ECON 2301 Chapter 12 Quiz

Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)? A. an appreciation of the U.S. dollar B. increased consumer optimism regarding future economic conditions C. increased government spending on military equipment. D. a reduced amount of excess capacity.

A. an appreciation of the U.S. dollar

The slope of the immediate-short aggregate supply curve is based on the assumption that: A. both input and output prices are fixed. B. input prices are fixed, but output prices are flexible. C. neither input nor output prices re fixed. D. input prices are flexible, but output prices are fixed.

A. both input and output prices are fixed.

Wage contracts, menu costs, and the minimum wage are explanations for why: A. wages tend to be inflexible downward. B. competition results in price wars. C. there is little support for the existence of a real-balances effect. D. the aggregated demand curve slopes downward.

A. wages tend to be inflexible downward.

Refer to the above graph, which shows an aggregate demand curve for a hypothetical economy. If the price level is 200, the quantity of real GDP demanded is: A. $700 billion. B. $600 billion. C. $500 billion. D. $800 billion.

B. $600 billion.

In the diagram, the economy's immediate-short-run AS curve is line ______, its short-run AS curve is ______, and its long-run AS curve is line ______. A. 1; 2; 3 B. 3; 2; 1 C. 2; 3; 4 D. 1; 2; 4

B. 3; 2; 1

If the dollar appreciates in value to foreign currencies: A. aggregate demand increases. B. aggregate demand decreases. C. the quantity of real domestic output demanded decreases. D. the quantity of real domestic output demanded increases.

B. aggregate demand decreases.

Refer to the above graph, which factor will shift AS1 to AS2? A. A decrease in business subsidies. B. An increase in input prices. C. An increase in real interest rates. D. A decrease in business taxes.

D. A decrease in business taxes.

Which of the following would not shift the aggregate supply curve? A. a decline in business taxes B. an increase in labor productivity C. a decline in the price of imported oil D. an increase in the price level

D. an increase in the price level

Menu costs A. are sunk costs and therefore should be disregarded. B. decreased during recession. C. increase during recession. D. are the cost to firms of changing prices and communicating them to customers.

D. are the cost to firms of changing prices and communicating them to customers.

The intersection of the aggregate demand and aggregate supply curves determines the: A. equilibrium level of real domestic output and prices. B. shape of the aggregate demand curve. C. per-unit cost of production in the economy. D. shape of the aggregate supply curve.

A. equilibrium level of real domestic output and prices.

Graphically, demand-pull inflation is shown as a A. rightward shift of the AD curve along an upsloping AS curve. B. leftward shift of the AS curve along an upsloping AD curve. C. rightward shift of the AD curve along a downsloping AS curve. D. rghtward shift of the AS curve along a downsloping AD curve.

A. rightward shift of the AD curve along an upsloping AS curve.

Per-unit production cost is A. total input cost divided by units of output. B. real output divided by inputs. C. a determinate of aggregate demand. D. units of output divided by total input cost.

A. total input cost divided by units of output.

The immediate-short-run aggregate supply curve is: A. downward sloping. B. horizontal. C. vertical. D. upward sloping.

B. horizontal.

Refer to the above diagram, when AD1 shifts to AD2, real output: A. stays the same, while he price level rises. B. increases from Q1 to Q2, while the price level rises. C. increases from Q1 to Q3, while the price level declines. D. increases from Q1 to Q2, while the price level stays the same.

B. increases from Q1 to Q2, while the price level rises.

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each unit of labor, $3. The per-unit cost of production in this economy is A. $0.50 B. $1.00 C. $0.10 D. $0.05

C. $0.10

Suppose that an economy produces 500 units of outputs. It takes 10 units of labor at $15 a unit of capital at $50 a unit to produce this output. The pre-unit cost of production is: A. $0.40. B. $1.24. C. $0.70. D. $1.42.

C. $0.70. (10*15+4*50)/500=$0.70.

A decrease in government spending will cause a(n): A. increase in aggregate demand. B. increase in the quantity of real domestic output demanded. C. decrease in aggregate demand. D. decrease in the quantity of real domestic output demanded.

C. decrease in aggregate demand.

Graphically, cost-push inflation is shown as a A. rightward shift of the AS curve. B. rightward shift of the AD curve. C. leftward shift of the AS curve. D. leftward shift of the AD curve.

C. leftward shift of the AS curve.

An increase in aggregate demand would be most likely caused by a decrease in: A. the wealth of consumers. B. expected future prices. C. the tax rates of household income. D. consumer confidence.

C. the tax rates of household income.

The long-run aggregate supply curve is: A. upsloping, and a graph of the short-run aggregate supply is vertical. B. horizontal, and a graph of the short-run aggregate supply is upsloping. C. vertical, and a graph of the short-run aggregate supply curve is upsloping. D. downsloping, and a graph of the short-run aggregate supply is horizontal.

C. vertical, and a graph of the short-run aggregate supply curve is upsloping.

Other things equal, if the U.S. dollar were to depreciate , the A. aggregate demand curve would remain fixed in place . B. aggregate supply curve would shift to the right. C. aggregate demand curve would shift to the left. D. aggregate supply curve would shift to the left.

D. aggregate supply curve would shift to the left.

The short-run aggregate supply curve shows the: A. direct relationship between the price level and real GDP purchased. B. inverse relationship between the price level and real GDP produced. C. inverse relationship between the price level and real GDP purchased. D. direct relationship between the price level and real GDP produced.

D. direct relationship between the price level and real GDP produced.

Other things equal, a reduction in personal and business taxes can be expected to A. decrease both aggregate demand and aggregate supply. B. decrease aggregate demand d increase aggregate supply. C. increase aggregate demand and decrease aggregate supply. D. increase both aggregate demand and aggregate supply.

D. increase both aggregate demand and aggregate supply.

If Congress passed new laws significantly increasing the regulation of business, this action will tend to: A. increase per-unit production costs and shift the aggregate demand curve to the right. B. increase per-unit production costs and shift the aggregate supply curve to the right. C. increase per-unit production costs and shift the aggregate demand curve to the left. D. increase per-unit production costs and shift the aggregate supply curve to the left.

D. increase per-unit production costs and shift the aggregate supply curve to the left.

Which combination of factors would most likely increase aggregate demand? A. An increase in household indebtedness and a decrease in foreign demand for products. B. An increase in business taxes and a decrease in profit expectations. C. An increase in personal taxes and a decrease in government spending. D. An increase in consumer wealth and a decrease in interest rates.

D. An increase in consumer wealth and a decrease in interest rates.