If there is an equal increase in aggregate demand and aggregate supply:
- A?the price level rises and real output decreases.
- B?the price level rises rapidly and there is little change in real output.
- C?the price level does not change, but real output declines.
- D?the price level does not change, but real output increases.
- E?the price level increases somewhat, with a relatively large change in output.
If the increase in aggregate demand exceeds the increase in aggregate supply:
- A?the price level rises and real output decreases.
- B?the price level rises rapidly and there is little change in real output.
- C?the price level does not change, but real output declines.
- D?the price level does not change, but real output increases.
- E?the price level increases somewhat, with a relatively large change in output.
Refer to the data in the table given below. Suppose that the present equilibrium price level and level of real GDP are 100 and $260, and that data set C represents the relevant aggregate supply schedule for the economy. Price Level a. What must be the current amount of real output demanded at the 100 price level? Real output demanded = $ |:| b. lfthe amount of output demanded increases by $25 at the 100 price level shown in C, what will be the new equilibrium real GDP? The new equilibrium level of real GDP = $ In business cycle terminology, what would economists call this change in real GDP? (Click to select) v Answer the following questions on the basis of the three sets of data for the country of North Vaudeville: 3. Which set of data illustrates aggregate supply in the immediate shortrun in North Vaudeville? The data in C v Which set of data illustrates aggregate supply in the short-run in North Vaudeville? The data in B v Which set ofdata illustrates aggregate supply in the longrun in North Vaudeville? The data in A v b. Assuming no change in hours of work, if real output per hour of work decreases by 10 percent, what will be the new levels of real GDP in the right column of A? Instructions: Round your answers to two decimal places. Price level 110: New output = Price level 100: New output = |:| Price level 95: New output = Price level 90: New output = Does the new data reflect an increase in aggregate supply or does it indicate a decrease in aggregate supply? (Click to select) v Which of the following help to explain why the aggregate demand curve slopes downward? Instructions: You may select more than one answer. Click the box with a check mark for correct answers and click to empty the box for the wrong answers. a When the domestic price level rises, our goods and services become more expensive to foreigners. a When government spending rises, the price level fails 8 There is an inverse relationship between consumer expectations and personal taxes. 9 When the price level rises, the real value ofnancial assets (like stocks, bonds, and savings account balances) declines. Consider the following statement: "Unemployment can be caused by a decrease in aggregate demand or a decrease in aggregate supply." Note whether this is true or false and specify the effect on the pricelevel in each case. 0 True. A decrease in aggregate supply will unambiguously increase the price level. A decrease in aggregate demand will reduce the price level if economy is operating above its fullemployment output or if prices are not sticky. 0 False. A decrease in aggregate supply will unambiguously increase the price level. A decrease in aggregate demand will reduce the price level if economy is operating above its full-employment output or if prices are not sticky. 0 True. A decrease in aggregate supply will decrease the price level. A decrease in aggregate demand will increase the price level. 0 False. A decrease in aggregate supply will decrease the price level. A decrease in aggregate demand will increase the price level. e. The short-run aggregate supply curve is relatively steep to the right of the full employment output because 0 most resources are already employed. 0 there are large amounts of unused capacity and idle human resources. 0 there are shortages of capital. 0 of menu costs. Suppose that the table below shows an economy's relationship between real output and the inputs needed to produce that output: Input Real quantity domestic output $400 w 37-5 m a. What is the level of productivity in this economy? Instructions: Round your answer to two decimal places. 5.33 b. What is the perunit cost of production if the price of each input unit is $4? Instructions: Round your answer to two decimal places. $ 0.75 c. Assume that the input price increases from $4 to $5 with no accompanying change in productivity. What is the new perunit cost of production? Instructions: Round your answer to two decimal places. $ 0.94 In what direction would the $1 increase in input price push the aggregate supply curve? What effect would this shift of the short-run aggregate supply have on the price level and the level of real output? (Click to select) v d. Suppose that the increase in input price does not occur but, instead, that productivity increases by 50%. What would be the new perunit cost of production? d. Suppose that the increase in input price does not occur but, instead, that productivity increases by 50%. What would be the new perunit cost of production? Instructions: Round your answer to three decimal places. $|:| What effect would this change in perunit production cost have on the shortrun aggregate supply curve? The aggregate supply curve will shift to the (Click to select) v . What effect would this shift of the shortrun aggregate supply have on the price level and the level of real output
