32 The fear o F unwanted price wars may explain why many fins are relactant to A

Question

32 The fear o F unwanted price wars may explain why many fins are relactant to A reiuce wages when a decline in ageregate demand occurs B roduce prices when a decline in aggregate demand occurs C. expand presduction capacity when an increase in aggregate demand occurs D provide wage increases when labor productivity rises 33 The foreign purchases effctgsts that an increase in the U S. price level relative to other countries will: A increase the amount of IUS. real output purc B. increase U.S imports and decrease US exports C increase both u s imports and U S exports D decrease both U.S. imports and U S. exports urchased 34. Which set of events would most likely decrease aggicgate demand A A reduction in the excess capital of the existing capiai stock B A reduction in business and personal tax rates C. An increase in investment spending D An increase in personal income tax rates 35. The slope of the immediate-short-run aggregate supply curve is based on the assumption that: A. Both input and output prices are fixed B. Neither input nor output prices are fixed C. Input prices are flexible but output prices are fixed D. Input prices are fixed but output prices are flexible 36. A fall in the price of capital goods will shift the aggregate A Demand curve leftward B Demand curve rightward C Supply curve rightward D. Supply curve leftward

Explanation / Answer

1. The fear of unwanted price wars may explain why many firms are reluctant to reduce prices when the decline in aggregate demand occurs. This is because they are not very sure of the future movements so as to protect their working capacity. Correct option is a.

2. The foreign purchase effect suggest that an increase in the US price level relative to other countries will increase US imports and decrease US exports. Because exporting the product will become costlier in comparison to imports. Correct option is b.

3. An increase in personal income tax rates are most likely to decrease aggregate demand. This is because with increase taxes, people will have less disposable income to consume. So correct option is d.

4. The slope of immediate short run aggregate supply curve is based on the assumption that both input and output prices are fixed. Correct option is A.

5. A fall in prices of capital goods will shift the aggregate supply curve rightwards as the means of production will increase increasing the supply of goods in the market. So correct option is C.

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.