ECON Ch. 29 Review

AP) Which of the following changes in the aggregate demand and aggregate supply curves is likely to result in stagflation?

The aggregate supply curve shift to the left

(Last Word)

The amount significant the composition

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

expand investment and shift the AD curve to the right

AP) An increase in which of the following will increase aggregate demand?

government spending

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

output would rise

AP) The aggregate demand curve is downward sloping because as the price level increases the

purchasing power of wealth decreases

AP) The intersection of the aggregate supply curve and the aggregate demand curve occurs at the economy's equilibrium level of

real national output and price level

The fear of unwanted price wars may explain why many firms are reluctant to

reduce prices when a decline in aggregate demand occurs

Graphically, demand-pull inflation is shown as a:

rightward shift of the AD curve along upsloping AS curve

Graphically, the full-employment, low-inflation, rapid-growth economy of the last half of the 1990s is depicted by a:

rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve

An increase in input productivity will:

reduce the equilibrium price level, assuming downward flexible prices

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

A substantial appreciation of the U.S. dollar with no immediate change in the U.S. price level would result in a:

rightward shift of the aggregate supply curve, such as from AS1 to AS2

Which of the diagrams best portrays the effects of declines in the prices of imported resources?

A

AP) Which of the following changes will have the smallest expansionary effect on aggregate demand in the short run?

A decrease in taxes of $100

AP) Which of the following statements best describes the impact of a decrease in Japanese income on aggregate demand in the United States?

Aggregate demand will decrease because the demand for United States Exports decreases

AP) Which of the following changes would cause an economy's aggregate demand curve to shift to the right?

An increase in autonomous consumption spending

AP) The economy of a country is currently in equilibrium at point A in the diagram. If the government does nothing and wages are flexible, which of the following will most likely occur in the long run?

Falling wages will shift the aggregate supply curve to the right, producing full employment

Which one of the following would not shift the aggregate demand curve?

a change in the price level

AP) Stagflation is caused by

a decrease in aggregate supply

AP) Stagflation is most likely to be caused by

a decrease in aggregate supply

The real-balances effect indicates that:

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

If the price level is 150 and producers supply $300 of real output:

a shortage of real output of $200 will occur

Other things equal, if the U.S. dollar were to depreciate, the:

aggregate supply curve would shift to the left

Which of the following would not shift the aggregate supply curve?

an increase in the price level

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

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

(AP question-modified) The graph shows the macroeconomic conditions of Klein. Many economists estimate that the natural rate of unemployment is 6 percent. If this is true and the current rate of unemployment is 5.1 percent, in what range of real gross domestic product is the economy currently producing?

greater than Y2

If the current price level was such that the aggregate quantity demanded exceeded the aggregate quantity supplied, we would expect:

inflation would occur

Graphically, cost-push inflation is shown as a:

leftward shift of AS curve

AP) An increase in which of the following is consistent with an outward shift of the production possibilities curve?

long-run aggregate supply

AP) An advance in technology will cause the

long-run aggregate supply curve to shift to the right

AP) In an economy with a horizontal aggregate supply curve, and increase in government spending will cause output and the price level to change in which of the following ways?

output increase; price level no change

AP) Which of the following would indicate that economic growth has occurred?

the LRAS curve shifts to the right

AP) The short-run aggregate supply curve is likely to shift to the left when there is an increase in

the cost of productive resources

AD and AS represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves. The change in aggregate supply from as to as2 could be caused by:

the increased availability of entrepreneurial talent

If aggregate demand decreases, and as a result, real output and employment decline but the price level remains unchanged, it is most likely that:

the price level is inflexible downward and a recession has occurred

Per unit production cost is:

total input cost divided by units of output

AP) Which of the following would cause the short-run aggregate supply curve to shift to the right?

(A decrease in the expected price level)

If the amount of real output demanded at each price level falls by $200

150 and $300, respectively

The equilibrium price level will be:

200

AP) Which of the following would most likely cause a rightward shift in an economy's aggregate supply curve?

An across-the-board reduction of wages in the manufacturing sector

AP) A decrease in the price of inputs will cause which of the following to occur in the short run?

An increase in the short-run aggregate supply and a decrease in the price level

AP) a decrease in business taxes would lead to an increase in national income by increasing which of the following?

Both aggregate demand and aggregate supply

Which of the above diagrams best portrays the effects of an increase in consumer spending

C

Which of the above diagrams best portrays the effects of an increase in foreign spending on U.S. products?

C

Which of the diagrams best portrays an improvement in expected rates of return on investment?

C

AP) Aggregate demand may be measured by adding

Consumption, investment, government spending, and net exports

Which of the diagrams best portrays the effects of a substantial reduction in government spending?

D

The aggregate supply curve (short-run) is upsloping because:

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

AP) A leftward shift of the long-run aggregate supply curve is most likely consistent with an improvement in a country's standard of living if

population decreases

The aggregate supply curve:

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

AP) If an economy's aggregate supply curve is upward sloping, an increase in government spending will most likely result in a decrease in the

unemployment rate

Which of the following is incorrect?

when the price level increases, real balances increase, businesses and households find themselves wealthier and therefore increase their spending