Chapter 12
Which of the following is a true statement?
A decline in aggregate demand will primarily affect real output and employment if prices are inflexible downward.
Graphically, demand-pull inflation is shown as a:
rightward shift of the AD curve along an upsloping AS curve.
(Last Word) Relative to previous decades, the U.S. economy is less affected by changes in the price of oil partly because:
the composition of GDP has changed from larger, heavier items such as earth movers and steel products toward smaller, lighter items such as software and microchips.
The shape of the immediate-short-run aggregate supply curve implies that:
total output depends on the volume of spending.
Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)?
An appreciation of the U.S. dollar.
Which of the following would most likely shift the aggregate demand curve to the right?
An increase in stock prices that increases consumer wealth.
(Last Word) Which of the following is a reason why changes in the price of imported oil have less of an effect on the U.S. economy than in the 1970s and early 1980s?
The amount of energy consumed in producing each dollar of GDP has greatly declined.
Which of the following would not shift the aggregate supply curve?
an increase in the price level
Menu costs:
are the costs to firms of changing prices and communicating them to customers.
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.
The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will:
increase U.S. exports and decrease U.S. imports.
If investment decreases by $20 billion and the economy's MPC is .5, the aggregate demand curve will shift:
leftward by $40 billion at each price level.
When aggregate demand declines, some firms may reduce employment rather than wages because wage reductions may:
not be possible due to the minimum wage law.