ECO Chapter 10

Many economists view the natural rate of unemployment as the level observed when real GDP is given by the position of the long-run aggregate supply curve.There can be positive unemployment in this situation because

information is costly and rigidities always exist causing some types of unemployment​ (frictional and​ structural) to occur even in the long run after everyone in the economy has fully adjusted to any changes.

The​ long-run aggregate supply curve is determined by

the​ full-employment level of real output.

The​ long-run aggregate supply curve shifts outward when

there is economic growth.

The​ long-run aggregate supply curve

is vertical because changes in the price level have no effect on real output.

Year to year rightward shifts in​ long-run aggregate supply leads to

a​ long-run trend path for real GDP.

The​ long-run aggregate supply curve ​(LRAS​) is equivalent to the​ full-employment level of real GDP.

True

The shape of the​ long-run aggregate supply curve ​(LRAS​) is

Vertical

Economic growth is represented by the​ long-run aggregate supply curve ​(LRAS​) shifting

outward to the right.

The ​long-run aggregate supply​ curve, ​LRAS, is
a ______ line determined by amounts of available resources such as labor and capital and by technology and resource productivity. The position of the LRAS gives the​ full-information and​ full-adjustment level of real GDP per year.

vertical

The ______ rate of unemployment occurs at the​ long-run level of real GDP per year given by the position of the LRAS.

natural

If labor or capital increases from year to year or if the productivity of either of these resources rises from one year to the​ next, the LRAS shifts ________. In a growing​ economy, therefore, real GDP per year gradually _______ over time.

rightward/ increases

Suppose that there is a sudden riserise in the price level. As a​ consequence, economywide planned spending on purchases of goods and services will

decrease

Which of the following is not a reason for this change in economywide planned​ spending?

The substitution effect.

Aggregate demand​ curve

A curve showing planned purchase rates for all final goods and services in the economy at various price​ levels, all other things held constant.

Deflation has occurred during the past year.

Movement down along

Real GDP levels of all the​ nation's major trading partners have declined.

Shifts to left

There has been a decline in the foreign exchange value of the​ nation's currency.

Shifts to right

The price level has increased this year.

Movement up along

Total expenditures for domestically produced goods and services consist of

consumer​ spending, business​ spending, government​ spending, and net foreign spending.

Which one of the following is not a component of total​ expenditures?

Merchandise inventories.

What determines the total value of annual U.S.​ GDP?

The spending and production decisions of​ consumers, firms,​ governments, and foreigners.

The total of all planned real expenditures in the economy is

aggregate demand.

The aggregate demand curve

shows planned purchase rates of goods and services at various price levels.

The aggregate demand curve slopes downward because of the

real-balance, interest rate and open economy effects.

According to the​ real-balance effect, an increase in the price level

reduces an​ individual's expenditures due to a decrease in the real value of cash balances.

According to the interest rate​ effect, an increase in the price level

-reduces borrowing and spending. -increases nominal interest rates. -reduces the aggregate quantity of goods and services demanded. All of the above

Which of the following will generate an increase in aggregate​ demand?

Government spending for the onset of a war.

The U.S. aggregate demand curve would shift to the left if

the Federal Reserve Board caused the real interest rate to increase.

The aggregate demand curve would shift to the right as a result of

a drop in the foreign exchange value of the dollar.

All of the following would cause the aggregate demand curve to shift except

price level changes.

In an open​ economy, the total value of GDP is based on the spending decisions of​ individuals, firms,​ governments, and foreign residents.

True

The components of GDP as calculated using the expenditure approach are identical to the components of aggregate demand.

True

The shape of the aggregate demand curve ​(AD​) is

downward sloping.

A change in the price level has no effect on the real value of cash balances.

False

The idea that higher price levels in the United States result in foreign residents desiring to buy fewer​ U.S.-made goods and U.S. residents desiring to buy more​ foreign-made goods is referred to as the

open economy effect.

The lower the price​ level, the greater the total planned spending on goods and services.

True

The aggregate demand curve is essentially the same as the demand curve for an individual product.

False

An increase in the price level shifts the aggregate demand curve ​(AD​) to the left.

False

Aggregate demand is the total of all planned ______ in the​ economy, and aggregate supply is the total of all planned ______ in the economy. The aggregate demand curve shows the various quantities of total planned ________ on final goods and services at various price​ levels; it is downward sloping.

expenditures/production/spending

There are three reasons why the aggregate demand curve is downward sloping. They are the ______ ​effect, the _______ effect, and the ______ effect.

real balance/ interest rate/ open economy

The ______ effect occurs because price level changes alter the real value of cash​ balances, thereby causing people to desire to spend more or​ less, depending on whether the price level decreases or increases.

real balance

The ______ effect is caused by interest rate changes that mimic price level changes. At higher interest​ rates, people seek to buy _______ houses and​ cars, and at lower interest​ rates, they seek to buy _______.

interest rate/ fewer/ more

The open economy effect occurs because of a shift away from expenditures on ______ goods and a shift toward expenditures on _______ goods when the domestic price level increases.

domestic/ foreign

RGDP=

(NGDP2 x 100/ PL) - (NGDP1 x 100/ PL) Nominal GDP Price Level

Identify the combined shifts in​ long-run aggregate supply and aggregate demand that could unambiguously explain the simultaneous occurrences of an increase in equilibrium real GDP and increase in the equilibrium price level.

​Long-run aggregate supply schedule​ (LRAS) shifts to the right and aggregate demand schedule​ (AD) shifts to the right by a larger amount.

Identify the combined shifts in​ long-run aggregate supply and aggregate demand that could unambiguously explain the simultaneous occurrences of a decrease in equilibrium real GDP with no change in the equilibrium price level.

​Long-run aggregate supply schedule​ (LRAS) shifts to the left and aggregate demand schedule​ (AD) shifts to the left by an equal amount.

Identify the combined shifts in​ long-run aggregate supply and aggregate demand that could unambiguously explain the simultaneous occurrences of an increase in equilibrium real GDP with no change in the equilibrium price level.

​Long-run aggregate supply schedule​ (LRAS) shifts to the right and aggregate demand schedule​ (AD) shifts to the right by an equal amount.

​Base-year dollars:

The value of a current sum expressed in terms of prices in a base year.

During the​ year, no change occurs in the various factors that influence aggregate demand. As a​ result, the U.S.​ long-run equilibrium price level during this particular year will

increase

Suppose that the current price level is Upper P 3P3. In this​ case, the price will riserise toward Upper P 1P1because

-actual real GDP would be less than total planned real expenditures. -inventories of unsold goods would begin to be depleted. -firms would stand ready to offer fewer services than people wish to purchase. All of the above.

Reduction in the quantity of money in circulation

Diagonal AD

Technological improvement

Vertical LRAS

​Long-run equilibrium in the economy will occur

at the price level where total planned real expenditures equals real GDP at full employment.

The​ long-run equilibrium of an economy occurs

where the​ long-run aggregate supply curve meets the aggregate demand curve.

In the accompanying graph the equilibrium price level is​ ____ and the equilibrium real GDP is​ _____.

​120; $8 trillion

In the accompanying graph if the price level is 140

real GDP exceeds total planned expenditures.

An increase in the U.S. price level can be caused by all of the following except

worsening economic conditions in Asia.

If economic growth causes the​ long-run aggregate supply curve to shift rightward over​ time, but the aggregate demand curve does not​ change, we expect

the​ long-run equilibrium price to​ decline, and there will be secular deflation.

A persistent decline in the price level due to economic growth with stable aggregate demand is

secular deflation.

An increase in the LRAS curve that is larger proportionately than an increase in the AD curve will lead to

a decrease in the price level and an increase in output.

In the long​ run, persistent deflation in a growing economy can occur if

increases in the LRAS are proportionately larger than the increases in AD.

If the actual price level increases beyond the​ long-run equilibrium price​ level, all of the following will tend to occur except

firms offering fewer services than people wish to purchase.

If the LRAS shifts to the right over time and during this time AD does not noticeably​ change, real GDP will​ ________ and the price level will​ ________.

increase; decrease

When the economy is in​ long-run equilibrium, the price level adjusts to equate total planned real
___________ by​ individuals, businesses, the​ government, and foreign​ (non-U.S.) residents with total planned ______ by firms.

expenditures/ production

Economic growth causes the​ long-run aggregate supply schedule to shift _______ over time. If the position of the aggregate demand curve does not​ change, the​ long-run equilibrium price level tends to ________, and there is secular deflation.

rightward/ decrease

Inflation can be caused by

decreases in the​ long-run aggregate supply curve or increases in the aggregate demand curve.

Consider this​ statement: "Persistent inflation in a growing economy is possible only if the aggregate demand curve shifts rightward over time at a faster pace than the rightward progression of the​ long-run aggregate supply​ curve." This statement is describing

​demand-side inflation.

​Supply-side inflation can be caused by a continual

decrease in aggregate supply while aggregate demand remains unchanged.

Which of the following factors could cause the economy to experience​ supply-side inflation?

Government laws which say that the average work week must be reduced by one hour every year.

An increase in​ long-run aggregate supply cuases the price level to​ increase, and is therefore inflationary.

False

Persistent inflation in a growing economy is possible only if the aggregate demand curve shifts rightward over time at a faster pace than the rightward progression of the​ long-run aggregate supply curve.

True

Inflation can be caused by an increase in aggregate
_____ or by a decrease in aggregate ________.

demand/ supply

__________ side inflation cannot account for persistent inflation in a growing​ economy, but _______ side inflation can occur even as real GDP increases.

supply/ demand

Because the U.S. economy has grown in recent​ decades, the persistent inflation during those years has been caused by the aggregate demand curve shifting ________ at a faster pace than the​ long-run aggregate supply curve.

rightward

ECO Chapter 10 - Subjecto.com

ECO Chapter 10

Your page rank:

Total word count: 1842
Pages: 7

Calculate the Price

- -
275 words
Looking for Expert Opinion?
Let us have a look at your work and suggest how to improve it!
Get a Consultant

Many economists view the natural rate of unemployment as the level observed when real GDP is given by the position of the long-run aggregate supply curve.There can be positive unemployment in this situation because

information is costly and rigidities always exist causing some types of unemployment​ (frictional and​ structural) to occur even in the long run after everyone in the economy has fully adjusted to any changes.

The​ long-run aggregate supply curve is determined by

the​ full-employment level of real output.

The​ long-run aggregate supply curve shifts outward when

there is economic growth.

The​ long-run aggregate supply curve

is vertical because changes in the price level have no effect on real output.

Year to year rightward shifts in​ long-run aggregate supply leads to

a​ long-run trend path for real GDP.

The​ long-run aggregate supply curve ​(LRAS​) is equivalent to the​ full-employment level of real GDP.

True

The shape of the​ long-run aggregate supply curve ​(LRAS​) is

Vertical

Economic growth is represented by the​ long-run aggregate supply curve ​(LRAS​) shifting

outward to the right.

The ​long-run aggregate supply​ curve, ​LRAS, is
a ______ line determined by amounts of available resources such as labor and capital and by technology and resource productivity. The position of the LRAS gives the​ full-information and​ full-adjustment level of real GDP per year.

vertical

The ______ rate of unemployment occurs at the​ long-run level of real GDP per year given by the position of the LRAS.

natural

If labor or capital increases from year to year or if the productivity of either of these resources rises from one year to the​ next, the LRAS shifts ________. In a growing​ economy, therefore, real GDP per year gradually _______ over time.

rightward/ increases

Suppose that there is a sudden riserise in the price level. As a​ consequence, economywide planned spending on purchases of goods and services will

decrease

Which of the following is not a reason for this change in economywide planned​ spending?

The substitution effect.

Aggregate demand​ curve

A curve showing planned purchase rates for all final goods and services in the economy at various price​ levels, all other things held constant.

Deflation has occurred during the past year.

Movement down along

Real GDP levels of all the​ nation’s major trading partners have declined.

Shifts to left

There has been a decline in the foreign exchange value of the​ nation’s currency.

Shifts to right

The price level has increased this year.

Movement up along

Total expenditures for domestically produced goods and services consist of

consumer​ spending, business​ spending, government​ spending, and net foreign spending.

Which one of the following is not a component of total​ expenditures?

Merchandise inventories.

What determines the total value of annual U.S.​ GDP?

The spending and production decisions of​ consumers, firms,​ governments, and foreigners.

The total of all planned real expenditures in the economy is

aggregate demand.

The aggregate demand curve

shows planned purchase rates of goods and services at various price levels.

The aggregate demand curve slopes downward because of the

real-balance, interest rate and open economy effects.

According to the​ real-balance effect, an increase in the price level

reduces an​ individual’s expenditures due to a decrease in the real value of cash balances.

According to the interest rate​ effect, an increase in the price level

-reduces borrowing and spending. -increases nominal interest rates. -reduces the aggregate quantity of goods and services demanded. All of the above

Which of the following will generate an increase in aggregate​ demand?

Government spending for the onset of a war.

The U.S. aggregate demand curve would shift to the left if

the Federal Reserve Board caused the real interest rate to increase.

The aggregate demand curve would shift to the right as a result of

a drop in the foreign exchange value of the dollar.

All of the following would cause the aggregate demand curve to shift except

price level changes.

In an open​ economy, the total value of GDP is based on the spending decisions of​ individuals, firms,​ governments, and foreign residents.

True

The components of GDP as calculated using the expenditure approach are identical to the components of aggregate demand.

True

The shape of the aggregate demand curve ​(AD​) is

downward sloping.

A change in the price level has no effect on the real value of cash balances.

False

The idea that higher price levels in the United States result in foreign residents desiring to buy fewer​ U.S.-made goods and U.S. residents desiring to buy more​ foreign-made goods is referred to as the

open economy effect.

The lower the price​ level, the greater the total planned spending on goods and services.

True

The aggregate demand curve is essentially the same as the demand curve for an individual product.

False

An increase in the price level shifts the aggregate demand curve ​(AD​) to the left.

False

Aggregate demand is the total of all planned ______ in the​ economy, and aggregate supply is the total of all planned ______ in the economy. The aggregate demand curve shows the various quantities of total planned ________ on final goods and services at various price​ levels; it is downward sloping.

expenditures/production/spending

There are three reasons why the aggregate demand curve is downward sloping. They are the ______ ​effect, the _______ effect, and the ______ effect.

real balance/ interest rate/ open economy

The ______ effect occurs because price level changes alter the real value of cash​ balances, thereby causing people to desire to spend more or​ less, depending on whether the price level decreases or increases.

real balance

The ______ effect is caused by interest rate changes that mimic price level changes. At higher interest​ rates, people seek to buy _______ houses and​ cars, and at lower interest​ rates, they seek to buy _______.

interest rate/ fewer/ more

The open economy effect occurs because of a shift away from expenditures on ______ goods and a shift toward expenditures on _______ goods when the domestic price level increases.

domestic/ foreign

RGDP=

(NGDP2 x 100/ PL) – (NGDP1 x 100/ PL) Nominal GDP Price Level

Identify the combined shifts in​ long-run aggregate supply and aggregate demand that could unambiguously explain the simultaneous occurrences of an increase in equilibrium real GDP and increase in the equilibrium price level.

​Long-run aggregate supply schedule​ (LRAS) shifts to the right and aggregate demand schedule​ (AD) shifts to the right by a larger amount.

Identify the combined shifts in​ long-run aggregate supply and aggregate demand that could unambiguously explain the simultaneous occurrences of a decrease in equilibrium real GDP with no change in the equilibrium price level.

​Long-run aggregate supply schedule​ (LRAS) shifts to the left and aggregate demand schedule​ (AD) shifts to the left by an equal amount.

Identify the combined shifts in​ long-run aggregate supply and aggregate demand that could unambiguously explain the simultaneous occurrences of an increase in equilibrium real GDP with no change in the equilibrium price level.

​Long-run aggregate supply schedule​ (LRAS) shifts to the right and aggregate demand schedule​ (AD) shifts to the right by an equal amount.

​Base-year dollars:

The value of a current sum expressed in terms of prices in a base year.

During the​ year, no change occurs in the various factors that influence aggregate demand. As a​ result, the U.S.​ long-run equilibrium price level during this particular year will

increase

Suppose that the current price level is Upper P 3P3. In this​ case, the price will riserise toward Upper P 1P1because

-actual real GDP would be less than total planned real expenditures. -inventories of unsold goods would begin to be depleted. -firms would stand ready to offer fewer services than people wish to purchase. All of the above.

Reduction in the quantity of money in circulation

Diagonal AD

Technological improvement

Vertical LRAS

​Long-run equilibrium in the economy will occur

at the price level where total planned real expenditures equals real GDP at full employment.

The​ long-run equilibrium of an economy occurs

where the​ long-run aggregate supply curve meets the aggregate demand curve.

In the accompanying graph the equilibrium price level is​ ____ and the equilibrium real GDP is​ _____.

​120; $8 trillion

In the accompanying graph if the price level is 140

real GDP exceeds total planned expenditures.

An increase in the U.S. price level can be caused by all of the following except

worsening economic conditions in Asia.

If economic growth causes the​ long-run aggregate supply curve to shift rightward over​ time, but the aggregate demand curve does not​ change, we expect

the​ long-run equilibrium price to​ decline, and there will be secular deflation.

A persistent decline in the price level due to economic growth with stable aggregate demand is

secular deflation.

An increase in the LRAS curve that is larger proportionately than an increase in the AD curve will lead to

a decrease in the price level and an increase in output.

In the long​ run, persistent deflation in a growing economy can occur if

increases in the LRAS are proportionately larger than the increases in AD.

If the actual price level increases beyond the​ long-run equilibrium price​ level, all of the following will tend to occur except

firms offering fewer services than people wish to purchase.

If the LRAS shifts to the right over time and during this time AD does not noticeably​ change, real GDP will​ ________ and the price level will​ ________.

increase; decrease

When the economy is in​ long-run equilibrium, the price level adjusts to equate total planned real
___________ by​ individuals, businesses, the​ government, and foreign​ (non-U.S.) residents with total planned ______ by firms.

expenditures/ production

Economic growth causes the​ long-run aggregate supply schedule to shift _______ over time. If the position of the aggregate demand curve does not​ change, the​ long-run equilibrium price level tends to ________, and there is secular deflation.

rightward/ decrease

Inflation can be caused by

decreases in the​ long-run aggregate supply curve or increases in the aggregate demand curve.

Consider this​ statement: "Persistent inflation in a growing economy is possible only if the aggregate demand curve shifts rightward over time at a faster pace than the rightward progression of the​ long-run aggregate supply​ curve." This statement is describing

​demand-side inflation.

​Supply-side inflation can be caused by a continual

decrease in aggregate supply while aggregate demand remains unchanged.

Which of the following factors could cause the economy to experience​ supply-side inflation?

Government laws which say that the average work week must be reduced by one hour every year.

An increase in​ long-run aggregate supply cuases the price level to​ increase, and is therefore inflationary.

False

Persistent inflation in a growing economy is possible only if the aggregate demand curve shifts rightward over time at a faster pace than the rightward progression of the​ long-run aggregate supply curve.

True

Inflation can be caused by an increase in aggregate
_____ or by a decrease in aggregate ________.

demand/ supply

__________ side inflation cannot account for persistent inflation in a growing​ economy, but _______ side inflation can occur even as real GDP increases.

supply/ demand

Because the U.S. economy has grown in recent​ decades, the persistent inflation during those years has been caused by the aggregate demand curve shifting ________ at a faster pace than the​ long-run aggregate supply curve.

rightward

Share This
Flashcard

More flashcards like this

NCLEX 10000 Integumentary Disorders

When assessing a client with partial-thickness burns over 60% of the body, which finding should the nurse report immediately? a) ...

Read more

NCLEX 300-NEURO

A client with amyotrophic lateral sclerosis (ALS) tells the nurse, "Sometimes I feel so frustrated. I can’t do anything without ...

Read more

NASM Flashcards

Which of the following is the process of getting oxygen from the environment to the tissues of the body? Diffusion ...

Read more

Unfinished tasks keep piling up?

Let us complete them for you. Quickly and professionally.

Check Price

Successful message
sending