Question 1

The long-run aggregate supply curve shifts to the right when there is

Accepted Answer

A decline in the natural rate of unemployment indicates that there are more workers available for production, which increases the potential output of the economy and shifts the long-run aggregate supply curve to the right. Options A and B would shift the curve to the left as there would be less capital and labor available for production, and option C would also shift the curve to the left as less available technology would decrease productivity.

Question 2

The long-run aggregate supply curve shifts to the right when there is

Accepted Answer

The long-run aggregate supply curve shifts to the right with an increase in the total amount of capital in the economy, an increase in available technology, and a decrease in the natural rate of unemployment. All these factors enhance the economy's productive capacity.

Question 3

The long-run aggregate supply curve is

Accepted Answer

The long-run aggregate supply curve is vertical as it represents the economy's production capacity in the long run, which is determined by the available factors of production such as labor, capital, and technology. The natural rate level of output is the level of output that an economy can produce at the full employment level of its resources. Therefore, the long-run aggregate supply curve is a vertical line through the natural rate level of output.

Question 4

The short-run aggregate supply curve shifts to the right when

Accepted Answer

The short-run aggregate supply curve shows the relationship between the price level and the quantity of output that firms are willing to produce in the short run. A rightward shift of the short-run aggregate supply curve signifies an increase in the quantity of output supplied at any given price level. This shift can be caused by a decrease in input prices, an increase in the quantity and quality of physical and human capital, or improvements in technology. This, in turn, reduces the cost of production and, therefore, increases the profitability of firms. Consequently, firms will be willing and able to produce more at any given price level. The shift to the right is not affected by output gap or expected inflation.

Question 5

Which of the following increases aggregate supply in the short-run,everything else held constant?

Accepted Answer

A technological improvement that increases worker productivity can lead to a decrease in the cost of production, allowing firms to produce more output at the same cost or the same level of output at a lower cost. This leads to an increase in aggregate supply in the short run. Options A, B, and C would all increase costs, leading to a decrease in aggregate supply in the short run.

Question 6

Everything else held constant,a change in workers' expectations about inflation will cause ________ to change.

Accepted Answer

A change in workers' expectations about inflation will cause a change in wages. If workers expect inflation to increase, they will demand higher wages to compensate. This increase in wages will increase production costs and shift the short-run aggregate supply curve to the left, resulting in a decrease in output and an increase in prices. Therefore, the correct answer is B.

Question 7

Which of the followings does NOT shift the short-run aggregate supply curve?

Accepted Answer

The answer of Which of the followings does NOT shift...

Question 8

Explain through the component parts of aggregate demand why the aggregate demand curve slopes down with respect to the inflation rate.Be sure to discuss two channels through which changes in inflation rates affect demand.

Accepted Answer

The answer of Explain through the component parts of aggregate...

Question 9

The aggregate supply curve is the total quantity of

Accepted Answer

The aggregate supply curve shows the total quantity of final goods and services that all firms in an economy are willing and able to sell at different price levels. It reflects the relationship between the price level and the quantity of output supplied in the economy as a whole. Therefore, it represents the amount of final goods and services offered for sale at different inflation rates.

Question 10

Everything else held constant,when actual output exceeds the natural rate of output ________ aggregate supply ________.

Accepted Answer

In the short-run, when actual output exceeds the natural rate of output, aggregate supply decreases. This is because firms are unable to increase production beyond their capacity, leading to an increase in prices and a decrease in the quantity supplied. In the long-run, however, prices adjust and firm capacity can increase, resulting in an increase in aggregate supply.

Question 11

Everything else held constant,aggregate demand increases when

Accepted Answer

When taxes are cut, households and firms have more disposable income which leads to an increase in consumption and investment spending. This leads to an increase in aggregate demand.

Question 12

The long-run aggregate supply curve is a vertical line passing through

Accepted Answer

The long-run aggregate supply curve is vertical because it represents the economy's potential output when all factors of production are fully employed. This potential output is also known as the natural rate of output, thus the long-run aggregate supply curve passes through the natural rate of output. The other options (B, C, and D) do not represent the full potential output of the economy and would cause shifts in the aggregate supply curve.

Question 13

Everything else held constant,aggregate demand increases when

Accepted Answer

Planned investment spending increases. This is because higher investment spending leads to an increase in total spending in the economy, which in turn increases aggregate demand. A decrease in net exports (choice A) would decrease aggregate demand, an increase in taxes (choice B) would decrease disposable income and therefore decrease consumption spending, and a decrease in the money supply (choice D) would lead to a decrease in spending and therefore decrease aggregate demand.

Question 14

Assuming the economy is starting at the natural rate of output and everything else held constant,the effect of ________ in aggregate ________ is a rise in both inflation and output in the short-run,but in the long-run the only effect is a rise in inflation.

Accepted Answer

According to the question, the economy is currently at the natural rate of output which means there are no short-run effects of changes in aggregate supply or demand.

Option D states that there is an increase in aggregate demand which would cause both inflation and output to rise in the short-run. This is because an increase in demand would lead to firms producing more goods and services, which would increase output. However, since the economy was already at the natural rate of output, in the long-run the only effect of this increase in demand would be an increase in prices (inflation).

Therefore, option D is the best choice that fits the given scenario.

Question 15

The aggregate supply curve shows the relationship between

Accepted Answer

The aggregate supply curve shows the relationship between the inflation rate and the level of aggregate output supplied. As the price level increases, producers are willing to supply more goods and services, resulting in an upward sloping aggregate supply curve.

Question 16

________ flexible wages and prices imply that the short-run aggregate supply curve is ________.

Accepted Answer

The answer of ________ flexible wages and prices imply that...

Question 17

The long-run rate of unemployment to which an economy always gravitates is the

Accepted Answer

The natural rate of unemployment is also known as the long-run rate of unemployment. It is the rate of unemployment at which there is no cyclical unemployment and is determined by structural factors in the economy such as demographics, technology, and labor market institutions. This rate is considered "normal" as it is not influenced by short-term fluctuations in the economy.

Question 18

The fact that an economy always returns to the natural rate level of output is known as

Accepted Answer

The self-correcting mechanism is the idea that an economy will eventually return to its natural rate level of output, even in the face of short-term shocks or market imperfections. This is because prices and wages will adjust over time, restoring equilibrium in the economy.

Question 19

Everything else held constant,if workers expect an increase in inflation,________ aggregate supply ________.

Accepted Answer

According to the sticky-wage theory, if workers expect an increase in inflation, they will demand higher wages to compensate for the expected inflation, which increases firms' labor cost and decreases short-run aggregate supply. In the long-run, however, wages and prices are flexible, and the economy will adjust to the new equilibrium, resulting in no change in aggregate supply.

Question 20

Everything else held constant,which of the following does NOT cause aggregate demand to increase?

Accepted Answer

an increase in taxes reduces disposable income, leading to a decrease in consumption and investment spending, thus decreasing aggregate demand. Therefore, an increase in taxes does not cause aggregate demand to increase.

Quiz 23: Aggregate Demand and Supply Analysis

The long-run aggregate supply curve shifts to the right when there is

The long-run aggregate supply curve shifts to the right when there is

The long-run aggregate supply curve is

The short-run aggregate supply curve shifts to the right when

Which of the following increases aggregate supply in the short-run,everything else held constant?

Everything else held constant,a change in workers' expectations about inflation will cause ________ to change.

Which of the followings does NOT shift the short-run aggregate supply curve?

Explain through the component parts of aggregate demand why the aggregate demand curve slopes down with respect to the inflation rate.Be sure to discuss two channels through which changes in inflation rates affect demand.

The aggregate supply curve is the total quantity of

Everything else held constant,when actual output exceeds the natural rate of output aggregate supply .

Everything else held constant,aggregate demand increases when

The long-run aggregate supply curve is a vertical line passing through

Everything else held constant,aggregate demand increases when

Assuming the economy is starting at the natural rate of output and everything else held constant,the effect of in aggregate is a rise in both inflation and output in the short-run,but in the long-run the only effect is a rise in inflation.

The aggregate supply curve shows the relationship between

flexible wages and prices imply that the short-run aggregate supply curve is .

The long-run rate of unemployment to which an economy always gravitates is the

The fact that an economy always returns to the natural rate level of output is known as

Everything else held constant,if workers expect an increase in inflation, aggregate supply .

Everything else held constant,which of the following does NOT cause aggregate demand to increase?