Question 1

If the price of crude oil decreases, 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.

Accepted Answer

A decrease in the price of crude oil will likely decrease production costs for firms that use oil as an input, thus increasing profitability and the ability to supply goods and services at a lower cost. This will lead to an increase in aggregate supply in the U.S.

Question 2

Which would be considered to be one of the factors that shift the aggregate supply curve in the short run? A change in:
A) Personal income taxes
B) Consumer spending
C) Government regulation
D) Profit expectations on investment projects

Accepted Answer

Government regulation can affect production costs and efficiency, thus shifting the short-run aggregate supply curve.

Question 3

If Congress passed new laws significantly increasing the regulation of business, this action would tend to:
A) Increase per-unit production costs and shift the aggregate supply curve to the left
B) Increase per-unit production costs and shift the aggregate supply curve to the right
C) Increase per-unit production costs and shift the aggregate demand curve to the left
D) Decrease per-unit production costs and shift the aggregate supply curve to the left

Accepted Answer

Increasing regulations on businesses often require additional resources and expenses to meet compliance standards, which can increase per-unit production costs. This would shift the aggregate supply curve to the left as firms would supply less goods and services at every price level to maintain their profitability.

Question 4

Answer the question based on the following list of items that are related to aggregate demand and/or aggregate supply.  Refer to the list above. Changes in which combination of factors best explain why the aggregate supply curve would shift?
A) 1 and 2
B) 2 and 10
C) 3 and 6
D) 7 and 8

Accepted Answer

The answer of Answer the question based on the following...

Question 5

A decrease in business taxes will tend to:
A) Increase aggregate demand but not change aggregate supply
B) Increase aggregate supply but not change aggregate demand
C) Increase aggregate demand and increase aggregate supply
D) Decrease aggregate supply and decrease aggregate demand

Accepted Answer

A decrease in business taxes reduces production costs, which can increase aggregate supply. It also increases after-tax profits, potentially leading to more investment and spending, thereby increasing aggregate demand.

Question 6

Answer the question based on the following list of items that are related to aggregate demand and/or aggregate supply.  Refer to the list above. Changes in which of the above two factors would most likely cause a change in aggregate demand?
A) 1 and 5
B) 3 and 10
C) 5 and 7
D) 8 and 9

Accepted Answer

The answer of Answer the question based on the following...

Question 7

Which would most likely increase aggregate supply?
A) An increase in the prices of imported products
B) An increase in productivity
C) A decrease in business subsidies
D) A decrease in personal income taxes

Accepted Answer

An increase in productivity would increase the amount of goods and services produced, thus increasing aggregate supply. A decrease in business subsidies (C) would likely decrease production and decrease aggregate supply. An increase in the prices of imported products (A) would likely increase the cost of production and decrease aggregate supply. A decrease in personal income taxes (D) would likely increase consumer demand, but it may not necessarily increase aggregate supply.

Question 8

Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. The level of productivity in this economy is:
A) 20
B) 30
C) 40
D) 50

Accepted Answer

Productivity is defined as the ratio of output to input. So, productivity = Output/Input = 2400/60 = 40. Therefore, the level of productivity in this economy is 40.

Question 9

A fall in labor costs will cause aggregate:
A) Supply to increase
B) Demand to increase
C) Supply to decrease
D) Demand to decrease

Accepted Answer

A fall in labor costs will lower the production costs for firms, leading to an increase in the overall supply of goods and services. This is because lower labor costs will incentivize firms to produce more goods and services, which will increase the overall quantity of supply.

Question 10

An increase in productivity will:
A) Increase aggregate demand
B) Increase aggregate supply
C) Increase aggregate supply and aggregate demand
D) Decrease aggregate supply and aggregate demand

Accepted Answer

An increase in productivity means that more goods and services can be produced with the same amount of resources. This leads to a shift in the aggregate supply (AS) curve to the right, indicating that more output can be produced at every price level. However, it does not directly impact aggregate demand (AD), which is influenced by factors such as consumer spending, investment, and government policies. Therefore, an increase in productivity will only increase aggregate supply, not both.

Question 11

Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. All else equal, if the price of each unit of input decreased from $30 to $20, then productivity would:
A) Increase from $40 to $90 and aggregate supply would decrease
B) Increase from $50 to $60 and aggregate supply would decrease
C) Increase from $60 to $70 and aggregate supply would increase
D) Remain unchanged but aggregate supply would increase

Accepted Answer

Productivity, defined as output per unit of input, remains unchanged at 40 (2400/60) because the output and input quantity remain the same. However, the decrease in input cost increases aggregate supply.

Question 12

Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. If productivity increased such that 3000 units are now produced with the quantity of inputs still equal to 60, then per-unit production costs would:
A) Decrease and aggregate supply would decrease
B) Decrease and aggregate supply would increase
C) Increase and aggregate supply would decrease
D) Remain unchanged and aggregate supply would remain unchanged

Accepted Answer

The per-unit production costs would decrease because the output has increased without any increase in input, indicating a higher productivity level. As a result, the cost per unit is lower, even though the total cost remained the same. Therefore, aggregate supply would increase due to the same level of input producing more output.

Question 13

Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. The per-unit cost of production is:
A) $0.25
B) $0.50
C) $0.75
D) $2.00

Accepted Answer

The answer of Suppose that an economy produces 2400 units...

Question 14

If personal income taxes and business taxes increase, then this will:
A) Increase aggregate demand and aggregate supply
B) Decrease aggregate demand and aggregate supply
C) Decrease aggregate demand and increase aggregate supply
D) Increase aggregate demand and decrease aggregate supply

Accepted Answer

An increase in personal income taxes reduces consumers' disposable income, leading to a decrease in consumption and thus a decrease in aggregate demand. An increase in business taxes raises production costs, which can reduce the incentive for businesses to produce, leading to a decrease in aggregate supply.

Question 15

Suppose that an economy produces 500 units of output. It takes 10 units of labor at $15 a unit and 4 units of capital at $50 a unit to produce this amount of output. The per unit cost of production is:
A) $1.42
B) $1.24
C) $0.70
D) $0.40

Accepted Answer

The total cost of production is calculated by adding the total cost of labor and the total cost of capital. Total cost of labor = 10 units * $15/unit = $150. Total cost of capital = 4 units * $50/unit = $200. Therefore, the total cost of production = $150 + $200 = $350. The per unit cost of production = Total cost of production / Total units of output = $350 / 500 units = $0.70 per unit.

Question 16

Refer to the graph above. Which of the following factors will shift AS₁ to AS₃? A) An increase in productivity B) An increase in input prices C) A decrease in business taxes D) A decrease in household indebtedness

Accepted Answer

The answer of  Refer to the graph above. Which...

Question 17

In an economy it costs $1,500 to produce 2,000 units of output. If the costs increase to $2,500, then the per unit cost of production will have increased from:
A) $0.75 to $1.25
B) $0.75 to $1.00
C) $1.33 to $1.75
D) $0.80 to $1.33

Accepted Answer

Initially, the per unit cost is $1,500 / 2,000 units = $0.75. With the increase, the per unit cost becomes $2,500 / 2,000 units = $1.25.

Question 18

Which would most likely shift the aggregate supply curve? A change in the prices of:
A) Domestic products
B) Foreign products
C) Financial assets
D) Resources

Accepted Answer

A change in the prices of resources, such as labor and raw materials, can cause a shift in the aggregate supply curve. An increase in the price of resources will decrease aggregate supply, while a decrease in the price of resources will increase aggregate supply. Changes in the prices of domestic or foreign products and financial assets would not directly impact aggregate supply.

Question 19

Refer to the graph above. Which of the following factors will shift AS₁ to AS₂? A) An increase in real interest rates B) A decrease in business subsidies C) An increase in input prices D) A decrease in business taxes

Accepted Answer

The answer of  Refer to the graph above. Which...

Question 20

If the U.S. dollar appreciates in value relative to foreign currencies, then this will:
A) Increase aggregate demand and aggregate supply
B) Decrease aggregate demand and aggregate supply
C) Decrease aggregate demand and increase aggregate supply
D) Increase aggregate demand and decrease aggregate supply

Accepted Answer

An appreciation of the U.S. dollar makes U.S. goods more expensive and less attractive to foreign buyers, leading to a decrease in exports. As a result, there is a decrease in aggregate demand. However, the appreciation of the dollar makes imports cheaper, leading to an increase in imports and an increase in aggregate supply. Therefore, the correct choice is C: Decrease aggregate demand and increase aggregate supply.

Quiz 12: Aggregate Demand and Aggregate Supply

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

Which would be considered to be one of the factors that shift the aggregate supply curve in the short run? A change in:

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

Answer the question based on the following list of items that are related to aggregate demand and/or aggregate supply. Refer to the list above. Changes in which combination of factors best explain why the aggregate supply curve would shift?

A decrease in business taxes will tend to:

Answer the question based on the following list of items that are related to aggregate demand and/or aggregate supply. Refer to the list above. Changes in which of the above two factors would most likely cause a change in aggregate demand?

Which would most likely increase aggregate supply?

Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. The level of productivity in this economy is:

A fall in labor costs will cause aggregate:

An increase in productivity will:

Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. All else equal, if the price of each unit of input decreased from $30 to $20, then productivity would:

Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. The per-unit cost of production is:

If personal income taxes and business taxes increase, then this will:

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

Refer to the graph above. Which of the following factors will shift AS1 to AS3?

In an economy it costs $1,500 to produce 2,000 units of output. If the costs increase to $2,500, then the per unit cost of production will have increased from:

Which would most likely shift the aggregate supply curve? A change in the prices of:

Refer to the graph above. Which of the following factors will shift AS1 to AS2?

If the U.S. dollar appreciates in value relative to foreign currencies, then this will:

Refer to the graph above. Which of the following factors will shift AS₁ to AS₃?

Refer to the graph above. Which of the following factors will shift AS₁ to AS₂?