Macro Exam #3
AE= ?
C + I + G + (X-M)
The _____ effect is a reason for the negative slope of the aggregate demand curve.
Interest rate
Improvements in production capacity will:
Shift the PPF outward
capital to labor ratio
amount of fixed or real capital present in relation to labor.
An increase in the incomes of the countries that purchase U.S.-made products will cause a(n) _____ in the _____ U.S.-made products.
increase; aggregate demand for
A(n) _____ in oil prices and a(n) _____ in taxes will shift short-run aggregate supply to the left.
increase; increase
In the long run, attempts to expand beyond an economy's natural rate of unemployment tend to result in:
increased inflation
The capital-to-labor ratio is:
high in rich countries
Economic growth is shown as a:
shift to the right of the long-run aggregate supply curve.
Infrastructure is:
A country's public capital.
What would NOT cause the aggregate demand curve to shift?
A rise in the aggregate price level causes a decline in exports.
According to the textbook, what brought the United States out of the Great Depression?
An increase in spending on World War II.
_____ inflation occurs when a supply shock reduces aggregate supply.
Cost-Push
What would cause a decrease in aggregate demand?
Increase in taxes
_____ is the change in consumption associated with a change in income.
The marginal propensity to consume
A(n) _____ in government spending, a _____ domestic currency, and _____ interest rates will shift a country's aggregate demand to the left.
decrease; stronger; higher
Long-run growth is MOST likely to be achieved by promoting:
development of new technologies.
The aggregate demand curve slopes _____ and has _____ on the vertical axis.
downward; the price level
A shift to the _____ of the _____ curve would cause the price level and employment to decrease.
left; aggregate demand
If a country's population increases at a higher rate than the growth in its real GDP:
the standard of living in the country has declined
If a pill is discovered that allows people to work twice as fast as they would ordinarily work, then the aggregate supply curve will:
shift to the right
Investment spending:
tends to be volatile
In the Keynesian macroeconomic equilibrium:
-AE=Y -S=I
List the true statements of economic growth:
-Economic growth leads to increased consumption of goods and services. -Economic growth leads to lower poverty rates. -Economic growth leads to longer life expectancies.
Sources of productivity growth:
-Higher skills—an increase in labor skills. -More capital—an increase in the ratio of capital to labor. -Improved management—better use of available resources in the production process. -Technological advance—the development and use of better capital equipment.
Physical capital includes:
Manufactured products that are used to produce other goods and services.
Which of the following did classical economists believe would happen if the economy experienced a downturn?
The economy would self-correct
The real GDP that firms will produce at varying price levels is:
aggregate supply
____ inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output and the price level rises.
Demand-pull
In the Keynesian model, the price level is _____.
fixed
In the aggregate demand and supply model, the price level is _____.
flexible
As a general rule, the more capital employed with workers, the _____ their productivity and the _____ their earnings.
higher; higher
As income increases, consumption _____.
increases at a slower rate
The reason business investment is sensitive to interest rates is that:
most funds used for investment are borrowed, so firms incur an interest charge.
Which is NOT a source of productivity growth?
moving resources from production to pension benefits
If the U.S. aggregate price level falls:
net exports rise
Economic growth is most accurately measured using:
real GDP per capita.
Because of the wealth effect, a rising aggregate price level _____ the purchasing power of wealth and therefore _____ output demanded.
reduces; reduces
Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded.
right; increase
A production function:
shows the output that is produced using different combinations of inputs combined with existing technology.