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Positive shocks or changes to aggregate supply include

1) an unexpected increase in productivity 2) an abrupt decrease in oil prices

Which of the following will cause governmental purchases to rise

1. increased spending on airports 2. increased spending on defense 3. increased spending on highways

In the short run the economy moves to a new equilibrium where real GDP is

above the full-employment level, and unemployment is lower than the natural rate.

Economic growth can be shown as:

an outward shift of the production possibilities frontier

If the government _____ the amount of spending, aggregate demand shift to the left

decreases

Saving is important for long-run growth: when households save, that money is available for:

firms to borrow for investment: that borrowing leads to more capital and higher production in the future.

Holding the price level constant, and increase in net exports____ the aggregate demand for real GDP

increases

Which of the following levels of output correspond to the long-run aggregate supply curve?

long run real GDP potential output full-employment real GDP

In the short run, a significant increase in saving may actually have harmful effects on the economy

true

According to the interest rate effect, when the price level rises, people need:

More money to make the same number of purchases, causing interest rates to rise, reducing consumption, investment and the quantity of real GDP demanded resulting in a downward sloping aggregate demand curve

Suppose there is a positive supply shock. In the short run, the economy moves to a new equilibrium where real GDP is:

above the full-employment level, and unemployment is lower than the natural rate.

The two main determinants of net exports are:

exchange rates national income levels

If net exports are increasing because of the lower price level, there will be a:

movement along the AD curve

Which of the following will cause investment to fall

1) higher interest rates 2) to lower expected returns

Which of the following will cause consumption to rise

1) improved consumer expectations 2) lower personal taxes 3) increased borrowing.

Which of the following will cause government purchases to rise?

1) increased spending on defense 2) increased spending on airports

There is an ____ correction mechanism in our economy which operates thorugh the aggregate supply

automatic

Inflation that results from a(n) ______ in aggregate supply is called cost-push inflation

decrease

Suppose there is a positive supply shock, in the long run wages and production costs:

fall, the short-run aggregate supply curve shift to the right. the price level falls. real GDP rises and eventually the economy returns to its full-employment level of real GDP

Stagflation is used to describe an economy that is not growing, but has rising____ together with high _____

inflation unemployment

in the long run, the equilibrium price level is determined by the intersection of the

long run aggregate supply curve and the aggregate demand curve

If consumption, gross investment, or next exports are increasing because of the lower price level. there will be a:

movement along the AD curve

If firms are producing more output because of the higher price level, that's a

movement along the aggregate supply

In the short run, the economy moves to a new equilibrium where real GDP is below the full-employment leven and unemployment is higher than the _____ rate In the long run, wages and production costs____. firms produce more at every price level. The short-run aggregate supply curve shifts to the right moving the economy to a new higher equilibrium. The price level ____ and real GDP____ eventually the economy returns to its full-employment level of real GDP.

natural Fall Fall Increases

Stagflation is caused by ____ shocks, such as _____ input costs, that shift aggregate supply to the left.

negative rising

If many households in the economy try to increase their savings, overall saving in the economy won't increase. This describes the:

paradox of thrift

Aggregate demand shows a negative relationship between the ___ level and the quantity of real ____ or output demanded

price GDP

If____ costs rise, each additional unit of output will cost more to produce

resource

If net exports are increasing because of some non-price change, there will be a

shift of the AD curve

If there is a dramatic reduction in electricity prices, there will be a :

shift of the AS curve

If consumption or gross investment increase for any reason other than the price level, that's a

shift of the aggregate demand

If the aggregate demand shifts in the short run, aggregate_____ will eventually shift in the long run to bring the economy back to full employment

supply

a leftward shift of the aggregate____ causes prices to rise with unemployment

supply

Many things affect productivity including

technology health of workers

Once an expansion occurs, as nominal wages and the costs of other resources rise, eventually

the aggregate supply curve shifts to the left, the price level rises, and the real GDP returns to the full employment level.

The term stagflation was coined in the 1970's, during a period of high _____ in the United States

unemployment

Which of the following are the three broad categories of the determinants of aggregate supply?

1) social institutions 2) resource price 3) productivity

Assume an economy starts out in equilibrium. When the price level rises: ( place the impacts listed below in the proper order)

1) the purchasing power of assets such as savings, stocks and bonds decreases. 2) firms and consumers can purchase fewer goods and services. 3) the aggregate expenditures schedule downward.

If consumers____ the amount of goods and services they purchase, given constant prices, then aggregate_____ for real GDP decreases

decrease demand

A(n) ____ in output increases____ as less labor is needed to produce lower level of real GDP

decrease unemployment

Suppose every household decreases its consumption by 10% and consumption is roughly 70% of total output. A 10% decrease in consumption represents a 7% decrease in output. Aggregate demand will

decrease by more than 7% because of the expenditures multiplier

aggregate_____ determine the level of real GDP

expenditures

If the price level rises, aggregate expenditure:

falls, the aggregate expenditure line shifts down, and there is a movement to a higher point along the aggregate demand line.

Input prices tend to be sticky because:

labor contracts might commit firm to paying a certain wage over multiple years.

in the short run, the price level decreases. Firms hire____ workers and____production. The quantity of real GDP decreases. As the demand of labor decreases and labor contracts expire, workers will accept ____ wages. In the ___ run, output falls.

less decrease lower long

If the economy is producing above equilibrium unemployment

low wages will start to rise which puts upward pressure on prices

The supply curve for an individual good or service is upward-sloping because

marginal costs are increasing

A shock to aggregate supply that affect the economy in a negative way include:

rising oil prices

If consumption, gross investment, or net exports are increasing because of some non-price change there will be a

shift of the AD curve

Cost-push inflation occurs as an increase in resource costs shifts aggregate ____ to the left

supply

There is a dramatic increase in oil prices in Wardor. In the short-run, equilibrium will move to a point similar to point

Not B Not Demand-pull Not Lower

A decline in investment will

Shift the AE line downward and shift the AD curve to the left