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Define aggregate supply.

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Aggregate supply is a schedule...

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The foreign purchases, interest rate, and real-balances effects explain why the


A) aggregate demand curve is downward sloping.
B) aggregate demand curve may shift to the left or right.
C) economy will adjust toward equilibrium.
D) aggregate expenditures schedule may shift up or down.

E) C) and D)
F) B) and D)

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An increase in net exports will shift the AD curve to the


A) left by a multiple of the change in net exports.
B) left by the same amount as the change in net exports.
C) right by the same amount as the change in net exports.
D) right by a multiple of the change in net exports.

E) A) and B)
F) None of the above

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Explain the rationale for the shape of the short-run aggregate supply curve in the immediate short run.

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Input prices are fixed due to contractual...

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 Real Domestic Output  Demanded (in Billions)   Price Level (Index Value)   Real Domestic Output  Supplied (in Billions)  $3,000350$9,0004,0003008,0005,0002507,0006,0002006,0007,0001505,0008,0001004,000\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Real Domestic Output } \\\text { Demanded (in Billions) }\end{array} & \text { Price Level (Index Value) } & \begin{array} { c } \text { Real Domestic Output } \\\text { Supplied (in Billions) }\end{array} \\\hline \$ 3,000 & 350 & \$ 9,000 \\\hline 4,000 & 300 & 8,000 \\\hline 5,000 & 250 & 7,000 \\\hline 6,000 & 200 & 6,000 \\\hline 7,000 & 150 & 5,000 \\\hline 8,000 & 100 & 4,000 \\\hline\end{array} The accompanying table shows the aggregate demand and aggregate supply schedules for a hypothetical economy. The equilibrium price and output levels will be


A) 200 and $5,000.
B) 200 and $6,000.
C) 250 and $7,000.
D) 300 and $8,000.

E) All of the above
F) B) and C)

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If aggregate demand decreases, and, as a result, real output and employment decline but the price level remains unchanged, it is most likely that


A) the money supply has declined.
B) the price level is inflexible downward and a recession has occurred.
C) cost-push inflation has occurred.
D) productivity has declined.

E) B) and C)
F) A) and C)

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Explain the reasoning behind the shape of the short-run aggregate supply curve in the short run.

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The short run is the period of time duri...

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In the diagram, the economy's long-run aggregate supply curve is shown by line A) 1. B) 2. C) 3. D) 4. In the diagram, the economy's long-run aggregate supply curve is shown by line


A) 1.
B) 2.
C) 3.
D) 4.

E) A) and D)
F) B) and D)

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The short-run aggregate supply curve


A) becomes flatter at output levels above the full-employment output.
B) becomes steep at output levels above the full-employment output.
C) is upward-sloping with a constant slope.
D) is horizontal.

E) B) and D)
F) A) and B)

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A) \text { increases from } Q _ { 1 } \text { to } Q _ { 3 } \text { while the price level falls from } P _ { 2 } \text { to } P _ { 1 } \text {. } B) \text { increases from } Q _ { 1 } \text { to } Q _ { 2 } \text { while the price level falls from } P _ { 2 } \text { to } P _ { 1 } \text {. } C) \text { increases from } Q _ { 1 } \text { to } Q _ { 3 } \text { while the price level rises from } P _ { 1 } \text { to } P _ { 2 } \text {. } D) \text { increases from } Q _ { 1 } \text { to } Q _ { 2 } \text { while the price level rises from } P _ { 1 } \text { to } P _ { 2 } \text {. }


A)  increases from Q1 to Q3 while the price level falls from P2 to P1. \text { increases from } Q _ { 1 } \text { to } Q _ { 3 } \text { while the price level falls from } P _ { 2 } \text { to } P _ { 1 } \text {. }
B)  increases from Q1 to Q2 while the price level falls from P2 to P1. \text { increases from } Q _ { 1 } \text { to } Q _ { 2 } \text { while the price level falls from } P _ { 2 } \text { to } P _ { 1 } \text {. }
C)  increases from Q1 to Q3 while the price level rises from P1 to P2. \text { increases from } Q _ { 1 } \text { to } Q _ { 3 } \text { while the price level rises from } P _ { 1 } \text { to } P _ { 2 } \text {. }
D)  increases from Q1 to Q2 while the price level rises from P1 to P2. \text { increases from } Q _ { 1 } \text { to } Q _ { 2 } \text { while the price level rises from } P _ { 1 } \text { to } P _ { 2 } \text {. }

E) A) and D)
F) A) and C)

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Changes in the national incomes of our trading partners would directly impact our


A) consumption.
B) exports.
C) imports.
D) government spending.

E) B) and D)
F) A) and B)

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If the cost of resources decreases, then real domestic output will increase.

A) True
B) False

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A) A B) B C) C D) D


A) A
B) B
C) C
D) D

E) B) and D)
F) B) and C)

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Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Given an increase in input price from $4 to $6, we would expect the Aggregate


A) supply curve to shift to the left.
B) supply curve to shift to the right.
C) demand curve to shift to the left.
D) supply and demand curves to both remain unchanged.

E) None of the above
F) A) and D)

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An increase in the price level reduces the real value of financial assets with fixed money values, and, as a result, the holders of these assets decrease their spending.

A) True
B) False

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An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each Unit of labor, $3. If the per-unit price of raw materials rises from $4 to $8 and all else remains Constant, the aggregate


A) supply curve would shift to the left.
B) supply curve would shift to the right.
C) demand curve would shift to the left.
D) demand curve would shift to the right.

E) None of the above
F) B) and C)

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A decrease in consumer spending can be expected to shift the


A) aggregate expenditures curve downward and the aggregate demand curve leftward.
B) aggregate expenditures curve upward and the aggregate demand curve leftward.
C) aggregate expenditures curve downward and the aggregate demand curve rightward.
D) aggregate expenditures curve upward and the aggregate demand curve rightward.

E) A) and C)
F) B) and C)

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In the accompanying graph, which line might represent an aggregate demand curve? A) 1 B) 2 C) 3 D) 4 In the accompanying graph, which line might represent an aggregate demand curve?


A) 1
B) 2
C) 3
D) 4

E) All of the above
F) None of the above

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If the price of crude oil decreased, then this would most likely


A) decrease aggregate supply in the U.S.
B) increase aggregate supply in the U.S.
C) increase aggregate demand in the U.S.
D) decrease aggregate demand in the U.S.

E) B) and D)
F) A) and C)

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The long-run aggregate supply curve is upward sloping.

A) True
B) False

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