Econ 260 CH 10 Study Plan

18 November 2022
4.8 (225 reviews)
74 test answers

Unlock all answers in this set

Unlock answers (70)
question
Many economists view the natural rate of unemployment as the level observed when real GDP is given by the position of the long-run aggregate supply curve. There can be positive unemployment in this situation because
answer
information is costly and rigidities always exist causing some types of unemployment‚Äč (frictional and‚Äč structural) to occur even in the long run after everyone in the economy has fully adjusted to any changes.
question
The long-run aggregate supply curve is determined by
answer
the full-employment level of real output.
question
The‚Äč long-run aggregate supply curve shifts outward when
answer
there is economic growth.
question
The long-run aggregate supply curve
answer
is vertical because changes in the price level have no effect on real output.
question
Year to year rightward shifts in long-run aggregate supply leads to
answer
a long-run trend path for real GDP
question
The long-run aggregate supply curve (LRAS) is equivalent to the full-employment level of real GDP.
answer
True
question
The shape of the long-run aggregate supply curve (LRAS) is
answer
vertical
question
Economic growth is represented by the long-run aggregate supply curve (LRAS) shifting
answer
outward to the right
question
The long-run aggregate supply curve (LRAS) is _____ line determined by amounts of available resources such as labor and capital and by technology and resource productivity. The position of the LRAS gives the full-information and full-adjustment level of real GDP year.
answer
a vertical
question
The ____ rate of unemployment occurs at the long-run level of GDP per year given by the position of the LRAS.
answer
natural
question
If labor or capital increases from year to year or if the productivity of either of these resources rises from one year to the‚Äč next, the LRAS shifts ______. In a growing economy, therefore, real GDP per year gradually ______ over time.
answer
rightward / increases
question
Suppose that there is a sudden rise in the price level. As a‚Äč consequence, economywide planned spending on purchases of goods and services will _____.
answer
decrease
question
Suppose that there is a sudden riserise in the price level. As a‚Äč consequence, economywide planned spending on purchases of goods and services will
answer
The substitution effect
question
From the list‚Äč below, match the letter of the outcome each of the following events produces upon the AD curve.
answer
A - Shifts to right B - Shifts to left C - Movement up along D - Movement down along
question
Deflation has occurred during the past year
answer
D - Movement down along
question
Real GDP levels of all the nation's major trading partners have declined
answer
B - Shifts to the left
question
There has been a decline in the foreign exchange value of the nation's currency
answer
A - Shifts to the right
question
The price has increased this year
answer
C - Movement up along
question
Total expenditures for domestically produced goods and services consist of
answer
consumer‚Äč spending, business‚Äč spending, government‚Äč spending, and net foreign spending.
question
Which one of the following is not a component of total‚Äč expenditures?
answer
Merchandise inventories
question
What determines the total value of annual U.S.‚Äč GDP?
answer
The spending and production decisions of‚Äč consumers, firms,‚Äč governments, and foreigners.
question
The total of all planned real expenditures in the economy is
answer
aggregate demand
question
The aggregate demand curve
answer
shows planned purchase rates of goods and services at various price levels.
question
The aggregate demand curve slopes downward because of the
answer
‚Äčreal-balance, interest rate and open economy effects.
question
According to the‚Äč real-balance effect, an increase in the price level
answer
reduces an‚Äč individual's expenditures due to a decrease in the real value of cash balances.
question
According to the interest rate‚Äč effect, an increase in the price level
answer
reduces borrowing and spending increases nominal interest rates reduces the aggregate quantity of goofs and services demanded
question
Which of the following will generate an increase in aggregate‚Äč demand?
answer
Government spending for the onset of a war.
question
The U.S. aggregate demand curve would shift to the left if
answer
the Federal Reserve Board caused the real interest rate to increase.
question
The aggregate demand curve would shift to the right as a result of
answer
a drop in the foreign exchange value of the dollar.
question
All of the following would cause the aggregate demand curve to shift except
answer
price level changes.
question
In an open‚Äč economy, the total value of GDP is based on the spending decisions of‚Äč individuals, firms,‚Äč governments, and foreign residents.
answer
True
question
The components of GDP as calculated using the expenditure approach are identical to the components of aggregate demand.
answer
True
question
The shape of the aggregate demand curve ‚Äč(AD‚Äč) is
answer
downward sloping.
question
A change in the price level has no effect on the real value of cash balances.
answer
False
question
The idea that higher price levels in the United States result in foreign residents desiring to buy fewer‚Äč U.S.-made goods and U.S. residents desiring to buy more‚Äč foreign-made goods is referred to as the
answer
open economy effect.
question
The lower the price‚Äč level, the greater the total planned spending on goods and services.
answer
True
question
The aggregate demand curve is essentially the same as the demand curve for an individual product.
answer
False
question
An increase in the price level shifts the aggregate demand curve ‚Äč(AD‚Äč) to the left.
answer
False
question
Aggregate demand is the total of all planned _____ in the economy, and aggregate supply is the total of all planned ______ in the economy. The aggregate demand curve shows the various qualities of total planned ____ on final goods and services at various price levels; it is downward sloping.
answer
expenditures / production / spending
question
There are three reasons why the aggregate demand curve is downward sloping. They are the ____ effect, the_____ effect, and the ______ effect.
answer
real-balance / interest rate / open-economy
question
The ____ effect occurs because price level changes alter the real value of cash‚Äč balances, thereby causing people to desire to spend more or‚Äč less, depending on whether the price level decreases or increases.
answer
real-balance
question
The ____ effect is caused by interest rate changes that mimic price level changes. At higher interest‚Äč rates, people seek to buy ____ houses and cars, and at lower interest rates, they seek to buy _____.
answer
interest rate / fewer / more
question
The open economy effect occurs because of a shift away from expenditures on _____ goods and a shift toward expenditures on ____ goods when the domestic price level increases.
answer
domestic / foreign
question
Suppose that the full employment level of nominal GDP rises in one year from ‚Äč$16.816.8 to ‚Äč$18.018.0 trillion. The‚Äč long-run equilibrium price‚Äč level, however, remains unchanged at 120120. By how much‚Äč (in real‚Äč dollars) has the‚Äč long-run aggregate supply curve shifted to the right from one year to the‚Äč next?
answer
$0.35 trillion x= [(NGDP Year B - NGDP Year A) x 100] / L-R Equilibrium Price
question
By how‚Äč much, if‚Äč any, has the aggregate demand curve shifted to the‚Äč right?
answer
AD has shifted exactly by ‚Äč$0.35 trillion. [INSERT ANSWER FROM PREVIOUS CALCULATIONS]
question
Identify the combined shifts in‚Äč long-run aggregate supply and aggregate demand that could unambiguously explain the simultaneous occurrences of an increase in equilibrium real GDP and increase in the equilibrium price level.
answer
Long-run aggregate supply schedule‚Äč (LRAS) shifts to the right and aggregate demand schedule‚Äč (AD) shifts to the right by a larger amount.
question
Identify the combined shifts in‚Äč long-run aggregate supply and aggregate demand that could unambiguously explain the simultaneous occurrences of a decrease in equilibrium real GDP with no change in the equilibrium price level.
answer
‚ÄčLong-run aggregate supply schedule‚Äč (LRAS) shifts to the left and aggregate demand schedule‚Äč (AD) shifts to the left by an equal amount.
question
Identify the combined shifts in‚Äč long-run aggregate supply and aggregate demand that could unambiguously explain the simultaneous occurrences of an increase in equilibrium real GDP with no change in the equilibrium price level.
answer
Long-run aggregate supply schedule‚Äč (LRAS) shifts to the right and aggregate demand schedule‚Äč (AD) shifts to the right by an equal amount.
question
Suppose that during a given‚Äč year, the quantity of U.S. real GDP that can be produced in the long run falls from ‚Äč$13 trillion to ‚Äč12.5 ‚Äčtrillion, measured in base-year dollars. During the‚Äč year, no change occurs in the various factors that influence aggregate demand. As a‚Äč result, the U.S.‚Äč long-run equilibrium price level during this particular year will
answer
increase
question
In Ciudad‚Äč Barrios, El‚Äč Salvador, the latest payments from relatives working in the United States have finally arrived. When the credit unions open for‚Äč business, up to 150 people are already waiting in line. After receiving the funds their relatives have transmitted to these‚Äč institutions, customers go off to outdoor markets to stock up on food or clothing or to appliance stores to purchase new stereos or televisions. Similar scenes occur throughout the developing‚Äč world, as each year migrants working in‚Äč higher-income, developed nations send around‚Äč $200 billion of their earnings back to their relatives in less developed nations. Evidence indicates that the‚Äč relatives, such as those in Ciudad‚Äč Barrios, typically spend nearly all of the funds on current consumption. Based on the above‚Äč information, developing‚Äč countries' income inflows transmitted by migrant workers are primarily affecting their‚Äč economies' long-run aggregate _____ curves.
answer
demand
question
The equilibrium price levels in nations that are recipients of large inflows of funds from migrants will likely
answer
rise because there is an increase in the aggregate demand in these countries.
question
‚ÄčLong-run equilibrium in the economy will occur
answer
at the price level where total planned real expenditures equals real GDP at full employment.
question
The‚Äč long-run equilibrium of an economy occurs
answer
where the‚Äč long-run aggregate supply curve meets the aggregate demand curve.
question
An increase in the U.S. price level can be caused by all of the following except
answer
worsening economic conditions in Asia.
question
If economic growth causes the‚Äč long-run aggregate supply curve to shift rightward over‚Äč time, but the aggregate demand curve does not‚Äč change, we expect
answer
the‚Äč long-run equilibrium price to‚Äč decline, and there will be secular deflation.
question
A persistent decline in the price level due to economic growth with stable aggregate demand is
answer
secular deflation
question
In the long‚Äč run, persistent deflation in a growing economy can occur if
answer
increases in the LRAS are proportionately larger than the increases in AD.
question
An increase in the LRAS curve that is larger proportionately than an increase in the AD curve will lead to
answer
a decrease in the price level and an increase in output.
question
If the actual price level increases beyond the‚Äč long-run equilibrium price‚Äč level, all of the following will tend to occur except
answer
firms offering fewer services than people wish to purchase.
question
If the LRAS shifts to the right over time and during this time AD does not noticeably‚Äč change, real GDP will‚Äč ________ and the price level will‚Äč ________.
answer
increase; decrease
question
When the economy is in‚Äč long-run equilibrium, the price level adjusts to equate total planned real ______ by‚Äč individuals, businesses, the‚Äč government, and foreign‚Äč (non-U.S.) residents with total planned ______ by firms.
answer
expenditures / production
question
Economic growth causes the‚Äč long-run aggregate supply schedule to shift ______ over time. If the position of the aggregate demand curve does not‚Äč change, the‚Äč long-run equilibrium price level tends to _____, and there is secular deflation.
answer
rightward / decrease
question
Inflation can be caused by
answer
decreases in the‚Äč long-run aggregate supply curve or increases in the aggregate demand curve.
question
Consider this‚Äč statement: "Persistent inflation in a growing economy is possible only if the aggregate demand curve shifts rightward over time at a faster pace than the rightward progression of the‚Äč long-run aggregate supply‚Äč curve." This statement is describing
answer
demand-side inflation
question
‚ÄčSupply-side inflation can be caused by a continual
answer
decrease in aggregate supply while aggregate demand remains unchanged.
question
Which of the following factors could cause the economy to experience‚Äč supply-side inflation?
answer
Government laws which say that the average work week must be reduced by one hour every year.
question
An increase in‚Äč long-run aggregate supply cuases the price level to‚Äč increase, and is therefore inflationary.
answer
false
question
Persistent inflation in a growing economy is possible only if the aggregate demand curve shifts rightward over time at a faster pace than the rightward progression of the‚Äč long-run aggregate supply curve.
answer
True
question
Inflation can be caused by an increase in aggregate ____ or by a decrease in aggregate _____.
answer
demand / supply
question
____-side inflation cannot account for persistent inflation in a growing‚Äč economy, but ____-side inflation can occur even as real GDP increases.
answer
supply / demand
question
Because the U.S. economy has grown in recent‚Äč decades, the persistent inflation during those years has been caused by the aggregate demand curve shifting ____ at a faster pace than the‚Äč long-run aggregate supply curve.
answer
rightward
question
There are underutilized and untapped resources in Greenland. Some economists believe that unfreezing these resources will
answer
increase aggregate supply.
question
‚ÄčGreenland's glacial ice and small population have
answer
limited the aggregate supply of real output.
question
‚ÄčGreenland's glacial ice and small population
answer
are examples of the‚Äč country's limited endowments.