Chapter 30 – Flashcards
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The aggregate demand curve is the relationship between the
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Price level and the real domestic output purchased
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When the price level rises,
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The demand for money and interest rates rises
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One explanation for the downward slope of the aggregate demand curve is that a change in the price level results in
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A foreign purchases effect
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A sharp decline in the real value of stock prices, which is independent of a change in the price level, would best be an example of
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A change in the real value of consumer wealth
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The aggregate demand curve will be increased by
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A depreciation in the value of the U.S. dollar
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The aggregate supply curve is the relationship between the
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Price level and the real domestic output produced
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The short-run aggregate supply curve assumes that
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Nominal wages do not respond to changes in the price level
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In the long run, the aggregate supply curve is
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Vertical
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If the prices of imported resources increase, then this event would most likely
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Decrease aggregate supply
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The level of productivity in this economy is
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5
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The per-unit cost of production is
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$0.40
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If productivity increased such that 60 units are now produced with the quantity of inputs still equal to 10, then per-unit production costs would
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Decrease and aggregate supply would increase
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All else equal, if the price of each input increases from $2 to $4, productivity would
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Remain unchanged and aggregate supply would decrease
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If Congress passed much stricter laws to control the air pollution from businesses, this action would tend to
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Increase per-unit production costs and shift the aggregate supply curve to the left
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An increase in business taxes will tend to
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Decrease aggregate demand and decrease aggregate supply
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If at a particular price level real domestic output from producers is less than real domestic output desired by buyers, there will be a
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Shortage and the price level will rise
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The equilibrium price level and quantity of real domestic output will be
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100 and $3,000
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If the quantity of real domestic output demanded increased by $2,000 at each price level, the new equilibrium price level and quantity of real domestic output would be
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150 and $4,000
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Using the original data from the table, if the quantity of real domestic output demanded increased by $1,500 and the quantity of real domestic output supplied increased by $500 at each price level, the new equilibrium price level and quantity of real domestic output would be
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125 and $4,000
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An increase in aggregate demand with a short-run aggregate supply curve will increase
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Both real output and the price level
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In the aggregate demand-aggregate supply model, an increase in the price level will
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Decrease the strength of the multiplier
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Aggregate demand decreases and real output falls, but the price level remains the same. Which factor most likely contributes to downward price inflexibility?
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Efficiency wages
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Fear of price wars, menu costs, and wage contracts are associated with
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A price level that is inflexible downward
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If there were cost-push inflation,
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The real domestic output would decrease and the price level would rise
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An increase in aggregate supply will
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Decrease the price level and increase the real domestic output
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An increase in the price level will:
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Reduce the purchasing power of household wealth and reduce consumption
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Refer to the graph. The shift from AD1 to AD2 may have been caused by:
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A decrease in government spending
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Refer to the graph. Suppose aggregate demand falls from AD1 to AD2. In the short run, this will cause output to:
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Fall to Q3 but the price level to remain at P1
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The short-run aggregate supply curve:
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Shows the amount of real output supplied at various price levels
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A leftward shift of the short-run aggregate supply curve would illustrate:
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Cost-push inflation
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At very low levels of output, the short-run aggregate supply curve is relatively:
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Flat, because firms can expand output with relatively little increase in per-unit production costs
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The aggregate demand curve slopes downward to the right:
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Because a lower price level reduces the demand for money, which lowers the interest rate and increases desired investment
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An increase in the incomes of U.S. trading partners would shift the U.S.:
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Aggregate demand curve to the right
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Higher prices of imported resources will:
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Shift the aggregate supply curve to the left
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In the short run, a reduction in aggregate demand is:
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Unlikely to cause a reduction in the price level because of menu costs and efficiency wages
