Lecture 8 Flashcards
Refer to Figure 23-2. The shift from AS1 to AS2 shown in the diagram is referred to as a(n)
A) negative aggregate supply shock.
B) positive aggregate supply shock.
C) increase in unit costs.
D) increase in aggregate supply.
E) decrease in unit costs.
A
Consider the economy’s aggregate supply curve. Other things being equal, unit costs will tend to fall if
A) wage and price controls are in effect.
B) there is a fall in the price of oil.
C) wages fall.
D) wage increases are less than productivity increases.
E) the government increases payroll taxes.
D
Suppose there is an exogenous increase in the domestic price level. Which of the individuals listed below would experience an increase in wealth?
A) a person with a corporate bond that promises to repay the face value of the bond in the future
B) a person with a government bond that promises to pay the holder $1000, 5 years hence
C) a person with cash under the mattress
D) a person with a 25-year home mortgage
E) a person with deposits in a bank savings account
D
Other things being equal, when the domestic price level falls exogenously,
A) the aggregate expenditure function shifts downward.
B) Canadian goods become more expensive relative to foreign goods.
C) the net export function shifts upward.
D) the net export function shifts downward.
E) imports of foreign goods rise.
D
A decrease in aggregate supply in the short run is
A) caused by a decrease in the price level.
B) caused by an increase in the price level.
C)reflected in a shift to the right in the AS curve.
D)interpreted to mean that less total output will be supplied at any given price level.
E) reflected in a movement to the left along the AS curve.
B
Consider a simple macro model with demand-determined output. An exogenous increase in the domestic price level will
A) shift the net export function downward and the AE curve upward.
B) shift the net export function upward and the AE curve downward.
C) shift both the net export function and the AE curve upward.
D) pivot the net export function and the AE curve upward.
E) shift both the net export function and the AE curve downward.
E
Refer to Figure 23-2. Which of the following events could cause the upward shift of the AS curve?
A) a recession in the U.S. that reduces our net exports
B) a major discovery of new oil reserves that will increase the world supply
C) a decrease in business confidence that reduces desired investment
D) improvements in communications technology
E) a massive drought that reduces agricultural output
E
Which of the following would likely cause a downward shift in the AE curve and a movement upward along the AD curve?
A) an increase in the price level
B) a decrease in the business confidence of firms
C) a reduction in government purchases
D) a decrease in the price level
E) a decrease in the MPC
A
The economy’s AS curve will shift upward in the short run if there is
A) an improvement in technology.
B) an increase in nominal wages.
C) an increase in the price level.
D) a decrease in the cost of capital.
E) a decrease in nominal wages.
B
A rightward shift in the aggregate demand (AD) curve could result from a rise in
A) the net tax rate.
B) desired saving.
C) induced imports.
D) the price level.
E) desired investment.
E
Which of the following would likely cause a downward parallel shift in the AE curve and a leftward shift in the AD curve?
A) an increase in the price level
B) an decrease in the MPC
C) a reduction in government purchases
D) a decrease in the price level
E) an increase in the business confidence of firms
A
Other things being equal, an exogenous rise in the domestic price level will
A) cause net exports to rise.
B) have no effect on the level of desired real expenditure.
C) decrease desired real expenditure because it will affect the real value of wealth.
D) increase the level of desired real expenditure.
E) decrease desired real expenditure only if it is accompanied by a change in the current income of households.
C
A leftward shift in the economy’s AS curve implies that
A) at any given price level, a higher level of output will be supplied.
B) there is a demand shock.
C) there is an increase in aggregate supply.
D) at any given price level, a lower level of output will be supplied.
E) the same output will be produced in equilibrium, but at a lower price level.
D
Consider a simple macro-model with demand-determined output. An exogenous increase in the domestic price level will ________ the real value of the private sector’s wealth, which leads to ________ in autonomous consumption and thus ________ shift in the AE function.
A) increase; an increase; an upward
B) increase; an increase; a downward
C) reduce; an increase; an upward
D) increase; a decrease; a downward
E) reduce; a decrease; a downward
E
The aggregate supply curve relates the price level to the quantity of output that firms would like to produce and sell, given the assumption that
A) unit costs remain constant.
B) technology and the prices of all factors of production remain constant.
C) technology and the prices of all factors of production do not remain constant.
D) all firms are price takers.
E) all firms are price setters.
B
