestic output
Disinflation refers to a situation where:
The rate of inflation falls, but the price level does not
An increase in the real value of stock prices, which is independent of a change in the price level, would best be an example of the:
Wealth effect
Which would most likely increase aggregate supply?
an increase in productivity
An increase in aggregate demand is most likely to be caused by an increase in:
consumer confidence
An increase in expected future income will:
Increase aggregate demand
A decrease in business taxes will tend to:
Increase aggregate demand and increase aggregate supply
An increase in productivity will:
Increase aggregate supply
The economy experiences an increase in the price level and an increase in real domestic output. Which is a likely explanation?
Net exports have increased
One reason why the aggregate supply curve might shift to the left is that:
Per unit production costs have increased
An aggregate supply curve represents the relationship between the:
Price level and the production of real domestic output
The aggregate demand curve is the relationship between the:
Price level and the purchasing of real domestic output
Deflation refers to a situation where:
Price level falls
Which would most likely shift the aggregate supply curve? A change in:
Prices of imported resources
Which would be considered to be one of the factors that shift the aggregate supply curve? A change in:
Business productivity
Cost-push inflation arises from:
A decrease in aggregate supply
Which would most likely increase aggregate supply?
A decrease in the prices of resources
A sharp rise in household wealth will cause:
Aggregate demand to rise
A change in aggregate supply would be caused by a change in:
An aggregate supply determinant
The massive increase in government spending during World War II moved the economy in the span of a few short years from mass unemployment and price stability to "overfull" employment and severe demand-pull inflation. This situation can be best characterized by:
An increase in aggregate demand
Which would be one of the factors that increase aggregate demand?
An increase in consumer wealth
Which set of events would most likely decrease aggregate demand?
An increase in personal income tax rates
An increase in business taxes would tend to:
Decrease aggregate demand and decrease aggregate supply
A decrease in net exports will cause a(n):
Decrease in aggregate demand
An increase in personal income tax rates will cause a(n):
Decrease in aggregate demand
An increase in taxes on consumers will most likely cause a(n):
Decrease in aggregate demand
Cost-push inflation is characterized by a(n):
Decrease in aggregate supply and no change in aggregate demand
The aggregate supply curve shows the:
Direct relationship between the price level and real GDP produced
The intersection of the aggregate demand and aggregate supply curves determines the:
Equilibrium level of real domestic output and prices
A fall in prices of imported resources will cause aggregate:
Supply to increase
The passage of new legislation that imposes much less government regulation of business will most likely:
Increase aggregate supply
If the price per barrel of Crude decreases in the international market, then this event would most likely:
Increase aggregate supply in the United States
A rise in government spending will cause a(n):
Increase in aggregate demand
An increase in government spending will cause a(n):
Increase in aggregate demand
Demand-pull inflation is associated with a(n):
Increase in aggregate demand
A decrease in business taxes will most likely result in a(n):
Increase in aggregate demand and aggregate supply
A decline in the quantity of real output demanded along the aggregate demand curve is a result of a(n):
Increase in the price level
If Congress passed new laws significantly increasing the regulation of business, this action would tend to:
Increase per-unit production costs and shift the aggregate demand curve to the left
If Congress raised taxes on businesses, this action would:
Increase per-unit production costs and thus decrease aggregate supply
The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation?
Interest rates and wage rates have decreased
Which would be one of the factors that shift the aggregate demand curve? A change in:
Profit expectations on investment projects
The labels for the axes of an aggregate supply curve should be:
Real domestic output for the horizontal axis and price level for the vertical axis
An increase in aggregate supply causes:
Real domestic output to increase and the price level to become smaller
