Macro Exam (weeks 11 & 12)

Cost-Push inflation arises from:

A decrease in aggregate supply

The amount of real domestic output that will be purchased at each possible price level is best shown by the :

Aggregate demand curve

A shift in the aggregate demand curve would be caused by a change in:

An aggregate demand determinant

A decrease in government spending will cause a(n):

Decrease in aggregate demand

The intersection of the aggregate demand and aggregate supply curves determines the:

Equilibrium level of real domestic output and prices

Aggregate demand is a schedule which shows the various amounts of goods and services that only consumers and businesses desire to purchase at each possible price level

False

Cost-push inflation can be described as a rightward shift of the aggregate supply curve

False

The long-run aggregate supply curve slope is horizontal

False

When there is an increase in aggregate demand, there will be an increase in the price level but not in the level of output or employment

False

An increase in government spending will cause a(n):

Increase in aggregate demand

Demand-Pull inflation is associated with a(n):

Increase in aggregate demand

If congress raised taxes on businesses, this action would:

Increase per-unit production costs and thus decrease aggregate supply

The downward slope of the aggregate demand curve is best explained by the:

Interest rate, real balances, and foreign purchases effects

The vertical slope of the long-run aggregate supply curve is based on the assumption that:

Nominal wages and other resource costs do respond to price level changes

One reason why the aggregate supply curve might shift to the left is that:

Per-unit production costs have increased

The aggregate supply curve is the relationship between the:

Price level and the production of real domestic output

The labels for the axes of the aggregate demand graph should be:

Real domestic output on the horizontal axis and the price level on the vertical axis

The shape of the short-run aggregate supply curve basically depends on what happens to production costs and therefore to the prices which businesses must receive to cover costs and make a profit as real domestic output expands

True

The long-run aggregate supply curve is:

Vertical

A graph of the long-run aggregate supply curve is:

Vertical, and a graph of the short-run aggregate supply is upsloping