Question 1

The short-run aggregate supply curve is upward sloping because in the short run, costs of many factors that go into producing goods and services are ________, meaning that the price for a unit of output will ________ relative to input prices and the profit per unit will rise.
A)fixed; rise
B)fixed; fall
C)flexible; rise
D)flexible; fall

Accepted Answer

The answer of The short-run aggregate supply curve is upward...

Question 2

Everything else held constant, a decrease in the cost of production ________ aggregate ________.
A)increases; demand
B)decreases; demand
C)increases; supply
D)decreases; supply

Accepted Answer

A decrease in the cost of production would result in an increase in the quantity supplied at each price level. This means that the supply curve shifts to the right, resulting in an increase in aggregate supply.

Question 3

The total quantity of final goods and services offered for sale at different price levels is ________.
A)the aggregate supply curve
B)the aggregate demand curve
C)the 45° line
D)A and D only.

Accepted Answer

The total quantity of final goods and services offered for sale at different price levels is represented by the aggregate supply curve.

Question 4

Everything else held constant, when output is ________ the natural rate level, wages will begin to ________, increasing short-run aggregate supply.
A)above; fall
B)above; rise
C)below; fall
D)below; rise

Accepted Answer

When output is below the natural rate level, wages will begin to fall, leading to a decrease in production costs and an increase in short-run aggregate supply.

Question 5

The long-run rate of unemployment to which an economy always gravitates is the ________.
A)normal rate of unemployment
B)natural rate of unemployment
C)neutral rate of unemployment
D)inflationary rate of unemployment

Accepted Answer

The natural rate of unemployment represents the rate of unemployment that is consistent with stable inflation over the long run. It is not affected by short-term factors such as business cycles or policy interventions, and represents the underlying structural factors in the labor market, such as frictions and skill mismatches.

Question 6

What are the factors that can shift the aggregate demand curve to the right?

Accepted Answer

The answer of What are the factors that can shift...

Question 7

The long-run aggregate supply curve is a vertical line passing through ________.
A)the natural rate of output
B)the natural-rate price level
C)the actual rate of unemployment
D)the expected rate of inflation

Accepted Answer

The long-run aggregate supply curve represents the economy's potential output when all factors of production are used at their natural rate. Thus, it is a vertical line passing through the natural rate of output, which is the level of output produced when all resources are used at their long-run sustainable level. The other options are not correct as the LRAS is not affected by the actual rate of unemployment or expected rate of inflation but rather by the natural rate of output. The natural-rate price level is a concept related to the short-run aggregate supply curve.

Question 8

Economists believe the natural rate of unemployment is approximately ________ percent.
A)seven
B)six
C)five
D)four

Accepted Answer

The answer of Economists believe the natural rate of unemployment...

Question 9

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

Accepted Answer

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

Question 10

Why is the aggregate demand curve downward sloping?

Accepted Answer

The answer of Why is the aggregate demand curve downward...

Question 11

Everything else held constant, which of the following does not cause aggregate demand to increase?
A)An increase in net exports
B)An increase in government spending
C)An increase in taxes
D)An increase in consumer optimism

Accepted Answer

An increase in taxes decreases disposable income, leading to a decrease in consumption spending and ultimately a decrease in aggregate demand.

Question 12

The aggregate supply curve shows the relationship between ________.
A)the level of inputs and aggregate output
B)the price level and the level of inputs
C)the wage rate and the level of employment
D)the price level and the level of aggregate output supplied

Accepted Answer

The aggregate supply curve shows the relationship between the price level and the level of aggregate output supplied by firms in the economy, holding constant other factors such as the level of inputs and the wage rate. Thus, the correct choice is D.

Question 13

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 14

The positively sloped short-run aggregate supply curve reflects the assumption that labour prices are ________.
A)more flexible than output prices
B)less flexible than output prices
C)fixed in the long run
D)perfectly flexible in both the short run and the long run

Accepted Answer

The positively sloped short-run aggregate supply curve reflects the assumption that labour prices are less flexible than output prices. This means that in the short run, output prices can adjust more quickly than wages or labor costs, leading to an increase in production and supply as prices rise.

Question 15

The aggregate supply curve is ________.
A)the total quantity of raw materials offered for sale at different prices
B)the total quantity of final goods and services offered for sale at the current price level
C)the total quantity of final goods and services offered for sale at different price levels
D)the total quantity of intermediate and final goods and service offered for sale at different price levels

Accepted Answer

The aggregate supply curve shows the total quantity of final goods and services that all producers in an economy are willing and able to offer for sale at different price levels. It takes into account all final goods and services, unlike choice A which only refers to raw materials or choice D which includes intermediate goods.

Question 16

Everything else held constant, aggregate demand increases when ________.
A)taxes are cut
B)government spending is reduced
C)animal spirits decrease
D)the money supply is reduced

Accepted Answer

When taxes are cut, disposable income increases which leads to increased consumption, and hence aggregate demand increases. In contrast, options B, C, and D all lead to a decrease in aggregate demand.

Question 17

Everything else held constant, aggregate demand increases when ________.
A)net exports decrease
B)taxes increase
C)planned investment spending increases
D)the money supply decreases

Accepted Answer

Planned investment spending is a component of aggregate demand. When it increases, aggregate demand increases. The other options would decrease aggregate demand.

Question 18

Some unemployment is always present due to the ________ and ________ components, which are greater than zero.
A)frictional; structural
B)frictional; cyclical
C)structural; cyclical
D)involuntary; frictional

Accepted Answer

Frictional unemployment exists due to individuals who are temporarily between jobs or who are entering the labor force for the first time. Structural unemployment exists due to a mismatch between the skills and qualifications of workers and the requirements of available jobs. Both of these components are inherent in any economy and cannot be eliminated entirely.

Question 19

The long-run aggregate supply curve is ________.
A)a vertical line through the non-inflationary rate of output
B)a vertical line through the current level of output
C)a vertical line through the natural rate level of output
D)a horizontal line through the current level of output

Accepted Answer

The long-run aggregate supply curve is a vertical line through the natural rate level of output, which is the level of output that is consistent with potential GDP and the natural rate of unemployment. This is because in the long run, changes in the price level do not affect the economy's ability to produce goods and services, but only affect the nominal value of these goods and services. Therefore, the long-run aggregate supply curve is not affected by changes in the price level and remains a vertical line at the natural rate of output.

Question 20

Everything else held constant, an increase in the cost of production ________ aggregate ________.
A)increases; demand
B)decreases; demand
C)increases; supply
D)decreases; supply

Accepted Answer

An increase in the cost of production will lead to an increase in the cost of goods and services, and firms will be willing to supply fewer goods and services at any given price. Therefore, the supply of goods and services will decrease, causing a leftward shift of the supply curve.

Quiz 23: Aggregate Demand and Supply Analysis

The short-run aggregate supply curve is upward sloping because in the short run, costs of many factors that go into producing goods and services are , meaning that the price for a unit of output will relative to input prices and the profit per unit will rise.

Everything else held constant, a decrease in the cost of production aggregate .

The total quantity of final goods and services offered for sale at different price levels is ________.

Everything else held constant, when output is the natural rate level, wages will begin to , increasing short-run aggregate supply.

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

What are the factors that can shift the aggregate demand curve to the right?

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

Economists believe the natural rate of unemployment is approximately ________ percent.

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

Why is the aggregate demand curve downward sloping?

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

The aggregate supply curve shows the relationship between ________.

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 positively sloped short-run aggregate supply curve reflects the assumption that labour prices are ________.

The aggregate supply curve is ________.

Everything else held constant, aggregate demand increases when ________.

Everything else held constant, aggregate demand increases when ________.

Some unemployment is always present due to the and components, which are greater than zero.

The long-run aggregate supply curve is ________.

Everything else held constant, an increase in the cost of production aggregate .