Chapter 12 HW

Which one of the following would not shift the aggregate demand curve? A. A change in the price level. B. Depreciation of the international value of the dollar. C. An increase in personal income tax rates. D. A decline in the interest rate at each possible price level.

A. A change in the price level.

The aggregate supply curve (short run) is upsloping because: A. per-unit production costs rise as the economy moves toward and beyond its full-employment real output. B. wages and other resource prices are flexible upward but inflexible downward. C. the price level is flexible upward but inflexible downward. D. wages and other resource prices match changes in the price level.

A. per-unit production costs rise as the economy moves toward and beyond its full-employment real

The equilibrium price level and level of real output occur where: A. exports equal imports. B. real output is at its highest possible level. C. the aggregate demand and supply curves intersect. D. the price level is at its lowest level.

C. the aggregate demand and supply curves intersect.

Which of the following would most likely shift the aggregate demand curve to the right? a. An increase in personal income tax rates. b. Increased fear that a recession will cause workers to lose their jobs. C. An increase in stock prices that increases consumer wealth. D. A reduction in household borrowing because of tighter lending practices.

C. An increase in stock prices that increases consumer wealth.

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

C. left by a multiple of the change in investment.

Graphically, cost-push inflation is shown as a: A. rightward shift of the AD curve. B. rightward shift of the AS curve. C. leftward shift of the AS curve. D. leftward shift of the AD curve.

C. leftward shift of the AS curve.

If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium: A. output would necessarily fall. B. price level would necessarily rise. C. output would necessarily rise. D. price level would necessarily fall.

C. output would necessarily rise.

uppose that the price of each input increased from $5 to $8. The per-unit cost of production in the economy would: A. fall by $1.50 and the aggregate demand curve would shift to the right. B. rise by 60 percent and the aggregate demand curve would shift to the left. C. rise by 60 percent and the aggregate supply curve D. rise by $1.50 and the aggregate supply curve would shift to the right.

C. rise by 60 percent and the aggregate supply curve

The interest-rate effect suggests that: A. an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending. B. an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending. C. an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending. D. a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending.

B. an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.

The immediate-short-run aggregate supply curve is: A. vertical. B. downsloping. C. upsloping. D. horizontal.

D. horizontal.

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will: A. shift the aggregate supply curve leftward. B. shift the aggregate demand curve leftward. C. decrease U.S. exports and increase U.S. imports. D. increase U.S. exports and decrease U.S. imports.

D. increase U.S. exports and decrease U.S. imports.

Given a fixed upsloping AS curve, a rightward shift of the AD curve will: A. cause cost-push inflation. B. increase the price level but not real output. C. increase real output but not the price level. D. increase both the price level and real output.

D. increase both the price level and real output.

What percentage of the average U.S. firm's costs are accounted for by wages and salaries? A. 75. B. 40. C. 60. D. 85.

A. 75.

A rightward shift in the aggregate supply curve is best explained by an increase in: A. productivity. B. the price of imported resources. C. nominal wages. D business taxes.

A. productivity.

Productivity measures: A. the amount of capital goods used per worker. B. real output per unit of input. C. per-unit production costs. D. changes in real wealth caused by price level changes.

B. real output per unit of input.

Suppose that nominal wages fall and productivity rises in a particular economy. Other things equal, the aggregate: A. supply curve will shift leftward. B. supply curve will shift rightward. C. demand curve will shift leftward. D. expenditures curve will shift downward.

B. supply curve will shift rightward.

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question on the basis of this information. Refer to the information. The level of productivity is: A. 20. B.2. C. 10. D. 5.

B.2.

If the dollar price of foreign currencies falls (that is, the dollar appreciates), we would expect: A. both aggregate demand and aggregate supply to decrease. B. aggregate demand to increase and aggregate supply to decrease. C. aggregate demand to decrease and aggregate supply to increase. D. both aggregate demand and aggregate supply to increase.

C. aggregate demand to decrease and aggregate supply to increase.

An increase in aggregate expenditures resulting from a decrease in the price level is equivalent to a: A. leftward shift of the aggregate demand curve. B. decrease in aggregate supply. C. movement downward along a fixed aggregate demand curve. D. rightward shift of the aggregate demand curve.

C. movement downward along a fixed aggregate demand curve.

The idea that the price level readily moves upward but not downward is called the: A. stair-step effect. B. escalator effect. C. ratchet effect. D. elevator effect.

C. ratchet effect.

In response to the Great Recession, the federal government engaged in significant deficit-funded spending. While it kept the recession from getting worse, and did result in some positive economic growth, it did not fully achieve the desired result. Which of the following best explains why the fiscal policy actions fell short of their objective? A. The fiscal stimulus caused a significant leftward shift of aggregate supply. B. Despite the fiscal stimulus, aggregate demand continued to shift to the right. C. Offsetting monetary policy caused the aggregate demand to remain virtually unchanged, meaning that all gains in output came from aggregate supply shifts. D. The fiscal stimulus shifted aggregate demand to the right, but not enough to restore full employment.

D. The fiscal stimulus shifted aggregate demand to the right, but not enough to restore full employment.

An increase in input productivity will: A. reduce aggregate demand. B. shift the aggregate supply curve leftward. C. reduce the equilibrium real output. D. reduce the equilibrium price level, assuming downward flexible prices.

D. reduce the equilibrium price level, assuming downward flexible prices.

An increase in net exports will shift the A. AD curve to the: left by a multiple of the change in investment. B. left by the same amount as the change in investment. C. right by the same amount as the change in investment. D. right by a multiple of the change in investment.

D. right by a multiple of the change in investment.

If aggregate demand decreases, and as a result, real output and employment decline but the price level remains unchanged, it is most likely that: A. the money supply has declined. B. productivity has declined. C. cost-push inflation has occurred. D. the price level is inflexible downward and a recession has occurred.

D. the price level is inflexible downward and a recession has occurred.

Per-unit production cost is: A. units of output divided by total input cost. B. real output divided by inputs. C. a determinant of aggregate demand. D. total input cost divided by units of output.

D. total input cost divided by units of output.

The shape of the immediate-short-run aggregate supply curve implies that: A. government cannot bring an economy out of a recession by increasing spending. B. increases in aggregate demand are inflationary. C. output prices are flexible, but input prices are not. D. total output depends on the volume of spending.

D. total output depends on the volume of spending.

Other things equal, an improvement in productivity will: A. shift the aggregate demand curve to the left. B. shift the aggregate supply curve to the left. C. shift the aggregate supply curve to the right. D. increase the equilibrium price level.

C. shift the aggregate supply curve to the right.

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

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

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: A. the real-balances effect. B.the shift-of-spending effect. C.the output effect. D. the foreign purchases effect.

D. the foreign purchases effect.