macroeconomics chapter 12

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The immediate-short-run

aggregate supply curve is horizontal.

The economy's long-run

aggregate supply curve is vertical.

The immediate-short-run

aggregate supply curve represents circumstances where both input and output prices are fixed.

Other things equal

an improvement in productivity will shift the aggregate supply curve to the right.

Menu costs

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

The economy's long-run AS curve

assumes that wages and other resource prices eventually rise and fall to match upward or downward changes in the price level.

75 percent of the average U.S. firm's

costs are accounted for by wages and salaries.

Other things equal

if the U.S. dollar were to depreciate, the aggregate supply curve would shift to the left.

Other things equal

if the national incomes of the major trading partners of the United States were to rise, the U.S. aggregate demand curve would shift to the right.

This statement describes the foreign purchases effect

If the price level increases ,in the United States relative to foreign countries, then American consumers will purchase more foreign goods and fewer U.S. goods.

Refer to the above data

The equilibrium price level will be 200.

Depreciation of the international value of the dollar

a decline in the interest rate at each possible price level, and an increase in personal income tax rates will shift the aggregate demand curve while a change in the price level will not shift the aggregate demand curve.

The equilibrium price level and level

of real output occur where the aggregate demand and supply curves intersect.

Productivity measures

real output per unit of input.

The short-run aggregate supply curve

represents circumstances where input prices are fixed, but output prices are flexible.

An economy's aggregate demand curve

shifts leftward or rightward by more than changes in initial spending because of the multiplier effect.

The aggregate demand curve

shows the amount of real output that will be purchased at each possible price level.

When aggregate demand declines

some firms may reduce employment rather than wages because wage reductions may not be possible due to the minimum wage law.

The foreign purchases effect

suggests that a decrease in the U.S. price level relative to other countries will increase U.S. exports and decrease U.S. imports.

The determinants of aggregate

supply include resource prices and resource productivity.

Efficiency wages are above-market-wages

that bring forth so much added work effort that per-unit production costs are lower than at market wages.

In the above diagram

the economy's immediate-short-run AS curve is line 3, its short-run AS curve is 2, and its long-run AS curve is line 1.

In the above diagram

the economy's relevant aggregate demand and long-run aggregate supply curves, respectively, are lines 4 and 1.

In the above diagram

the economy's short-run AS curve is line 2 and its long-run AS curve is line 1.

A decline in investment

will shift the AD curve to the left by a multiple of the change in investment.

An increase in net exports

will shift the AD curve to the right by a multiple of the change in investment.


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