Chapter 32 Macro - test 4

Suppose that technological advancements stimulate $20 billion in additional investment spending. If the MPC = .6, how much will the change in investment increase aggregate demand?

$50 billion

suppose that real domestic output in an economy is 20 units, the quantity of inputs in 10 the this information. Refer to the information .the level of productivity is :

2

Which of the following will shift the aggregate supply curve to the right?

A new networking technology increases productivity all over the economy,Business taxes fall.

Label each of the following descriptions as being either an immediate-short-run aggregate supply curve, a short-run aggregate supply curve, or a long-run aggregate supply curve.

A vertical line-Long-run,The price level is fixed-Immediate-short-run,Output prices are flexible, but input prices are fixed-Short-run,A horizontal line-Immediate-short-run,An upsloping curve-Short-run,Output is fixed-Long-run.

the real balances effect indicates that :

a higher price level will decrease the real value of the many financial assets and therefore reduce spending

Efficiency wages are:

above-market wages that bring forth so much added work effort that per-unit production costs are lower than at market wages.

the interest-rate effect suggests that :

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

Menu costs:

are the costs to firms of changing prices and communicating them to customers

Which of the following will shift the aggregate demand curve to the left:

Interest rates rise, he government raises corporate taxes.

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

What is the productivity in this economy? What is the per-unit cost of production if the price of each input unit is $2?

Productivity:2.67 (300/112.5=2.67; 200/75.0 = 2.67 ; 400/150=2.67) , per-unit cost of production: 2x112.5/300 = 0.75

other things equal appreciation of the dollar :

decreases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources.

The size of the multiplier associated with an initial increase in spending will be:

diminished if inflation occurs

the economy's long -run aggregate supply curve :

is vertical

A decline in investment will shift the AD curve to the:

left by a multiple of the change in investment

Graphically, cost-push inflation is shown as a:

leftward shift of the AS curve.

The foreign purchases effect:

moves the economy along a fixed aggregate demand curve.

An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the:

multiplier effect

If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium:

output would necessary rise

the aggregate demand curve :

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

the aggregate supply curve:

shows the various amounts of real output that businesses will produce at each price level.

the aggregate supply curve (short run) :

slopes upward and to the right.

the equilibrium price level and level of real output occur where :

the aggregate demand and supply curves intersect

if the price level increase in the US relative to foreign countries , then American consumers will purchase more foreign goods and fewer US goods.This statement describes :

the foreign purchase effect

per-unit production costs is:

total input cost divided by units of output

The determinants of aggregate supply :

include resource prices and resource productivity

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

Other things equal, a reduction in personal and business taxes can be expected to:

increase both aggregate demand and aggregate supply.

If investment increases by $10 billion and the economy's MPC is .8, the aggregate demand curve will shift:

rightward by $50 billion at each price level

Graphically, demand-pull inflation is shown as a:

rightward shift of the AD curve along an upsloping AS curve.

other things equal, a decrease in the real interest rate will :

expand investment and shift the AD curve to the right

The determinants of aggregate demand:

explain shifts in the aggregate demand curve.

prince and wages tend to be :

flexible upward,but inflexible downward

The immediate-short-run aggregate supply curve is:

horizontal

(consider This) The idea that the price level readily moves upward but not downward is called the :

ratchet effect

the fear of in unwanted price wars may explain why many firms are reluctant to :

reduce prices when a decline in aggregate demand occurs

When aggregate demand declines, many firms may reduce employment rather than wages because wage reductions may:

reduce worker morale and work effort and thus lower productivity