Macroeconomics Chapter 12 questions/review #2

What action did the United States take to try to recover from supply shocks in the 1970s?

It stabilized prices.

Which situation would make the short-run aggregate supply curve shift to the left?

a decrease in worker productivity

If the economy is in equilibrium at potential output and there is a negative supply shock, then the result is:

a recessionary gap.

The _____ curve shows the relationship between the aggregate price level and the quantity of aggregate output demanded by households, businesses, government, and the rest of the world.

aggregate demand

The aggregate demand curve shows the relationship between the aggregate price level and the quantity of _____ demanded by households, businesses, government, and the rest of the world.

aggregate output

Which situation MOST likely will cause a negative supply shock?

an increase in energy costs

In the short run, a negative supply shock causes a(n):

decrease in output and an increase in prices.

Between 1929 and 1933, the U.S. economy moved:

down the short-run aggregate supply curve.

When the Federal Reserve changes the money supply or interest rates to change aggregate demand, it is using _____ policy.

monetary

If consumers and firms become pessimistic about future income and the level of real gross domestic product (GDP), then this will MOST likely cause a _____ shock.

negative demand

A producer has raised employee wages across the board. This will likely decrease its profit per unit UNLESS:

other costs of output have decreased and price per unit has increased

An event that shifts the aggregate demand curve to the right is a _____ shock.

positive demand

If the price level falls and all prices are fully flexible, then the amount of real gross domestic product (GDP) supplied in the long run will:

remain constant.

An increase in employers' contributions to workers' health insurance:

represents an increase in nominal wage.

A decrease in employers' contribution to workers' health insurance will MOST likely cause a:

shift of the short-run aggregate supply curve to the right.

When the economy suffers a negative demand shock, the aggregate demand curve:

shifts to the left.

If the price of oil decreases, then the:

short-run aggregate supply curve will shift to the right.

A lack of stabilization policy due to political constraints caused _____ to last longer than it might have otherwise done.

the Great Recession

Assuming everything else remains constant, as the aggregate price level increases:

this reduces the purchasing power of a given amount of money.

decrease in the aggregate price level.

According to the graphs, a movement along the aggregate demand curve from F to G could be caused by a(n):

If potential output is $10 trillion and actual output is $9 trillion, then there is an output gap of:

-10 %

If there is a 15% increase in the aggregate price level, a consumer who had been looking to purchase something that cost $2500 would now have to pay $______ for it.

2,875

A producer wants to determine if it should produce more units of output. It currently sells each unit for $30 and the production per unit is $25, giving them a profit of $_____ .

5

A producer sees that aggregate prices have increased by $3. It currently makes a $4 profit on each unit of output. Its new profit per unit will be $ _____.

7