Chapter 12 Quiz – Flashcards
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The immediate-short-run aggregate supply curve is:
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horizontal.
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The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries will:
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increase U.S. imports and decrease U.S. exports.
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Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)?
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An appreciation of the U.S. dollar.
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The economy's long-run aggregate supply (LRAS) curve is:
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vertical at natural (full employment) real GDP, or potential output (QN).
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The equilibrium price level and level of real output occur where:
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the aggregate demand and supply curves intersect.
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The aggregate supply curve (short run):
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slopes upward and to the right.
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An increase in input productivity will:
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reduce the equilibrium price level, assuming downward flexible prices.
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Assuming the short-run aggregate supply curve is upward sloping, an increase in short-run aggregate supply (while aggregate demand remains unchanged) results in a ____________ price level (P), ____________ output/real GDP level (Q), and ____________ unemployment level (U).
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lower; higher; lower
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Assuming the short-run aggregate supply curve is upward sloping, a decrease in aggregate demand (while short-run aggregate supply remains unchanged) results in a ____________ price level (P), ____________ output/real GDP level (Q), and ____________ unemployment level (U).
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lower; lower; higher
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The economy's long-run AS curve assumes that wages and other resource prices:
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eventually rise and fall to match upward or downward changes in the price level.
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If aggregate demand increases and aggregate supply decreases, the price level:
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will increase, but real output may increase, decrease, or remain unchanged.
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Prices and wages tend to be:
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flexible upward, but inflexible downward.
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In which of the following sets of circumstances can we confidently expect inflation?
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Aggregate supply decreases and aggregate demand increases.
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A rightward shift in the aggregate supply curve is best explained by an increase in:
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productivity.
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Which one of the following would not shift the aggregate demand curve?
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A change in the price level.
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If the short-run equilibrium level of real GDP (QE) is greater than full employment real GDP (QN), then the economy is in a(n) ____________ gap with unemployment (U) that is ____________ the natural rate of unemployment (UN).
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inflationary; below
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If the short-run equilibrium level of real GDP (QE) is less than full employment real GDP (QN), then the economy is in a(n) ____________ gap with unemployment (U) that is ____________ the natural rate of unemployment (UN).
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recessionary; above
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The aggregate demand curve is:
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downsloping because of the interest-rate, real-balances, and foreign purchases effects.
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In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to:
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increase aggregate demand.
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Which of the following would not shift the aggregate supply curve?
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An increase in the price level.
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The fear of unwanted price wars may explain why many firms are reluctant to:
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reduce prices when a decline in aggregate demand occurs.
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The economy experiences an increase in the price level and a decrease in real domestic output. Which of the following is a likely explanation?
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Input prices have increased
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The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the:
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determinants of aggregate demand.
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If the short-run equilibrium level of real GDP (QE) is equal to full employment real GDP (QN), then the economy is experiencing ____________ with unemployment (U) that is ____________ the natural rate of unemployment (UN).
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full employment (no gap); equal to
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The real-balances effect indicates that:
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a higher price level will decrease the real value of many financial assets and therefore reduce spending.
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Which one of the following would increase per-unit production cost and therefore shift the aggregate supply curve to the left?
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An increase in the price of imported resources.
