question
Which of the following describe why wages are inflexible downward?
Labor Contracts
Labor Contracts
answer
Large part of the labor force works under contract prohibiting wage cuts and wages are fixed for the duration of the contract.
Wages and salaries of non-union workers are usually adjusted only once a year.
Wages and salaries of non-union workers are usually adjusted only once a year.
question
Aggregate Demand
answer
Is a schedule or curve that shows the amounts of real output that buyers collectively desire to purchase at each possible price level.
question
Which would explain the reason for the up-sloping aggregate supply curve
answer
Higher prices mean higher profits when input costs are fixed.
Input costs are fixed, but output costs are variable.
Input costs are fixed, but output costs are variable.
question
Aggregate supply is represented by a curve showing the relationship between the nations _____ ______ and the amount of domestic output that firms in the economy produce?
answer
Price Level - Price Index
question
A down-ward sloping aggregate demand curve indicates an inverse relationship between?
answer
The price level and real GDP
question
Which of the following are the four components or determinants of aggregate demand?
answer
Investment spending-(interest rates, expected returns) Consumer spending,,(Consumer wealth, consumer expectations, household borrowing, taxes) Government spending, Net export spending(national income abroad, exchange rates)
question
The aggregate demand curve is downward because the relationship between the price level and real GDP is?
answer
Inverse
question
An increase in aggregate demand beyond the full-employment level of output that causes inflation is called?
answer
Demand-pull Inflation
question
When the price level rises, real GDP demanded_______? Price levels go up?
answer
Decreases. Increases
question
the short run is the period in which?
answer
output prices are flexible but input prices are fixed or highly inflexible
question
what is the result from a reduction in personal income tax rates on consumers?
answer
increasing consumer purchases at each possible price level.
Increased take-home income.
An increase in aggregate demand.
Increased take-home income.
An increase in aggregate demand.
question
regulations imposed on firms by the government does what..?
answer
Increases per-unit production costs and shifts the aggregate supply curve to the left
question
what are the effects of a depreciation of the US dollar on production costs and aggregate supply?
answer
the dollar price of imported resources is higher.
an increase in per unit production costs from using imported resources.
a decrease in imported resources.
A shift of the AS curve leftward.
US firms obtain less foreign currency with each dollar.
an increase in per unit production costs from using imported resources.
a decrease in imported resources.
A shift of the AS curve leftward.
US firms obtain less foreign currency with each dollar.
question
menu costs refer to the additional costs?
answer
of changing listed prices, firms may wait to see if the decline in demand in permanent
question
what is the measure of the relationship between a nation's level of real output and the amount of resources used to produce that output?
answer
Productivity
question
a rise in net exports will:
answer
shift the aggregate demand curve to the right
question
if firms are pessimistic about future business conditions, they are more likely to reduce current_____?
answer
Investment spending
question
an increase in real interest rates will ____ investment spending and ______ aggregate demand?
answer
Lower investment spending, Reduce aggregate demand.
question
an increase in the money supply will:
answer
lower the interest rates, increase investment and increase aggregate demand
question
what influences expected returns on investment projects?
answer
Business Taxes, Technology, Expectations about future Business conditions, Degree of excess capacity
question
what factors other than the price level, that would cause net exports to change?
answer
national income abroad.
Changes in exchange rates
Changes in exchange rates
question
a decline in aggregate supply, assuming constant aggregate demand, will result in _______ in the price level?
answer
An inceases
question
what are the main sources of productivity?
answer
Improved forms of business enterprise.
Better educated workforce.
Improved production technology.
Better trained workforce
Better educated workforce.
Improved production technology.
Better trained workforce
question
The three time horizons that influence how quickly output and input can change are...
answer
Immediate short-run
Short-run
Long-run
Short-run
Long-run
question
Assuming supply is constant, demand-pull inflation results in an...?
answer
increase in the price level
question
Aggregate supply
answer
the relationship between the price level and the total output will be different in various time horizons.
question
A decline in aggregate demand, assuming supply is constant, will result in...
answer
a decrease in the quantity demended for the GDP
question
the AD curve would shift to the left if...
answer
taxes were increased.
A decline in aggregate demand
A decline in aggregate demand
question
Foreign purchases effect occurs:
answer
when the US price level rises relative to foreign price levels ( and exchange rates do not respond quickly or completely) foreigners buy fewer US goods and Americans buy more foreign goods.
US exports fall and US imports rise.
US exports fall and US imports rise.
question
Consumer wealth is defined as:
answer
the total value of assets minus total value liabilities (debts)
question
wage decrease will:
answer
reduce per-unit production costs and shift the AS curve to the LEFT.
question
government spending
answer
the third determinant of AD, and a reduction in government spending will shift the AD curve to the left
question
real balances effect
answer
a higher price level reduces the purchasing power of the public's accumulated savings balances.
question
Which of the following factors explain the inverse relationship between the price level and the total demand for output?
-Substitution effect
-real-balances effect
-interest rate effect
-foreign purchases effect
-Substitution effect
-real-balances effect
-interest rate effect
-foreign purchases effect
answer
A Substitution effect.
question
The Substitution effect
answer
As price falls, the consumer wants to buy more of the product because it becomes less expensive than other goods.
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