ECON

In the above figure, which movement illustrates the impact of a falling price level and a constant money wage rate (and other input prices)?

E to I

In the above figure, which movement illustrates the impact of a rising price level and a constant money wage rate (and other input prices)?

E to F

________ economists believe that active help from fiscal and monetary policy is needed to insure that the economy is operating at full employment.

Keynesian

________ economists believe that the economy is self-regulating and will be at full employment as long as monetary policy is not erratic.

Monetarist

The "legs" of the Keynesian social safety net in the U.S. include:

New Deal (1930s), Great Society (1960s), and Great Regulation (1970s).

I equals

S + (T - G) + (M-X)

If the money price of a resource such as oil falls, then the

SRAS curve shifts rightward.

Which of the following is true?

a change the money wage and other resource prices does not shift the long-run aggregate supply. a shift left of the long-run aggregate supply and potential GDP will also shift the short-run aggregate supply curve left as well. a shift right of the long-run aggregate supply and potential GDP will also shift the short-run aggregate supply curve right as well. Correct all of the above are true.

A decrease in the price level accompanied by no change in the money wage rate or other input prices leads to ________ movement along the ________ aggregate supply curve.

a downward; short-run

Which of the following changes does NOT shift the long-run aggregate supply curve?

a fall in the price level

Which of the following shift the LRAS curve rightward?

a increase in the education level of the labor force

When the labor market is at full employment,

actual (real) GDP equals potential GDP.

The quantity of real GDP supplied (or aggregate production) at different price levels is reflected by the

aggregate supply curve.

Which of the following events will increase long-run aggregate supply?

an advance in technology

Suppose that the economy begins at a long-run equilibrium. Which of the following raises the price level and decrease real GDP in the short run?

an increase in the price of oil that decreases aggregate supply

An increase in the money wage rate (or of other input prices)

decreases the short-run aggregate supply.

When talking about aggregate supply, it is necessary to

distinguish between long-run aggregate supply and short-run aggregate supply.

Moving along a short-run aggregate supply curve, resource prices (and other input prices) ________, the money rate wage ________, and potential GDP ________.

do not change; does not change; does not change

When the price level rises, the long-run aggregate supply curve ________.

does not shift

(Per class discussion) If the U.S. trade deficit is sharply reduced:

funds for investment will likely be sharply reduced.

The short-run aggregate supply curve

has a positive slope.

According to the Ricardo-Barro effect

households increase their personal saving when governments run budget deficits

The short-run aggregate supply curve is upward sloping because

marginal costs rise with increased output so firms have to receive higher prices to justify their increase in output. capital is scarce

The long-run aggregate supply (LRAS) curve

is vertical.

A major technological advance shifts the

long-run and the short-run aggregate supply curves rightward.

The long-run aggregate supply curve is vertical because

potential GDP is independent of the price level.

The short-run aggregate supply curve is upward sloping because in the short run the

price level changes but the money wage/input prices rate does not.

U.S. investment is financed from

private saving, government budget surpluses, and borrowing from the rest of the world.

Aggregate supply describes the behavior of

producers.

Factors that shift the long-run aggregate supply and potential GDP rightward include an increase in:

quantity of labor. quality and quantity of other inputs. quantity of capital (physical capital and human capital). technology. Correct- all of the above.

In the long-run

real GDP is equal to potential GDP.

An increase in the U.S. budget deficit will:

shift the demand of loanable funds right ward.

An increase in the money supply by the FED will:

shift the supply of loanable funds right ward.

A decrease in disposable income shifts the ________.

supply of loanable funds curve leftward

A fall in the money wage rate (or other input prices) shifts

the SRAS curve rightward but leaves the LAS curve unchanged.

The idea that a government budget deficit decreases investment is called

the crowding-out effect.

The short-run aggregate supply curve is upward sloping because

the money wage rate (and other input prices) remains constant so the higher prices makes it profitable for firms to expand production.

Moving along the short-run aggregate supply curve, ________.

the money wage rate, the prices of other resources, and potential GDP remain constant

For movements along the long-run aggregate supply curve,

the price level and the money wage rate change by the same percentage.

The supply of real GDP is a function of

the quantities of labor, capital and the state of technology.

The nominal interest rate approximately equals which of the following?

the real interest rate plus the inflation rate

At potential GDP

unemployment is at its natural rate.

The long-run aggregate supply curve is

vertical at the full employment level of real GDP.