Econ 13.1 13.2

The aggregate demand curve slopes downward for all of the following reasons​ except:

A lower price level makes imports from other countries less​ expensive, and U.S. citizens buy more imports.

Which of the following statements is correct if real GDP in the United States declined by more during the 2007minus−2009 recession than did real GDP in​ Canada, China, and other trading partners of the United​ States?

Imports to the United States fell more than the U.S.​ exports, leading to an increase in net exports.

Which of the following statements is​ true? Which of the following factors will cause the​ long-run aggregate supply curve to shift to the​ right

In the long​ run, changes in the price level do not affect the level of real GDP All of the above.

Why does the​ short-run aggregate supply curve slope​ upward Why does the failure of workers and firms to accurately predict the price level result in an​ upward-sloping aggregate supply​ curve?

Profits rise when the prices of the goods and services firms sell rise more rapidly than the prices they pay for inputs. All of the above

​Source: Jon​ Hilsenrath, "Rising Dollar and Falling Oil Could Be Recipe For a U.S. Asset​ Boom," Wall Street Journal​, December​ 11, 2014. A​ "strong dollar" means that the_____ "Weak growth​ overseas" means that_____ The combination of a strong U.S. dollar and weak growth overseas might result in lower U.S. exports because______ The result of a strong dollar will be____

U.S. dollar exchanges for more units of foreign currencies . foreign economies are growing more slowly than the U.S. economy. U.S. exports become more expensive for foreign buyers while​ income, and purchasing​ power, in other countries is rising only slowly a leftward shift of the U.S. aggregate demand curve because it reduces​ exports, a spending component of aggregate demand.

Which of the following factors does not cause the aggregate demand curve to​ shift?______ How can government policies shift the aggregate demand curve to the​ right?____

a change in the price level by increasing government purchases

What is the effect of an increase in the price level on the​ short-run aggregate supply​ curve?

a movement up along a stationary curve

Which of the following causes the​ short-run aggregate supply curve to shift to the​ right? Which of the following causes the​ short-run aggregate supply curve to shift to the​ left?

a positive technological change an increase in the expected price of an important natural resource

From August 2009 to August​ 2015, the Standard​ & Poor's Index of 500 stock prices more than​ doubled, while the consumer price index increased by just over 10 percent. These changes would have caused

an increase in the real value of household​ wealth, which shifted the aggregate demand curve to the right.

Consider the two aggregate demand curves in the graph at right. A movement from point A to point B on AD1 could be the result of a A movement from point A to point C could be the result of a

change in the price level. change in the expectations of households.

The​ long-run aggregate supply curve is vertical because in the long​ run,

changes in the price level do not affect potential​ GDP, as potential GDP depends on the size of the labor​ force, capital​ stock, and technology.

​"It's easy to understand why the aggregate demand curve is downward​ sloping: When the price level​ increases, consumers substitute into less expensive​ products, thereby decreasing total spending in the​ economy." This statement is false because the aggregate demand curve is

downward sloping because as prices​ rise, consumer real wealth​ declines, interest rates​ rise, and exports become more expensive.

The aggregate demand curve slopes downward ____and the demand curve for an individual product slopes downward due to consumers substituting the more expensive product for cheaper goods____

due to the wealth effect, the interest-rate effect, and the international-trade effect due to consumers substituting the more expensive product for cheaper goods

The​ short-run aggregate supply curve slopes upward because of all of the following reasons except

in the short​ run, an unexpected change in the price of an important resource can change the cost to firms.

​"the economy's potential to supply goods and services​ [is] determined by such things as labour force and capital​ stock, as well as inflation​ expectations." This list of the determinants of potential GDP is

incorrect since changes in the expected price level affect short run aggregate supply but not the long run aggregate supply.

Firms become more optimistic and increase their spending on machinery and equipment. Because this is a change in___ The federal government increases taxes in an attempt to reduce a budget deficit. Because this is a change in_____ . The U.S. economy experiences 4 percent inflation. Because this is a change in_____

investment, shift rightward consumption, shift leftward price level, movement along

"Why Railroads​ Can't Keep Enough Boxcars in​ Service," Wall Street Journal​, June​ 21, 2015. The reduction in the number of trucks and boxcars will

likely increase transportation costs and shift the​ short-run aggregate supply curve to the left.

More capital accumulationMore capital accumulation will cause the​ long-run aggregate supply curve to

shift to the right

Consider the following information about menu costs. Menu costs are If menu costs were​ eliminated, the​ short-run aggregate supply curve will be

the costs to firms of changing prices upward sloping, wage price stickiness and slow wage adjustment by firms

What relationship is shown by the aggregate demand​ curve? The aggregate demand curve shows the relationship between The short run aggregate supply curve shows the relationship in the short run between

the price level and the quantity of real GDP demanded by​ households, firms, and the government. the price level and the quantity of real GDP supplied by firms

If the price level​ increases, then

there will be a movement up along a stationary aggregate demand curve

Increases in the interest rate will make the aggregate demand curve shift

to the left

Federal Reserve Bank of San Francisco Economic Letter​, July​ 15, 2013. Employers are hesitant to cut​ workers' salaries because wage cuts

upset workers and lower their productivity

An increase in the price level will cause a____ An increase in the gov't purchases will cause a An increase in the state income taxes will cause a An increase in the interest rates will cause a A faster income growth in other countries will cause

upward right left left right

The wealth effect refers to the fact that_____ The interest rate effect refers to the fact that a higher price level results in_____ The​ international-trade effect refers to the fact that an increase in the price level will result in____

when the price level​ falls, the real value of household wealth​ rises, and so will consumption. higher interest rates and lower investment. a decrease in exports and an increase in imports.

​Source:​ "Careful Now," Economist​, April​ 11, 2015. During a​ recession, some firms lay off some of their​ workers, while not cutting the wages of the workers they continue to​ employ, because the workers they continue to employ Could these firms have reduced their labor costs by the​ same, or possibly​ more, if they laid off fewer workers while cutting​ wages? What does the article mean by firms reducing the​ "cash value" of​ workers' wages? If firms want to reduce workers wages over​ time, they have to reduce

would likely react by becoming less productive if their wages are cut. ​No, because workers would become disgruntled with wage cuts and reduce their​ productivity, resulting in higher production costs. It means firms found it difficult to cut nominal wages. the cash or nominal​ value, of wages