The long-run aggregate supply of an economy at the potential level of real GDP i
ID: 1184342 • Letter: T
Question
The long-run aggregate supply of an economy at the potential level of real GDP is graphically represented by:
A) a horizontal line.
B) an upward-sloping curve.
C) a downward-sloping curve.
D) a vertical line.
E) a backward bending curve.
Firms' profits or production do not increase in the long run because:
A) some factors of production are fixed in the long run.
B) all the factors are variable in the long run.
C) changes in factor costs completely offset any change in price level.
D) there exists an excess capacity in the economy in the long run.
E) factor costs remain fixed in the long run.
Which of the following statements is true about the economy in the long run?
A) Equilibrium output must be below potential GDP and the rate of unemployment must exceed the natural rate.
B) Production costs are close to zero.
C) The rate of unemployment is zero in the long run.
D) The aggregate demand curve plays no role in determining the equilibrium level of real GDP.
E) The aggregate supply curve is a horizontal line.
What happens to aggregate supply when production costs adjust completely to price increases?
A) Both equilibrium output and prices increase
B) Only prices rise; equilibrium output remains fixed
C) Only equilibrium output rises; equilibrium prices remain fixed
D) Equilibrium output falls while prices rise
E) Both equilibrium output and prices remain fixed
In the long-run, if the economy is operating at the full employment level, the equilibrium level of real GDP is determined solely by the:
A) level of unemployment in the economy.
B) rate of inflation in the economy.
C) real interest rate in the economy.
D) aggregate supply curve of the economy.
E) aggregate demand curve of the economy.
.
The short-run aggregate supply curve will shift to the left if:
A) there is a significant increase in worker productivity.
B) workers on fixed-wage contracts expect higher inflation.
C) the price of raw materials decreases.
D) the price of capital goods rises.
E) wages fall in anticipation of higher prices.
Given that energy is an input in production, the development of a cheaper source of energy will result in:
A) a lower price level and a lower amount of production.
B) a higher price level and a higher amount of production.
C) a lower amount of production at every price level.
D) a higher amount of production at every price level.
E) a lower profit at every price level.
Which of the following could lead to a decline in aggregate supply?
A) The discovery of new mineral deposits in Arizona
B) Higher real wage rates in the U.S.
C) Lower personal income in France
D) Cutbacks in government borrowing
E) Rapid depreciation of the Swiss franc
Long-run aggregate supply increases as:
A) new production technology is introduced.
B) the quality of labor declines.
C) the average price level increases.
D) natural resources become depleted.
E) corporate wage rates increase.
.
Suppose in Country X, wages of workers are increased in the beginning of a financial year, anticipating high inflation in the economy. However prices remain unchanged during the year. Everything else remaining constant, which of the following will be observed in this economy?
A) The cost of labor, that is the real wage will decline
B) The current profits of the firm will rise
C) Aggregate supply in the economy will increase
D) Annual production in the economy will remain unaffected
E) The aggregate supply curve will move to the left
The movement of the vertical _____ curve to the _____ reflects the increase in potential output on account of the development of new technologies and increase in the quantity and quality of resources.
A) long-run aggregate supply; right
B) short-run aggregate supply; right
C) short-run aggregate demand; left
D) long-run aggregate demand curve; left
E) long-run aggregate supply; left
In the 1970s the international price of crude oil rocketed because:
A) the demand for crude oil fell short of its supply.
B) a new source of natural gas was discovered.
C) the demand for automobiles increased drastically.
D) the supply of oil was restricted by the oil exporting countries.
E) of the appreciation of dollar in the international market.
To determine short-run equilibrium in the economy, we use an aggregate supply curve that is:
A) downward-sloping.
B) vertical.
C) upward-sloping.
D) horizontal.
E) parabolic.
The intersection of the aggregate demand and the aggregate supply curve defines the equilibrium level of _____ and the price level.
A) real interest rate
B) nominal interest rate
C) nominal GDP
D) real GDP
E) unemployment
Identify the correct statement.
A) Aggregate demand alone determines equilibrium price and output.
B) Aggregate supply alone determines equilibrium price and output.
C) Aggregate demand and aggregate supply determine equilibrium price and output.
D) Aggregate demand shows the positive relationship between price level and real GDP.
E) Aggregate supply shows the negative relationship between price level and real GDP
Other things equal, an increase in aggregate demand will result in:
A) an economic expansion.
B) higher unemployment and a lower equilibrium price level.
C) an economic recession.
D) a decrease in equilibrium real GDP and an increase in the equilibrium level of prices.
E) decreased economic welfare.
Other things equal, an increase in aggregate spending tends to be associated with:
A) cost-push inflation.
B) an economic depression.
C) a lower level of equilibrium real GDP.
D) demand-pull inflation.
E) an increase in the quality of goods and services produced.
Other things equal, an increase in aggregate supply will cause:
A) a decrease in equilibrium real GDP and a decrease in the equilibrium price level.
B) an economic contraction.
C) an increase in equilibrium real GDP and an increase in the equilibrium price level.
D) cost-push inflation.
E) a reduction in unemployment and a decline in inflation.
Which of the following is true of cost-push inflation?
A) Cost-push inflation is associated with an economic expansion.
B) Cost-push inflation is rarely experienced in developed economies.
C) Cost-push inflation is caused by a decrease in aggregate supply.
D) Cost-push inflation is identical to demand-pull inflation.
E) Cost-push inflation is the result of increased consumer spending.
A simultaneous increase in inflation and decrease in economic growth in a country can be associated with:
A) a decrease in aggregate demand with no change in aggregate supply.
B) an increase in aggregate demand and aggregate supply.
C) an increase in aggregate supply with no change in aggregate demand.
D) a decrease in aggregate supply and aggregate demand.
E) a decrease in aggregate supply with no change in aggregate demand.
The degree to which _____ declines during a recession or increases during an expansion depends on the amount by which the AD and/or AS curves shift.
A) real GDP
B) nominal GDP
C) the money supply
D) real interest rate
E) the consumer price index
Assume that the AD curve is held constant and short-run aggregate supply decreases. The result is a(n):
A) increase in both equilibrium real GDP and the price level.
B) decrease in equilibrium real GDP and an increase in the price level.
C) decrease in both equilibrium real GDP and the price level.
D) decrease in equilibrium real GDP, while the price level remains fixed.
E) increase in the price level, while equilibrium real GDP remains fixed.
A simultaneous increase in both unemployment and inflation is most likely to be the result of a(n):
A) increase in long-run aggregate supply.
B) increase in short-run aggregate supply.
C) decrease in the aggregate demand curve.
D) a simultaneous outward shift of the aggregate demand and supply curves.
E) a decrease in the short-run aggregate supply.
Assume that the aggregate demand increases while the short-run aggregate supply decreases. The result is a(n):
A) increase in both equilibrium real GDP and the price level.
B) decrease in equilibrium real GDP and an increase in the price level.
C) decrease in both equilibrium real GDP and the price level.
D) decrease in equilibrium real GDP, while the price level remains fixed.
E) increase in the price level, while the change in equilibrium real GDP is ambiguous.
Aggregate demand
Explanation / Answer
Hi, If you like my answer, please rate my answer first and according to my answer...that way only I can earn points. Thanks The long-run aggregate supply of an economy at the potential level of real GDP is graphically represented by: D) a vertical line. Firms' profits or production do not increase in the long run because: C) changes in factor costs completely offset any change in price level. Which of the following statements is true about the economy in the long run? C) The rate of unemployment is zero in the long run. What happens to aggregate supply when production costs adjust completely to price increases? B) Only prices rise; equilibrium output remains fixed In the long-run, if the economy is operating at the full employment level, the equilibrium level of real GDP is determined solely by the: E) aggregate demand curve of the economy. . The short-run aggregate supply curve will shift to the left if: D) the price of capital goods rises. Given that energy is an input in production, the development of a cheaper source of energy will result in: D) a higher amount of production at every price level. Which of the following could lead to a decline in aggregate supply? B) Higher real wage rates in the U.S. Long-run aggregate supply increases as: A) new production technology is introduced. . Suppose in Country X, wages of workers are increased in the beginning of a financial year, anticipating high inflation in the economy. However prices remain unchanged during the year. Everything else remaining constant, which of the following will be observed in this economy? E) The aggregate supply curve will move to the left The movement of the vertical _____ curve to the _____ reflects the increase in potential output on account of the development of new technologies and increase in the quantity and quality of resources. A) long-run aggregate supply; right In the 1970s the international price of crude oil rocketed because: C) the demand for automobiles increased drastically. To determine short-run equilibrium in the economy, we use an aggregate supply curve that is: C) upward-sloping. The intersection of the aggregate demand and the aggregate supply curve defines the equilibrium level of _____ and the price level. D) real GDP Identify the correct statement. C) Aggregate demand and aggregate supply determine equilibrium price and output. Other things equal, an increase in aggregate demand will result in: A) an economic expansion. Other things equal, an increase in aggregate spending tends to be associated with: E) an increase in the quality of goods and services produced. Other things equal, an increase in aggregate supply will cause: E) a reduction in unemployment and a decline in inflation. Which of the following is true of cost-push inflation? C) Cost-push inflation is caused by a decrease in aggregate supply. A simultaneous increase in inflation and decrease in economic growth in a country can be associated with: E) a decrease in aggregate supply with no change in aggregate demand. The degree to which _____ declines during a recession or increases during an expansion depends on the amount by which the AD and/or AS curves shift. A) real GDP Assume that the AD curve is held constant and short-run aggregate supply decreases. The result is a(n): B) decrease in equilibrium real GDP and an increase in the price level. A simultaneous increase in both unemployment and inflation is most likely to be the result of a(n): D) a simultaneous outward shift of the aggregate demand and supply curves. Assume that the aggregate demand increases while the short-run aggregate supply decreases. The result is a(n): B) decrease in equilibrium real GDP and an increase in the price level. Aggregate demand
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