Chapter 12

A decrease in government spending on new public goods and services will cause a(n):

• increase in aggregate demand.

• decrease in aggregate demand.

• increase in the quantity of real domestic output demanded.

• decrease in the quantity of real domestic output demanded.

If the dollar appreciates in value relative to foreign currencies:

•  

  aggregate demand decreases.

• the quantity of real domestic output demanded decreases.

• the quantity of real domestic output demanded increases.

• aggregate demand increases.

Which combination of factors would most likely increase aggregate demand?

• An increase in personal taxes and a decrease in government spending.

• An increase in household indebtedness and a decrease in foreign demand for products.

• An increase in business taxes and a decrease in profit expectations.

• An increase in consumer wealth and a decrease in interest rates.

The slope of the immediate-short-run aggregate supply curve is based on the assumption that:

• both input and output prices are fixed.

• input prices are fixed, but output prices are flexible.

• input prices are flexible, but output prices are fixed.

• neither input nor output prices are fixed.

The immediate-short-run aggregate supply curve is:

• horizontal

• downward sloping.

• vertical.

• upward sloping.

The short-run aggregate supply curve shows the:

• inverse relationship between the price level and real GDP produced.

• inverse relationship between the price level and real GDP purchased.

• direct relationship between the price level and real GDP produced.

• direct relationship between the price level and real GDP purchased.

Refer to the above graph, which factor will shift AS1 to AS2?

• An increase in real interest rates.

• A decrease in business taxes.

• An increase in input prices.

• A decrease in business subsidies.

Suppose that an economy produces 500 units of outputs. It takes 10 units of labor at $15 a unit and 4 units of capital at $50 a unit to produce this output. The per-unit cost of production is:

• $0.40

• $1.24

• $1.42

• $0.70

If Congress passed new laws significantly increasing the regulation of business, this action will tend to:

• increase per-unit production costs and shift the aggregate supply curve to the left.

• increase per-unit production costs and shift the aggregate demand curve to the right.

• increase per-unit production costs and shift the aggregate supply curve to the right.

• increase per-unit production costs and shift the aggregate demand curve to the left.

The long-run aggregate supply curve is:

• vertical, and a graph of the short-run aggregate supply curve is upsloping.

• horizontal, and a graph of the short-run aggregate supply is upsloping.

• upsloping, and a graph of the short-run aggregate supply is vertical.

• downsloping, and a graph of the short-run aggregate supply is horizontal.