CH 12 ECON

When the U.S. price level increases, consumers in Canada become more likely to buy cars made in Mexico than cars made in Michigan USA.

foreign purchases effect

As a result of an increase in the price level, the cost of borrowing increases, which causes people to buy fewer cars.

interest-rate effect

When the price level decreases, restaurants become busier as more people purchase restaurant meals.

real-balances effect

A hurricane destroys manufacturing plants.

supply decreases

Employers are required to provide paid sick leave to part-time as well as full-time employees.

supply decreases

The spread of democracy around the world increases consumer confidence in the United States.

Demand increases.

Manufacturing firms expect steel prices to decrease significantly.

supply increases

cost push inflation

This phenomenon causes real domestic output to decrease and the price level to increase

The general expectation of coming rapid inflation.

aggregate demand will increase

A widespread fear by consumers of an impending economic depression.

aggregate demand will decrease

A 10 percent across-the-board reduction in personal income tax rates.

aggregate demand will increase

A major increase in spending for health care by the federal government

aggregate demand will increase

A reduction in interest rates at each price level.

aggregate demand will increase

An increase in exports that exceeds an increase in imports (not due to tariffs).

aggregate demand will increase

A 12 percent increase in nominal wages (with no change in productivity).

aggregate supply will decrease

A new national tax on producers based on the value added between the costs of the inputs and the revenue received from their output.

aggregate supply will decrease

A sizable increase in labor productivity (with no change in nominal wages).

aggregate supply will increase

The complete disintegration of OPEC, causing oil prices to fall by one-half.

aggregate supply will increase

A stock market crash reduces people's wealth.

demand decreases

Consumers become more pessimistic about the economy.

demand decreases

Government spending increases.

demand increases

Technological changes enable workers to be more productive.

supply increases