Chapter 9

Which of the following might cause a change in short-run aggregate supply?

Businesses are increasingly optimistic about the future.

Which of the following may be an explanation for the shift in aggregate demand from line A to line B?

Interest rates fall and boost investments.

A tax decrease on producers will shift the aggregate supply curve to the left.

false

Which of the following items is NOT a determinant of aggregate demand?

government saving

The shift in aggregate demand depicted may be due to a(n):

increase in income taxes

A(n) _____ in productivity and a(n) _____ in taxes will shift short-run aggregate supply to the right.

increase; decrease

In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts of these two curves, which of the following is a likely outcome?

inflation

Assume the economy depicted in the figure above is in long-run equilibrium, where the aggregate demand curve is AD0 and the short-run aggregate supply curve is SRAS0. If there is a supply shock, such as a drastic increase in the price of oil, this will cause a _____ and a movement to a short-run equilibrium at point _____.

leftward shift in SRAS2; a

According to the wealth effect, as prices fall, people feel wealthier and purchase more goods and services.

true

The long-run aggregate supply curve represents the full-employment capacity of the economy.

true