The aggregate demand curve is the relationship between the: |
A. price level and the purchasing of real domestic output. |
A decline in the quantity of real output demanded along the aggregate demand curve is a result of a(n): |
D. increase in the price level. |
An expected decline in the prices of consumer goods will: |
C. decrease aggregate demand. |
An expected rise in the rate of inflation for consumer goods will: |
D. increase current aggregate demand. |
An increase in aggregate demand would be most likely caused by a decrease in: |
D. the tax rates on household income. |
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: |
C. $600 billion. |
A decrease in government spending will cause a(n): |
C. decrease in aggregate demand. |
If the dollar appreciates in value relative to foreign currencies: |
D. aggregate demand decreases. |
When national income on other nations increases: |
D. aggregate demand increases. |
Which combination of factors would most likely increase aggregate demand? |
D. An increase in consumer wealth and a decrease in interest rates. |
An aggregate supply curve shows the: |
C. level of real domestic output that will be produced at each possible price level. |
The slope of the immediate-short-run aggregate supply curve is based on the assumption that: |
C. both input and output prices are fixed. |
The immediate-short-run aggregate supply curve is: |
C. horizontal. |
The short-run aggregate supply curve shows the: |
A. direct relationship between the price level and real GDP produced. |
Refer to the above graph, which factor will shift AS1 to AS2? |
A. A decrease in business taxes. |
Suppose that an economy produces 500 units of outputs. It takes 10 units of labor at $15 a unit and 4 units of capital at $50 a unit to produce this output. The per-unit cost of production is: |
C. $0.70. Per-unit production cost = total input cost/units of output = (1015+450)/500=$0.70. |
Suppose that real domestic output in an economy is 2400 units, the quantity of inputs is 60, and the price of each input is $30. The per-unit cost of production is: |
A. $0.75. Per-unit production cost=Total input cost/units of output = (60*30)/2400=$0.75. |
If Congress passed new laws significantly increasing the regulation of business, this action will tend to: |
D. increase per-unit production costs and shift the aggregate supply curve to the left. |
The long-run aggregate supply curve is: |
D. vertical, and a graph of the short-run aggregate supply curve is upsloping.= |
The intersection of the aggregate demand and aggregate supply curves determines the: |
D. equilibrium level of real domestic output and prices. |
Refer to the above diagram, when AD1 shifts to AD2, real output: |
B. increases from Q1 to Q2, while the price level rises. |
Wage contracts, menu costs, and the minimum wage are explanations for why: |
B. wages tend to be inflexible downward. |
What is the general relationship between a country’s price level and the quantity of its domestic output (real output) demanded? The relationship between a country’s price level and the quantity of its domestic output demanded is a inverse relationship. The AD curve shows that whenever the price level drops, at the same time the quantity of GDP increases. |
The relationship between a country’s price level and the quantity of its domestic output demanded is a inverse relationship. The AD curve shows that whenever the price level drops, at the same time the quantity of GDP increases. |
What assumptions cause the immediate-short-run aggregate supply curve to be horizontal? Why is the long-run aggregate supply curve vertical? Explain the shape of the short-run aggregate supply curve? The immediate-short-run aggregate supply curve is horizontal because of contractual agreements. |
The immediate-short-run aggregate supply curve is horizontal because of contractual agreements. The long-run aggregate supply curve is vertical because the economy’s output is determined by productivity and availability of sources. The shape of the short-run aggregate supply curve is upsloping |
Other things equal, what effect will each of the following have on the equilibrium price level? A. An increase in aggregate supply, with no change in aggregate demand. B. Equal increases in aggregate demand and short-run aggregate supply. C. An increase in aggregate demand and a decrease in aggregate supply. A. Price level will drop and output will increase. |
A. Price level will drop and output will increase. B. Price level will not change, but output raises up C. Price level increases and the change in real output is unknown. |
ECONOMICS CH. 7
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