Chapter 12 warm up

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. This statement describes the output effect. the foreign purchases effect. the real-balances effect. the shift-of-spending effect.

the foreign purchases effect.

What percentage of the average U.S. firm's costs is accounted for by wages and salaries? 40 60 75 85

75

In which of the following sets of circumstances can we confidently expect inflation? Aggregate supply and aggregate demand both increase. Aggregate supply and aggregate demand both decrease. Aggregate supply decreases and aggregate demand increases. Aggregate supply increases and aggregate demand decreases.

Aggregate supply decreases and aggregate demand increases.

Which one of the following would not shift the aggregate demand curve? a change in the price level depreciation of the international value of the dollar a decline in the interest rate at each possible price level an increase in personal income tax rates

a change in the price level

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. aggregate supply curve would shift to the left. aggregate supply curve would shift to the right. aggregate demand curve would shift to the left.

aggregate demand curve would shift to the right.

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

aggregate supply curve would shift to the left.

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

an appreciation of the U.S. dollar

The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the real-balances, interest-rate, and foreign purchases effects. determinants of aggregate supply. determinants of aggregate demand. sole determinants of the equilibrium price level and the equilibrium real output.

determinants of aggregate demand.

The aggregate demand curve is vertical under conditions of full employment. horizontal when there is considerable unemployment in the economy. downsloping because of the interest-rate, real-balances, and foreign purchases effects. downsloping because production costs decrease as real output rises.

downsloping because of the interest-rate, real-balances, and foreign purchases effects.

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. are flexible upward but inflexible downward. rise and fall more rapidly than the price level. are relatively inflexible both upward and downward.

eventually rise and fall to match upward or downward changes in the price level.

The determinants of aggregate demand explain why the aggregate demand curve is downsloping. explain shifts in the aggregate demand curve. demonstrate why real output and the price level are inversely related. include input prices and resource productivity.

explain shifts in the aggregate demand curve.

A decline in investment will shift the AD curve to the left by a multiple of the change in investment. left by the same amount as the change in investment. right by the same amount as the change in investment. right by a multiple of the change in investment.

left by a multiple of the change in investment.

An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the net export effect. wealth effect. real-balances effect. multiplier effect.

multiplier effect.

In the diagram, a shift from AS3 to AS2 might be caused by an increase in business taxes and government regulation. the prices of imported resources. the prices of domestic resources. productivity.

productivity.

The aggregate demand curve is upsloping because a higher price level is necessary to make production profitable as production costs rise. is downsloping because production costs decline as real output increases. shows the amount of expenditures required to induce the production of each possible level of real output. shows the amount of real output that will be purchased at each possible price level.

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