eco chapter 9

If the marginal propensity to consume is 0.9, then the spending multiplier is 9. 10. 7. 1.

10

_____ inflation occurs when a supply shock reduces aggregate supply. Cost-push Demand-push Demand-pull Sticky

Cost-push

Which event will shift the aggregate demand curve to the right? a new government program implemented to eliminate poverty a rise in the interest rate a decrease in exports an increase in imports

a new government program implemented to eliminate poverty

What would cause inflation and employment to increase? a rightward shift of the aggregate demand curve a leftward shift of the aggregate demand curve a rightward shift of the short-run aggregate supply curve a leftward shift of the short-run aggregate supply curve

a rightward shift of the aggregate demand curve

Which of these will shift the aggregate supply curve to the right? an increase in the investment of human capital an increase in the price of garbage collection the development of a cartel in the production of soybeans an increase in corporate taxes

an increase in the investment of human capital

A(n) _____ in government spending, a _____ domestic currency, and _____ interest rates will shift the aggregate demand curve to the left.

decrease; stronger; higher

During cost-push inflation, aggregate output _____ and the aggregate price level _____. rises; rises rises; falls falls; rises falls; falls

falls; rises

An increase in incomes of the countries that purchase U.S.-made products will cause a(n) _____ in the _____ U.S.-made products. increase; short-run aggregate supply of decrease; short-run aggregate supply of decrease; aggregate demand for increase; aggregate demand for

increase; aggregate demand for

If an economy is on the vertical portion of the aggregate supply curve, then it is overheating. is at full employment. is in a severe recession. has high unemployment.

is at full employment.

If the amount of regulation in an economy increases, the aggregate supply curve shifts _____ and output supplied will _____. left; increase left; decrease right; increase right; decrease

left; decrease

The _____ curve is vertical at full employment.

long-run aggregate supply

High taxes and/or heavy regulation can are not likely to affect firms' behavior since they are more concerned about profits than taxes or regulation. are likely to shift aggregate supply to the right. can cause firms to boost production so they can cover the added costs. raise costs of production so that the aggregate supply curve shifts to the left.

raise costs of production so that the aggregate supply curve shifts to the left.

Decreased interest rates will shift the aggregate demand curve to the _____ and _____ output demanded.

right; increase

Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded. left; increase right; decrease right; increase left; decrease

right; increase

The aggregate demand curve shows

the amount of real GDP that will be demanded at each possible price level.

The long-run aggregate supply curve is vertical because it incorporates the assumptions of Keynesian theory. wages, prices, and interest rates are not flexible in the long run. many inputs are fixed. the economy will gravitate to the position of full employment when all variables are flexible.

the economy will gravitate to the position of full employment when all variables are flexible.

One reason the amount of real output demanded declines when the aggregate price level rises is the result of a reduction in household wealth called the _____ effect.

wealth