Exam 2

If the dollar appreciates in value relative to foreign currencies, aggregate demand _____.

decreases because net exports decrease

In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to _____.

increase aggregate demand

A decrease in the price of crude oil would most likely _____.

increase aggregate supply in the U.S.

A shift of the aggregate demand curve from AD1 to AD0 might be caused by a(n) _____.

increase in investment spending (LOOK AT PHONE)

Congress's passage of new laws significantly increasing the regulation of business would tend to _____.

increase per-unit production costs and shift the aggregate supply curve to the left

Use the following diagrams for the U.S. economy to answer the next question. Which of the diagrams best portrays the effects of a substantial reduction in government spending?

Graph (4) (LOOK AT PHONE)

Use the above diagrams for the U.S. economy to answer the next question. Which of the diagrams best portrays the effects of an increase in resource productivity?

Graph(1) (LOOK AT PHONE)

Use the above diagrams for the U.S. economy to answer the next question. If the economy is initially at full employment, which of the diagrams best portrays a recession as a result of an increase in the cost of production?

Graph(2) (LOOK AT PHONE)

Which of the following is not correct?

In 2010, per capita real gross domestic product (GDP) in Germany was $40,197.67. By 2011, it had increased to $43,741.55. Germany's economy grew at 5.53%.

The economy experiences an increase in the price level and a decrease in real domestic output. Which of the following is a likely explanation?

Input prices have increased

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

Productivity rates

The following happens in French economy, assuming all else equal. "France sought to appease anger over tax hikes and EU concerns over its finances with a 2014 budget bill that focuses efforts largely on savings. Households will be hit by higher taxes to help cut the government budget deficit, a move that will hurt purchasing power."What would happen to French economy in short run?

Total output level will decrease

All of the following will increase the economy's long run output (or potential output) EXCEPT____.

a decrease in the aggregate price level.

Which of the following will not increase a nation's real GDP?

average price level

Between 2013 and 2014, the economy experienced a growth rate of 1.8% in real GDP per capita. If nominal GDP had increased by 3% and the population growth rate was 1%, then the annual inflation rate would be ____.

0.2%

A nation's real GDP was $250 billion in 2014 and $265 billion in 2015. Its population was 122 million in 2014 and 125 million in 2015. What is the growth rate of real GDP per capita in 2015?

3.4%

Which of the following factors will shift AD1 to AD3?

A decrease in consumer wealth (LOOK AT PHONE)

Which of the following scenarios is an example of an investment in physical capital?

A firm purchases new equipment for a manufacturing process.

Assuming all else equal, the following happens to German economy ....a weak reading of German investor sentiment - on concerns about a slowing in U.S. economic momentum and uncertainty around the emerging markets outlook... What would happen to the German economy in short run?

Aggregate price level decreases

Assuming all else equal, thanks to a strong Chinese demand of U.S. goods, exports in U.S. economy has increased. What would happen to U.S. economy in short run?

Aggregate price level of the economy increases.

Which combination of factors would most likely increase aggregate demand?

An increase in consumer wealth and a decrease in interest rates.

Which would most likely increase aggregate supply?

An increase in productivity

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

Providing a constant number of workers with additional capital with which to work will ______ labor productivity at a(n) ______ rate.

increase; decreasing

Which of the following is a measure of economic growth that is most useful for comparing changes in standards of living?

increases in real GDP per capita

The convergence hypothesis ____.

seems to hold only when other things such as education and infrastructure are held equal.

Suppose that oil prices increase sharply while the rate of growth in labor productivity declines. The combination of these two factors should ______.

shift the short-run aggregate supply curve to the left

This is from "Britain, Blighty: Behind the Revisions" the Economist, August 2010. "A BIT like a striptease, official statisticians (they're a much more exciting lot than you might imagine) gradually reveal more stuff about U.K. GDP. In late July they surprised everyone with the news that national output had sprinted ahead by 1.1% in the second quarter (compared with its level in the first)... (U.K.) government spending rose by only 0.3%. The main force driving the economy was private demand.That was encouraging but the breakdown of the spending figures reveals... household spending rose by 0.7%." Which of the following was most likely to occur in U.K? (Assuming all else equal.)

the aggregate demand curve shifts to the right

Physical capital is

the factories and machinery used to produce other goods and services.

The principle of diminishing returns to capital states that if the amount of labor and other inputs employed is held constant, then the greater the amount of capital in use the

the less an additional unit of capital adds to production