Econ ch 12 questions

The slope of the immediate-short-run aggregate supply curve is based on the assumption that: A. Both input and output prices are fixed B. Neither input nor output prices are fixed C. Input prices are flexible but output prices are fixed D. Input prices are fixed but output prices are flexible

A. Both input and output prices are fixed

The upward slope of the short-run aggregate supply curve is based on the assumption that: A. Wages and other resource prices do not respond to price level changes B. Wages and other resource prices do respond to price level changes C. Prices of output do not respond to price level changes D. Prices of inputs flexible while prices of outputs are fixed

A. Wages and other resource prices do not respond to price level changes

An aggregate supply curve represents the relationship between the: A. Price level and the buying of real domestic output B. Price level and the production of real domestic output C. Real domestic output bought and the real domestic output sold D. Price level that producers are willing to accept and the price level buyers are willing to pay

B

An expected increase in the prices of consumer goods in the near future will: A. Decrease (or shift left) in aggregate demand now B. Increase (or shift right) in aggregate demand now C. Decrease in the quantity of real output demanded (or movement up along AD) D. Increase in the quantity of real output demanded (or movement down along AD)

B

An increase in productivity will: A. Increase aggregate demand B. Increase aggregate supply C. Increase aggregate supply and aggregate demand D. Decrease aggregate supply and aggregate demand

B

If the price of crude oil decreases, then this would most likely: A. Decrease aggregate supply in the U.S. B. Increase aggregate supply in the U.S. C. Increase aggregate demand in the U.S. D. Decrease aggregate demand in the U.S.

B

The economy experiences an increase in the price level and a decrease in real domestic output. Which of the following is a likely explanation? A. Productivity has increased B. Input prices have increased C. There has been an increase in government spending D. Government regulations have been reduced

B

The immediate-short-run aggregate supply curve is: A. Vertical B. Horizontal C. Upward-sloping D. Downward-sloping

B

The short-run aggregate supply curve: A. Becomes flatter at output levels above the full-employment output B. Becomes steep at output levels above the full-employment output C. Is upward-sloping with a constant slope D. Is horizontal

B

The short-run version of aggregate supply assumes that product prices are: A. Fixed while resource prices are flexible B. Flexible while resource prices are fixed C. Both input and product prices are flexible D. Both input and product prices are fixed

B

Wage contracts, efficiency wages, and the minimum wage are explanations for why: A. Competition results in price wars B. Wages tend to be inflexible downward C. The aggregate demand curve slopes downward D. There is little support for the existence of a real-balances effect

B

A decrease in aggregate supply means: A. Both the real domestic output and the price level would decrease B. The real domestic output would increase and rises in the price level would become smaller C. The real domestic output would decrease and the price level would rise D. Both the real domestic output and rises in the price level would become greater

C

A decrease in business taxes will tend to: A. Increase aggregate demand but not change aggregate supply B. Increase aggregate supply but not change aggregate demand C. Increase aggregate demand and increase aggregate supply D. Decrease aggregate supply and decrease aggregate demand

C

A decrease in government spending will cause a(n): A. Increase in the quantity of real output demanded B. Decrease in the quantity of real output demanded C. Decrease in aggregate demand D. Increase in aggregate demand

C

A fall in the prices of inputs will shift the aggregate: A. Demand curve leftward B. Demand curve rightward C. Supply curve rightward D. Supply curve leftward

C

Cost-push inflation is characterized by a(n): A. Increase in aggregate supply and a decrease in aggregate demand B. Increase in aggregate demand and no change in aggregate supply C. Decrease in aggregate supply and no change in aggregate demand D. Decrease in both aggregate supply and aggregate demand

C

Demand-pull inflation is illustrated in the short run aggregate supply-aggregate demand model as a shift of the aggregate: A. Supply to the right B. Supply to the left C. Demand to the right D. Demand to the left

C

Disinflation refers to a situation where: A. Price level falls, but the rate inflation does not B. Price level rises, but the rate of inflation does not C. The rate of inflation falls, but the price level does not D. The rate of inflation rises, but the price level does not

C

If the dollar appreciates in value relative to foreign currencies: A. Aggregate demand decreases because C decreases B. Aggregate demand increases because C increases C. Aggregate demand decreases because net exports decrease D. Aggregate demand increases because net exports increase

C

In the mid-1970s, changes in oil prices greatly affected U.S. inflation. When oil prices rose, the U.S. would experience: A. Cost-push inflation and rising output B. Demand-pull inflation and rising output C. Cost-push inflation and falling output D. Demand-pull inflation and falling output

C

The U.S. economy was able to achieve full employment with relative price level stability between 1996 and 2000 because aggregate: A. Demand increased B. Supply decreased C. Demand increased and aggregate supply increased D. Demand decreased and aggregate supply increased

C

The aggregate demand curve or schedule shows the relationship between the total demand for output and the: A. Income level B. Interest rate C. Price level D. Real GDP

C

The foreign purchases effect on aggregate demand suggests that a: A. Fall in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand B. Fall in our domestic price level will decrease our imports and increase our exports, thereby reducing the net exports component of aggregate demand C. Rise in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand D. Rise in our domestic price level will decrease our imports and increase our exports, thereby reducing the net exports component of aggregate demand

C

The long-run aggregate supply analysis assumes that: A. Input prices are fixed while product prices are variable B. Input prices are variable while product prices are fixed C. Both input and product prices are variable D. Both input and product prices are fixed

C

The real-balances effect on aggregate demand suggests that a: A. Lower price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending B. Lower price level will decrease the real value of many financial assets and therefore cause an increase in spending C. Lower price level will increase the real value of many financial assets and therefore cause an increase in spending D. Higher price level will increase the real value of many financial assets and therefore cause an increase in spending

C

The short-run aggregate supply curve shows the: A. Inverse relationship between the price level and real GDP purchased B. Inverse relationship between the price level and real GDP produced C. Direct relationship between the price level and real GDP produced D. Direct relationship between the price level and real GDP purchased

C

The stimulus package that the government implemented during the Great Recession of 2007-09 did not have as strong an impact on GDP and unemployment as expected, for the following reasons, except: A. Very high debt levels of households B. Consumers raised their saving rates C. The stimulus package caused prices to fall in many sectors D. The effects of the stimulus package were diffuse and spread thinly among many sectors

C

With cost-push inflation in the short run, there will be: A. An increase in real GDP B. A leftward shift in the aggregate demand curve C. A decrease real GDP D. A decrease in unemployment

C

An increase in expected future income will: A. Increase aggregate demand and aggregate supply B. Decrease aggregate demand and aggregate supply C. Increase aggregate supply D. Increase aggregate demand

D

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to: A. A wealth effect B. A substitution effect C. An increase in aggregate supply D. A price level that is inflexible downward

D

Menu costs will: A. Increase the amount of training of workers B. Result in price wars between businesses C. Increase the legal minimum wage D. Make prices inflexible downward

D

The interest rate effect on aggregate demand indicates that a(n): A. Decrease in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending B. Decrease in the price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending C. Increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending D. Increase in the supply of money will increase interest rates and decrease interest-sensitive consumption and investment spending

D

The intersection of the aggregate demand and aggregate supply curves determines the: A. Productivity level in the economy B. Shape of the aggregate demand curve C. Per-unit cost of production in the economy D. Equilibrium level of real domestic output and prices

D

The labels for the axes of the aggregate demand graph should be: A. Quantity of a product on the vertical axis and the price of a product on the horizontal axis B. Price of a product on the vertical axis and quantity of a product on the horizontal axis C. Real domestic output on the vertical axis and the price level on the horizontal axis D. Real domestic output on the horizontal axis and the price level on the vertical axis

D

The long-run aggregate supply curve is: A. Upward-sloping and becomes steeper at output levels above the full-employment output B. Upward-sloping and becomes flatter at output levels above the full-employment output C. Horizontal D. Vertical

D

Which would most likely shift the aggregate supply curve? A change in the prices of: A. Domestic products B. Foreign products C. Financial assets D. Resources

D

If the national incomes of our trading partners increase, then our: A. Aggregate demand decreases because C decreases B. Aggregate demand increases because C increases C. Aggregate demand decreases because net exports decrease D. Aggregate demand increases because net exports increase

D. Aggregate demand increases because net exports increase

A decrease in interest rates caused by a change in the price level would cause a(n): A. Decrease (or shift left) in aggregate demand B. Increase (or shift right) in aggregate demand C. Decrease in the quantity of real output demanded (or movement up along AD) D. Increase in the quantity of real output demanded (or movement down along AD)

D. Increase in the quantity of real output demanded (or movement down along AD)

A decrease in aggregate demand in the short run will reduce: A. Both real output and the price level B. The price level and increase the real domestic output C. The real domestic output and have no effect on the price level D. The price level and have no effect on real domestic output

A

A decrease in expected returns on investment will most likely shift the AD curve to the: A. Right because C will increase B. Left because C will decrease C. Right because Ig will increase D. Left because Ig will decrease

A

A fall in labor costs will cause aggregate: A. Supply to increase B. Demand to increase C. Supply to decrease D. Demand to decrease

A

An increase in personal income tax rates will cause a(n): A. Decrease (or shift left) in aggregate demand B. Increase (or shift right) in aggregate demand C. Decrease in the quantity of real output demanded (or movement up along AD) D. Increase in the quantity of real output demanded (or movement down along AD)

A

Deflation refers to a situation where: A. Price level falls, and could be caused by a shift of AD to the left B. Price level falls, and could be caused by a decrease in aggregate supply C. The rate of inflation falls, and could be caused by a shift of AS to the right D. The rate of inflation rises, and could be caused by an decrease in aggregate demand

A

If Congress passed new laws significantly increasing the regulation of business, this action would tend to: A. Increase per-unit production costs and shift the aggregate supply curve to the left B. Increase per-unit production costs and shift the aggregate supply curve to the right C. Increase per-unit production costs and shift the aggregate demand curve to the left D. Decrease per-unit production costs and shift the aggregate supply curve to the left

A

In the Great Recession of 2007-2009, the stock market values shrank, causing a reverse: A. Wealth effect B. Real-balances effect C. Interest-rate effect D. Expectations effect

A

The aggregate demand curve shows the: A. Inverse relationship between the price level and the quantity of real GDP purchased B. Direct relationship between the price level and the quantity of real GDP produced C. Inverse relationship between interest rates and the quantity of real GDP produced D. Direct relationship between real-balances and the quantity of real GDP purchased

A

The foreign purchases, interest rate, and real-balances effects explain why the: A. Aggregate demand curve is downward-sloping B. Aggregate demand curve may shift to the left or right C. Economy will adjust towards equilibrium D. Aggregate expenditures schedule may shift up or down

A

When the general price level in our economy increases, the following effects occur except: A. The purchasing power of people's savings will increase B. The interest rate will also tend to increase C. Foreign buyers will buy less of our output, and we tend to import more D. Our net exports will tend to decrease

A