Which of the following help to explain why the aggregate demand curve slopes downward? a. When the domestic price level rises, our goods and services become more expensive to foreigners. b. When government spending rises, the price falls. c. There is an inverse relationship between consumer expectations and personal taxes. d. When the price level rises, the real value of financial assets (like stocks, bonds, and savings account balances) declines. Label each of the following descriptions as being either an immediate-short-run aggregate supply curve, a short-run aggregate supply curve, or a long-run aggregagte supply curve. a. A vertical line b. The price level is fixed c. Output prices are flexible, but input prices are fixed d. A horizontal line e. An upsloping curve f. Output is fixed What effects would each of the following have on aggregate demand or aggregate supply, other things equal? In each case, use a diagram to show the expected effects on the equilibrium price level and the level of real output, assuming that the price level is flexible both upward and downward. a. A widespread fear by consumers of an impending economic depression. b. A new national tax on producers based on the value added between the costs of the inputs and the revenue received from their output c. A reduction in interest rates at each price level. d. A major increase in spending for health care by the federal government. e. The general expectation of coming rapid inflation. f. The complete disintegration of OPEC, causing oil prices to fall by one-half. g. A 10 percent across-the-board reduction in personal income tax rates. h. A sizable increase in labor productivity (with no change in nominal wages). i. A 12 percent increase in nominal wages (with no change in productivity). j. An increase in exports that exceeds an increase in imports (not due to tariffs).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following help to explain why the aggregate demand curve slopes downward?

a. When the domestic price level rises, our goods and services become more expensive to foreigners.

b. When government spending rises, the price falls.

c. There is an inverse relationship between consumer expectations and personal taxes.

d. When the price level rises, the real value of financial assets (like stocks, bonds, and savings account balances) declines.

Label each of the following descriptions as being either an immediate-short-run aggregate supply curve, a short-run aggregate supply curve, or a long-run aggregagte supply curve.

a. A vertical line

b. The price level is fixed

c. Output prices are flexible, but input prices are fixed

d. A horizontal line

e. An upsloping curve

f. Output is fixed

What effects would each of the following have on aggregate demand or aggregate supply, other things equal? In each case, use a diagram to show the expected effects on the equilibrium price level and the level of real output, assuming that the price level is flexible both upward and downward.

a. A widespread fear by consumers of an impending economic depression.

b. A new national tax on producers based on the value added between the costs of the inputs and the revenue received from their output

c. A reduction in interest rates at each price level.

d. A major increase in spending for health care by the federal government.

e. The general expectation of coming rapid inflation.

f. The complete disintegration of OPEC, causing oil prices to fall by one-half.

g. A 10 percent across-the-board reduction in personal income tax rates.

h. A sizable increase in labor productivity (with no change in nominal wages).

i. A 12 percent increase in nominal wages (with no change in productivity).

j. An increase in exports that exceeds an increase in imports (not due to tariffs).

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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