EC141 Week 5
Refer to the above graph, which shows an aggregate demand curve for a hypothetical economy. If the price level is 200, the quantity of real GDP demanded is:
$600 billion
Which event would most likely increase aggregate demand?
A depreciation of the dollar
Which would be one of the factors that increase aggregate demand
An increase in consumer wealth
Which set of events would most likely decrease aggregate demand?
An increase in personal income tax rates
If the prices of imported resources increase, then this event would most likely:
Decrease aggregate supply
A decrease in net exports will cause a(n):
Decrease in aggregate demand
An increase in government spending will cause a(n):
Increase in aggregate demand
Cost-push inflation occurs because of a:
Leftward shift in the aggregate supply curve
The labels for the axes of an aggregate supply curve should be:
Real domestic output for the horizontal axis and price level for the vertical axis
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 magnification of small changes in spending into larger changes in output and income is produced by:
The multiplier effect
The long-run aggregate supply curve is:
Vertical
Wage contracts, efficiency wages, and the minimum wage are explanations for why:
Wages tend to be inflexible downward
The ratchet effect means that:
When aggregate demand decreases, the price level remains constant
An increase in aggregate demand is most likely to be caused by a decrease in:
the tax rates on household income.