ECO 2301 review

an increase in labor productivity shifts the?

SRAS curve rightward

if real GDP is greater than natural real GDP, the economy is in?

in an inflationary gap

if the SRAS curve intersects the AD curve to the right of natural real GDp?

in an inflationary gap

business optimism about future sales tends to _________ investment expenditures, shifting the AD curve to the ______?

increase; right

an increase in the money supply may __________ total expenditures, leading to a ____________ shift of the AD curve?

increase; rightward

the four federal taxes that accounted for 88 percent of all federal gov tax receipts in 2013 were?

individual income tax, social security tax, corporate tax,and medicare tax

a recessionary gap exists when AD and SRAS?

intersect to the left of the natural real GDP

an inflationary gap exists when AD and SRAS?

intersect to the right of natural real GDP

real GDP and unemployment rate are?

inversely related

individuals expectation of lower future prices is a?

leftward shifter of the AD curve

a recessionary gap exists if (actual) real gdp is ______ natural real GDP?

less than

As the price level rises, ceteris paribus, people holding some of their wealth in monetary form become?

less wealthy and they buy less

the frictional unemployment rate is 2.5 and the structural unemployment rate is 3.1 and the economy's current unemployment rate is 5.6. the economy is in?

long run equilibrium

An appreciation of the U.S dollar against foreign currencies tends to ____________ U.S net exports and shift the U.S AD curve to the ____________?

lower; left

As the price level falls, ceteris paribus, people holding some of their wealth in monetary form become?

more wealthy and they buy more

greater wealth makes people _______ willing to spend on consumption, causing ________ the economy's AD crve

more; a rightward shift

as the interest rate rises, businesses invest ________ and the AD curve shifts to the _____________?

more;right

if the economy is currently in a recessionary gap?

some economists will argue that the economy can remove itself from the gap without the gov.

According to Keynes, what households plan to save?

sometimes equals what firms plan to invest

according to say's law?

supply creates its own demand

if consumption increase?

the AD curve will shift right, which will push the price level up.

suppose the economy's short-run equilibrium is at a point to the right of natural real gdp. Which of the following statements is true?

the economy is in a inflationary gap

if total production is greater than total expenditures?

there will be an increase in inventories

if some of a persons wealth is in cash it follows that?

this persons monetary wealth will change as the price level changes

the LRAS curve is?

vertical

which of the following is most nearly consistent with say's law?

when a person produces one good,he or she plans to demand other goods.

which of the following will not lead to a leftward shift in the SRAS curve?

an increase in productivity

suppose the real exchange rate of 105 Japanese yen to the dollar changes to 115 to the dollar. in this situation, the dollar has _______________, making japanese good __________ expensive for Americans?

appreciates; more

in self-regulating economy inflationary and recessionary gaps?

are eliminated by forces internal to the economy, without gov intervention

the classical economists felt that wages and prices were flexiable in?

both the upward and downward direction

as income taxes rise , disposable income _________, causing _________ the AD curve?

decreases ; a leftward shift of

Suppose consumption decreases at each price level. As a result, aggregate demand,________, and the AD curve shifts_____

decreases ; leftward

suppose the real exchange rate of 10 pesos to the dollar changes to 9 pesos to the dollar. in this situation, the dollar has _______, making american goods ___________ expensive for Mexicans?

depreciated; less

AD curves are?

downward sloping

a falling interest rate affects the demand for consumer _________ and shifts the AD curve to the ________?

durable; right

If consumption changes because of a change in the price level then the?

economy moves from one point on an AD curve to another point on the same curve

the unemployment rate is equal to the natural unemployment rate at?

every point on the institutional PPF

rise in foreign real national income tends to raise U.S ______, shifting the U.S AD curve to the __________?

exports; right

if real GDP is less than natural rel GDP then the (actual) unemployment rate is?

greater than the natural unemployment rate

if the natural unemployment rate is 5.5 percent, then the economy is at a long run equilibrium when the actual unemployment rate is?

5.5 percent

If the price level remains constant but th wage rate increase, then there will be _________ in production and the SRAS curve will shift__________?

A decrease; leftward

if consumption change because of a change in a factor other than the price level, then the?

AD curve shifts

increase in the price of nonlabor inputs?

shifts the SRAS curve leftward

Which of the following will cause a movement from one point on an AD curve to another point on the same AD curve?

a change in price level

part of the story of the interest rate effect is that a lower price level causes ____________ in the demand for credit, which then causes the interest rate to __________________?

a decrease; fall

Suppose a drop in prices in the stock market makes people feel less financially secure. this would cause _______ the economy's AD curve?

a leftward shift of

the top 1% of income earners in the U.S pay?

a much higher percentage of their income in taxes than the average U.S taxpayer

a flat tax is another term for ______ tax?

a proportional

if real GDP is less than natural real GDP, the economy is?

a recessionary gap

if the SRAS curve intersects the AD curve to the left of Natural Real GDP, the economy is?

a recessionary gap

A decrease in the price of a nonlabor input such as electricity will cause?

a right ward shift in the SRAS curve

suppose the price level is rising and it is widely forecast to rise even further. This forecast might cause _________ of some consumption plans, resulting in _____________ the AD curve?

acceleration; a rightward shift of

an increase in the price level?

causes an upward movement along the existing AD curve

a rise in wage rates?

causes the SRAS curve to shift leftward

the marginal tax rate is equal to the?

change in the person's tax payment divided by the change in the persons taxable income

which of the following is an example of an adverse supply shock?

nationwide drought lasting many months, an outbreak of war among several of the Middle Easter oil-producing countries, an influenza virus that affects 50 percent of the labor force over a 2 month period.

when the economy is producing the level of output equals to a natural Real GDP, the unemployment rate is equal to?

natural unemployment rate

according to say's law, there can be?

neither a general overproduction nor a general underproduction of goods

which of the following factors can shift the AD curve?

net exports, government purchases, and money supply

changes in which of the following will not cause the SRAS curve to shift?

price level

one of the reasons why the AD curve slopes downwards is that?

price level falls, purchasing power rises

if the natural unemployment rate is5 percent and the current unemployment rate is 6 percent, then the economy is?

producing a level of real gdp that is greater than the level of natural real GDP, in an inflationary gap

a depreciation of the U.S dollar against foreign currencies tends to ________ U.S net exports and shift the U.S. AD curve to the _________?

raise; lower

if the economy is in a recessionary gap?

real gdp is less than natural real gdp

an AD curve shows?

real output (real GDP) people are willing and able to buy at different price levels, ceteris paribus

individuals expectations of higher future income is a?

reason for moving up along a give AD curve.

an increase in the interest rate ________ purchases of consumer ___________?

reduces; durables

according to say's law, in a money economy a reduction in consumption spending causes a _____ shift of the saving curve and therefore a ___ in the interest rate?

rightward; fall

an increase in labor productivity will cause the SRAS curve to shift ___________ and the price level to _________?

rightward; increase

as the interest rate rises, the cost of a given investment project ________and businesses invest _________?

rises; less