CH13ECON

Which of the following will cause consumption and, as a result, aggregate demand to decrease?

A decrease in consumer confidence

Ceteris paribus, which of the following would cause the aggregate demand curve to shift to the left?

A decrease in transfer payments

Which of the following is likely to increase investment in an economy?

A fall in the real interest rate

Which of the following would shift the short-run aggregate supply curve of an industry upward but not change its long-run aggregate supply curve?

A negative supply shock

Which of the following would shift the short-run aggregate supply curve of an industry rightward but not change its short-run aggregate supply curve?

A positive supply shock

Which of the following would be true if the federal government increased military purchases and state and local governments decreased their road building budgets at the same time?

Aggregate demand would decrease because military purchases are usually larger than state and local governments' road building budgets.

Which of the following increases U.S. aggregate demand?

An increase in Americans' expected future incomes

Figure 13-2 shows shifts in the aggregate demand curve. Which of the following combinations would be illustrated by a shift in aggregate demand from AD0to AD2?

An increase in business tax rates combined with a decrease in consumer confidence

Which of the following will decrease aggregate demand in an economy?

Exports falling faster than imports

A change that shifted the long-run aggregate supply curve to the right would not necessarily shift the short-run aggregate supply curve to the right.

FALSE

Which of the following statements is true?

Increases in costly government regulations can cause a leftward shift of both the short-run and long-run aggregate supply curves.

Which of the following would shift both the short-run aggregate supply curve and the long-run aggregate supply curve leftward?

Increases in the prices of the factors of production that reflect permanent changes in their supplies

Which of the following would be true of the aggregate demand curve of an economy if investment grew by a smaller magnitude than imports?

The aggregate demand curve would shift to the left.

Which of the following would be true if the exports of a country fell more than its imports?

The country's aggregate demand would decrease.

Which of the following would be true if the exports of a country fell more than its imports?

The country's aggregate demand would decrease. The country's aggregate demand would decrease.

Figure 13-6 shows the short-run macroeconomic equilibrium of an economy. Which of the following will happen in the short run if there is a decrease in aggregate demand?

The creation of a recessionary gap

Which of the following does not explain why the aggregate demand curve is negatively sloped?

The misperception effect

A recession with the price level falling is generally caused by:

a decrease in aggregate demand.

Figure 13-7 shows the short-run macroeconomic equilibrium of an economy. In the figure, starting at Point A, a decrease in aggregate demand would result in:

a decrease in the inflationary gap.

A technological advancement that increases the productivity of an input will lead to:

a rightward shift in both the short-run aggregate supply curve and the long-run aggregate supply curve.

The long run refers to:

a time period long enough for the prices of both output and inputs to adjust to changes in the economy.

Demand-pull inflation is caused by:

an increase in aggregate demand.

Which of the following will increase aggregate demand in an economy?

an increase in the population of the economy

A supply shock is:

an unexpected temporary event that can either increase or decrease the short-run aggregate supply.

If there was no profit effect, but there was a misperception effect in the short run, then:

both the short-run and long run aggregate supply curve would be upward sloping???????

Investment will increase if:

business taxes and real interest rates decrease at the same time.

Figure 13-3 shows the relationship between real GDP and the price level in an economy. In the figure, _____ represents long-run aggregate supply?

curve A

Figure 13-3 shows the relationship between real GDP and the price level in an economy. In the figure, _____ represents short-run aggregate supply?

curve B

Along the long-run aggregate supply curve, the level of real GDP supplied:

does not change with increases in the price level.

A change that shifted the long-run aggregate supply curve to the right would not necessarily shift the short-run aggregate supply curve to the right.

false

A fall in the price level will cause the aggregate demand curve to shift to the left.

false

If the overall price level decreases, then the aggregate demand curve will shift to the right.

false

If there was no real wealth or interest rate effect, the aggregate demand curve would be upward sloping.

false

The aggregate supply curves show how much a nation's consumers are willing and able to consume at each price level.

false

The interest rate effect helps explain why a lower price level will reduce the quantity of real goods and services demanded as an economy moves down along its aggregate demand curve.

false

The long-run level of real GDP changes whenever the aggregate demand curve shifts.

false

The short-run aggregate supply curve is vertical at the natural level of real output.

false

Which of the following is true of the efficiency wage model?

in the efficiency wage model, employers pay their employees a wage more than the equilibrium wage as a means to increase their productivities.

An increase in the U.S. price level will:

increase U.S. imports.

Which of the following would shift both the short-run aggregate supply curve and the long-run aggregate supply curve leftward?

increases----that do not reflect--- ??????

In the long run, the real output level _____.

is equal to the natural level of real output at all price levels

If some non-price level determinant causes total spending to decrease, there will be a(n):

leftward shift of the aggregate demand curve.

A decrease in the U.S. price level will:

make foreign goods costlier for U.S. consumers.

The short-run aggregate supply curve:

normally slopes upward to the right because the costs of labor and other inputs are relatively fixed in the short run.

One explanation for an upward-sloping short-run aggregate supply curve is the misperception effect, which is based on:

producers' tendency of increasing supply when they observe a rise in prices.

If some non-price level determinant causes total spending to increase, there will be a(n):

rightward shift of the aggregate demand curve.

Holding all other things constant, when the price level rises, interest rates:

rise, firms want to borrow less for new plants and equipment, and households want to borrow less for homebuilding.

Faster growth rates of a nation's major trading partner combined with an increase in the nation's stock market wealth would:

shift its aggregate demand curve to the right

Faster growth rates of a nation's major trading partner combined with an increase in the nation's stock market wealth would:

shift its aggregate demand curve to the right.

If an individual is living in a period of continued high inflation on a fixed income, then:

the cost of the goods and services he or she buys increases and his or her real income decreases.

Figure 13-5 shows the short-run macroeconomic equilibrium of an economy at Point A. In the figure, Point A suggests that:

the economy is operating with a recessionary gap.

Figure 13-3 shows the short-run macroeconomic equilibrium of an economy at Point A. In the figure, Point A suggests that:

the economy is operating with an inflationary gap.

The interest rate effect suggests that the negative slope of the aggregate demand curve results, at least in part, because changes in the price level affect:

the holdings of money by households and firms.

Figure 13-9 shows the short-run macroeconomic equilibrium of an economy at Point A. As the economy adjusts from short run equilibrium to long-run equilibrium, _____.

the price level will rise

Figure 13-10 shows the short-run macroeconomic equilibrium of an economy. Suppose the economy is currently at Point A. As the economy adjusts from short-run equilibrium to long-run equilibrium, _____.

the price level would fall and real GDP would rise

Sam prefers holding his savings as cash in his house. Currently, the economy is experiencing an increasing price level. He can conclude that:

the real value of his savings has decreased.

Sam prefers holding his savings as cash in his house. Currently, the economy is experiencing an increasing price level. He can conclude that:

the real value of his savings has decreased. the real value of his savings has decreased.

Jason has been holding his retirement savings in a safe in his house. Currently, the economy is experiencing a falling price level. He can conclude that:

the real value of his savings would increase as long as the price level falls.

Which of the following statements is true?

the short run aggrigate supply curve is generally upward sloping

If there is currently an inflationary gap, an increase in aggregate demand will make the inflationary gap smaller, but a decrease in aggregate demand would make the inflationary gap larger.

the short-run aggregate supply curve would be upward sloping and the long-run aggregate supply curve would be vertical.

If there was no profit effect, but there was a misperception effect in the short run, then:

the short-run aggregate supply curve would be upward sloping and the long-run aggregate supply curve would be vertical. this is what the comp said...

The aggregate demand curve reflects:

the total amount of real goods and services that all the groups in an economy want to purchase in a given period.

The short-run aggregate supply curve of an industry would be vertical if:

there was no profit effect or misperception effect.

A disaster that destroys a large part of the agricultural output of a country will not change long-run aggregate supply, while a disaster that destroys the capital stock in a major city will reduce long-run aggregate supply.

true

An unexpected increase in aggregate demand results in a decrease in real wages in the short run.

true

At a given price level, anything that changes the amount of total purchases in the economy will cause the aggregate demand curve to shift.

true

Higher interest rates will tend to reduce aggregate demand, other things being equal.

true

Increases in government regulations can make the production of goods and services more costly for producers, and the increase in production costs results in a leftward shift of both the short-run and the long-run aggregate supply curves.

true

The long-run aggregate supply curve is the relationship between the price level and the quantity of real GDP that is supplied once input prices have had time to fully adjust to that price level.

true

The real wealth effect is one reason for the negative slope of the aggregate demand curve.

true

The short-run aggregate supply curve is:

typically upward sloping.

Economies usually face recessions for long periods of time because:

wages and prices are rigid in nature.