ScienceEconomicsAggregate Demand and Aggregate Supply example #72348
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Aggregate Demand and Aggregate Supply example #72348

Rylee Sanchez avatar Rylee Sanchez
24 September 2023
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42 test answers

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question
Prices are most likely to be flexible in which type of curve?
answer
Long-run aggregate supply curve EXPLANATION The long run in macroeconomic analysis is a period in which wages and prices are flexible. In the long run, employment will move to its natural level and real GDP to potential.
question
What occurs when the natural level of employment is reached?jhn
answer
The real wage adjusts so that the quantity of labor demanded equals the quantity of labor supplied EXPLANATION The natural level of employment occurs where the real wage adjusts so that the quantity of labor demanded equals the quantity of labor supplied.
question
Which of the following is a feature of the short-run period?
answer
It is a period in which wages and some other prices do not respond to changes in economic conditions EXPLANATION The short run in macroeconomic analysis is a period in which wages and some other prices do not respond to changes in economic conditions.
question
Which of the following best describes the function of long-run macroeconomic equilibrium?
answer
It allows us to see the macroeconomy after full market adjustment has been achieved
question
Which statement best describes aggregate supply?
answer
Aggregate supply is equal to potential output at all prices. EXPLANATION Aggregate supply is equal to potential output at all prices.
question
Which statement is true of the aggregate demand curve?
answer
It tells us the level of expenditure in an economy for a given price level EXPLANATION The aggregate demand curve tells us the level of expenditure in an economy for a given price level. It has a negative slope: the demand for real GDP decreases when the price level increases.
question
Which of the following statements can be made regarding economic growth?
answer
It is a process through which the economy's potential output is increased EXPLANATION Because economic growth is the process through which the economy's potential output is increased, we can depict it as a series of rightward shifts in the long-run aggregate supply curve.
question
Which phrase best describes the difference between the aggregate demand curve and the aggregate supply curve?
answer
The downward sloping demand curve is partially due to the fact that, as prices rise, the real value of nominal wealth falls, whereas the aggregate supply curve is partially due to physical capital.
question
If a company providing health insurance for its 1,000 employees is faced with rapidly increasing health insurance costs, what is the company likely to do if nominal wages are fixed in the short run?
answer
The company will employ fewer workers.
question
What could be expected if a nation's government decided to increase its spending on bridge construction?
answer
Increased aggregate demand
question
Which result is strongly associated with an increase in the cost of health care?
answer
A reduction in short-run aggregate supply
question
According to economist Kevin Kliesen, which of the following was NOT a cause of the U.S. recession of 2001?
answer
An increase in government purchases EXPLANATION Kliesen points to four factors that, taken together, shifted the aggregate demand curve to the left and kept it there for a long enough period to keep real GDP falling for about nine months. The four factors were the fall in stock market prices, the decrease in business investment both for computers and software and in structures, the decline in the real value of exports, and the aftermath of 9/11.
question
Which of the following accounts for the short-run aggregate supply curve's upward slope?
answer
Wage and price stickiness
question
When there is an increase in the cost of healthcare, which of the following takes place?
answer
A reduction in short-run aggregate supply
question
Which of the following will most likely produce a change in the aggregate quantity of supplied goods and services?
answer
A change in the price level EXPLANATION A change in the price level produces a change in the aggregate quantity of goods and services supplied and is illustrated by the movement along the short-run aggregate supply curve.
question
Which scenario is likely to be a direct result of a change in the price level?
answer
A change in the aggregate quantity of goods and services supplied EXPLANATION A change in the price level produces a change in the aggregate quantity of goods and services supplied and is illustrated by the movement along the short-run aggregate supply curve.
question
A petroleum company with a long-term contract to sell diesel fuel for a fixed price for four years is an example of which of the following?
answer
Price stickiness
question
Which statement best describes the term sticky price?
answer
A sticky price is a price that is slow to adjust to its equilibrium level.
question
What do minimum wage laws intend to accomplish?
answer
Prevent wages from falling below a certain level
question
Which statement best describes an advantage of long-term nominal wage contracts?
answer
Negotiating a contract is a costly process for workers and firms. EXPLANATION One reason workers and firms may be willing to accept long-term nominal wage contracts is that negotiating a contract is a costly process.
question
Which phrase is best described as a barrier that prevents the economy from achieving its natural level of employment and potential output?
answer
Wage and price stickiness
question
What will be the tendency of a graph showing a long-run aggregate supply curve?
answer
Prices will be flexible
question
When the real wage adjusts so that the quantity of labor demanded equals the quantity of labor supplied, what is indicated in an economy?
answer
Natural level of employment
question
What is the name of the period in which wages and some other prices do not respond to changes in economic conditions?
answer
the short run period
question
Which of the following is most likely to have flexible prices?
answer
Long-run aggregate supply curve
question
Which of the following is true of long-run macroeconomic equilibrium?
answer
It allows us to see the macroeconomy after the full market adjustment has been achieved
question
What is equal to potential output at all prices?
answer
Aggreagate supply
question
What indicates the level of expenditure in an economy?
answer
Economic growth
question
The difference between the aggregate demand curve and the aggregate supply curve is best described by which of the following statements?
answer
The downward sloping demand curve is partially due to the fact that, as prices rise, the real value of nominal wealth falls, whereas the aggregate supply curve is partially due to physical capital. EXPLANATION The downward sloping demand curve is partially due to the fact that, as prices rise, the real value of nominal wealth falls, and this leads to a fall in household spending. Aggregate supply is equal to potential output at all prices. Potential output is determined by the available technology, physical capital, and labor force and is unaffected by the price level.
question
Which of the following is NOT true of the short-run aggregate supply curve?
answer
Short-run equilibrium occurs at the intersection of the aggregate demand curve and the long-run aggregate supply curve.
question
Davis Industries is a U.S.-based manufacturing company. It has provided health insurance for its roughly 1,000 employees and their families. However, the rapidly rising costs of health insurance have prompted the company to make drastic changes. If nominal wages are fixed in the short run, what is the most likely outcome?
answer
Davis Industries will employ fewer people at its facility
question
The difference between the aggregate demand curve and the aggregate supply curve is best described by which of the following?
answer
The downward sloping demand curve is partially due to the fact that, as prices rise, the real value of nominal wealth falls, whereas the aggregate supply curve is partially due to physical capital.
question
What may happen if a nation's government decides to increase its spending on a bridge's construction?
answer
It would increase aggregate demand
question
Which of the following is strongly associated with an increase in health care costs?
answer
A reduction in short-run aggregate supply
question
Which of the following is not one of the four factors that economist Kevin Kliesen indicated were the cause of the U.S. recession of 2001?
answer
An increase in government purchases
question
The upward slope of the short-run aggregate supply curve is caused by which of the following?
answer
Wage and price stickiness
question
Which of the following occurs when there is an increase in the cost of healthcare?
answer
A reduction in short-run aggregate supply
question
Which of the following is most likely to produce a change in the aggregate quantity of goods and services supplied?
answer
A change in the price level EXPLANATION A change in the price level produces a change in the aggregate quantity of goods and services supplied and is illustrated by the movement along the short-run aggregate supply curve.
question
Which of the following is associated with a direct change in price levels?
answer
A change in the aggregate quantity of goods and services supplied
question
Which of the following is associated with a change in the aggregate quantity of goods and services supplied?
answer
A change in the price level
question
What best describes an advantage of long-term nominal wage contracts?
answer
Negotiating a contract is a costly process for workers and firms.
question
Which of the following terms best describes the situation that prevents the economy from achieving its natural level of employment and potential output?
answer
Wage and price stickiness