ECON Test 2
Which of the following factors will shift AS1 to AS3? shift to the left
An increase in input prices
Which would most likely increase aggregate supply?
An increase in productivity
Which of the following effects best explains the downward slope of the aggregate demand curve?
An interest-rate effect
Which of the following will not increase a nation's real GDP?
Average price level
The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation?
Business costs and wage rates have decreased.
Which of the diagrams best portrays the effects of an increase in resource productivity?
Graph (1) AS shift to the right
If the economy is initially at full employment, which of the diagrams best portrays a recession as a result of an increase in the cost of production?
Graph (2) AS shift left
Which of the diagrams best portrays the effects of an increase in foreign spending on U.S. products and an expansion?
Graph (3) AD shift right
Which of the diagrams best portrays the effects of a substantial reduction in government spending?
Graph (4) AD shift to the left
The economy experiences an increase in the price level and a decrease in real domestic output. Which of the following is a likely explanation?
Input prices have increased.
Marketopia's real GDP was $520 billion in 2014 and $550 billion in 2015. Its population was 150 million in 2014 and 155 million in 2015. On the other hand, Econland's real GDP was $200 billion in 2014 and $210 billion in 2015; and its population was 53 million in 2014 and 55 million in 2015. Which of the following statements is true?
Marketopia's and Econland's GDP per capita both increased from 2014 to 2015.
When a firm builds a new factory, this is an example of an investment in
Physical Capital
Which of the following would not shift the aggregate demand curve?
Productivity rates
When the general price level in our economy increases, which of the following effects does NOT occur?
The interest rate will also tend to increase
The cost of a higher living standard in the future is giving up __________.
current consumption.
If the dollar appreciates in value relative to foreign currencies, aggregate demand _____.
decreases because net exports decrease
The economy's long-run AS curve assumes that wages and other resource prices _____.
eventually rise and fall to match upward or downward changes in the price level
In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to _____.
increase aggregate demand
A decrease in the price of crude oil would most likely _____.
increase aggregate supply in the U.S.
Use the following graph to answer the next question. A shift of the aggregate demand curve from AD1 to AD0 might be caused by a(n) _____.
increase in investment spending
Congress's passage of new laws significantly increasing the regulation of business would tend to _____.
increase per-unit production costs and shift the aggregate supply curve to the left
Providing a constant number of workers with additional capital with which to work will ______ labor productivity at a(n) ______ rate.
increase; decreasing
The benefits of economic growth are _____, while the costs of economic growth are _____.
increased output per person; the consumption sacrificed in exchange for capital formation
If the national incomes of our trading partners increase, then our aggregate demand _____.
increases because net exports increase
Which of the following is a measure of economic growth that is most useful for comparing changes in standards of living?
increases in real GDP per capita
The short-run aggregate supply curve is most likely to shift to the right if _____.
input prices decrease
The application of new technologies to the production process will increase
labor productivity.
If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium _____.
output would necessarily rise
In the diagrams, AD1 and AS1 are the "before" curves. Stagflation is depicted by _____.
panel (B) only AS shift left
For a nation's real GDP per capita to rise during a year,
real GDP must increase more rapidly than population.
If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, its real GDP per capita will
remain constant
The convergence hypothesis ____.
seems to hold only when other things such as education and infrastructure are held equal.
Suppose that oil prices increase sharply while the rate of growth in labor productivity declines. The combination of these two factors should ______.
shift the short-run aggregate supply curve to the left
Most economists agree that ______ are the single most important source of economic growth.
technological advances
Physical capital is
the factories and machinery used to produce other goods and services.
The principle of diminishing returns to capital states that if the amount of labor and other inputs employed is held constant, then the greater the amount of capital in use the
the less an additional unit of capital adds to production.
Human capital is
the talents, training, and education of workers.
Which combination of factors would most likely increase aggregate demand?
An increase in consumer wealth and a decrease in interest rates.
Between 2013 and 2014, the economy experienced a growth rate of 1.8% in real GDP per capita. If nominal GDP had increased by 3% and the population growth rate was 1%, then the annual inflation rate would be ____.
0.2%
A nation's real GDP was $250 billion in 2014 and $265 billion in 2015. Its population was 122 million in 2014 and 125 million in 2015. What is the growth rate of real GDP per capita in 2015?
3.4%
According to the Rule of 72, if a country experiences an average growth rate of 10%, its real GDP per capita will double in ____.
7.2 Years
Which of the following factors will shift AD1 to AD3? shift to the left
A decrease in consumer wealth
Which of the following scenarios is an example of an investment in physical capital?
A firm purchases new equipment for a manufacturing process.
