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Exploring Macroeconomics 5th Edition Robert L. Sexton - Solutions
Changes in input prices only affect SRAS if they reflect permanent changes in the supplies of those inputs. true or false.
If wages increase without a corresponding increase in labor productivity, SRAS will shift to the left; but LRAS will not shift, because with the same supply of labor as before, potential output does not change. true or false.
The price of factors, or inputs, that go into producing outputs will affect only SRAS if they don’t reflect permanent changes in the supplies of some factors of production. true or false.
Increases in government regulations that make it more costly for producers shift SRAS left but leave LRAS unchanged. true or false.
An expanded labor force increases the economy’s potential output, increasing LRAS. true or false.
Successful oil exploration would leave LRAS unchanged because it would not change the total amount of oil in the earth. true or false.
If entrepreneurs can find ways to lower the costs of production, then the short-run and long-run aggregate supply curves both shift to the right. true or false.
Added investments in human capital will shift the short-run aggregate supply curve right but leave the long-run aggregate supply curve unchanged. true or false.
Less and lower-quality capital will shift both the short-run aggregate supply curve and the long-run aggregate supply curve to the left. true or false.
Any permanent change in the quantity of any factor of production available—capital, entrepreneurship, land, or labor—can cause a shift in the long-run aggregate supply curve but not the short-run aggregate supply curve. true or false.
Ceteris paribus, lower production costs will motivate producers to produce more at any given price level, shifting AS rightward. true or false.
The economy can be in short-run equilibrium without being in long-run equilibrium. true or false.
Long-run equilibrium occurs wherever SRAS and AD intersect. true or false.
In the long run, the economy will produce at the maximum sustainable level allowed by its capital, labor, and technological inputs, regardless of the price level. true or false.
Along the LRAS curve, the economy is assumed to be at full employment. true or false.
Along the LRAS curve, a 10 percent increase in the price of goods and services is matched by a 10 percent increase in the price of inputs. true or false.
Along the long-run aggregate supply curve, we are looking at the relationship between RGDP produced and the price level, once input prices have been able to respond to changes in output prices. true or false.
Along the short-run aggregate supply curve, we assume that wages and other input prices have time to adjust. true or false.
When the price level falls, producers can be fooled into supplying more as a result of a short-run misperception of relative prices. true or false.
If the price level falls, input prices, producers’ profits, and real output will fall in the short run. true or false.
When price level rises in the short run, it will increase producers’ profit margins and make it in the producers’ self-interest to expand their production. true or false.
In the short run, the slow adjustments of input prices are due to the longer-term input contracts that do not adjust quickly to price-level changes. true or false.
In the short run, the aggregate supply curve is vertical. true or false.
The long-run relationship refers to a period long enough for the prices of outputs and all inputs to fully adjust to changes in the economy. true or false.
Nominal wages are assumed to adjust quickly in the short run. true or false.
The aggregate supply curve represents how much RGDP suppliers will be willing to produce at different price levels.
An economic boom in the economies of major trading partners may lead to an increase in U.S. exports to them, causing net exports to rise and AD to increase. true or false.
A reduction in government purchases shifts AD to the left. true or false.
If either business confidence increases or real interest rates rise, business investment will increase and AD will shift to the right. true or false.
An increase in consumer debt, other things being equal, would tend to shift AD to the left. true or false.
An increase in consumer confidence, an increase in wealth, or a tax cut may each increase consumption and shift AD to the right. true or false.
A decrease in C, I, G, or X 2 M for reasons other than changes in the price level will shift AD leftward. true or false.
A change in the price level will not change aggregate demand. true or false.
The real wealth effect, the interest rate effect, and the open economy effect all shift the AD curve. true or false.
An increased price level will tend to increase the demand for domestic goods and increase RGDP demanded. true or false.
If domestic prices of goods and services fall relative to foreign prices, more domestic products will be bought, increasing RGDP demanded. true or false.
A lower price level, other things being equal, would decrease the interest rate and increase both the level of investment and the quantity of RGDP demanded. true or false.
If the price level fell, interest rates would fall, which would trigger greater investment and consumer durable spending. true or false.
At a higher price level, interest rates will fall, other things being equal. true or false.
A lower price level, other things being equal, will lead to increased real wealth and an increase in the quantity of RGDP demanded. true or false.
The real wealth effect reflects the fact that the real (adjusted for inflation) value of any asset of fixed dollar value, such as cash, falls as the price level increases. true or false.
An increase in the price level causes the quantity of RGDP demanded to fall. true or false.
The AD curve is downward sloping for the same reasons that the demand curve for a particular product is downward sloping. true or false.
The aggregate demand (AD) curve indicates the quantities of nominal GDP demanded at different price levels. true or false.
Ceteris paribus, negative net exports would decrease aggregate demand. true or false.
Either an increase in exports or a decrease in imports would increase net exports. true or false.
A $1 million increase in exports has a smaller direct effect on aggregate demand than a $1 million increase in government purchases. true or false.
Good business conditions tend to increase the level of investment by firms. true or false.
Because consumption is such a stable part of GDP, analyzing its determinants is not important for an understanding of the forces leading to changes in aggregate demand. true or false.
Aggregate demand (AD) 5 Consumption (C) 1 Investment (I) 1 Government purchases (G) 1 Net exports (X 2 M). true or false.
When resources are idle, output will be _____________ responsive to changes in aggregate demand and the price level will be _____________ responsive to changes in aggregate demand.
The economy will not experience unemployment in the _____________ model.
Unlike our modern understanding, the classical model has no separate _____________ _____________ curve.
When real output is below potential real output, unemployment is _____________ than its natural rate.
Say’s law could be stated as “_____________ creates its own _____________.”
The _____________ of the AD and AS curves makes the AD/AS analysis less than completely satisfactory.
If the economy is currently in an inflationary gap, with output greater than potential output, the price level is _____________ than workers anticipated.
Wages and prices may be sticky downward because of _____________ labor contracts, a legal _____________ wage, employers paying _____________ wages, and _____________ costs.
The long-run result of a fall in aggregate demand is an equilibrium _____________ potential output and a(n)_____________ price level.
An economy can self-correct from a recessionary gap through _____________ wages and prices.
Holding AD constant, falling oil prices would lead to ____________ prices, ____________ output, and ____________ rates of unemployment in the short run.
Falling oil prices would result in a(n) _____________ shift in the SRAS curve.
With the economy initially at full-employment equilibrium, a sudden increase in oil prices would result in _____________ unemployment and in real output _____________ than potential output in the short run.
An increase in input prices can cause the SRAS curve to shift to the _____________, resulting in _____________ price levels, _____________ real output, and _____________ rates of unemployment in the short run.
_____________ is the situation in which lower economic growth and higher prices occur together.
In response to an inflationary gap in the short run, real wages and other real input prices will tend to _____________, which is illustrated by a(n)_____________ shift in the SRAS curve.
When AD increases, real (adjusted for inflation) wages _____________ in the short run.
Demand-pull inflation causes a(n) _____________ gap.
Demand-pull inflation causes a(n) _____________ in the price level and a(n) _____________ in real output in the short run, illustrated by a movement up along the SRAS curve.
_____________ inflation occurs when the price level rises as a result of an increase in aggregate demand.
When short-run equilibrium occurs at less than the potential output of the economy, it results in a(n)_____________ gap.
Economists call unexpected shifts in supply or demand _____________.
The long-run equilibrium level of RGDP changes only when the _____________ curve shifts.
The short-run equilibrium level of real output and the price level are determined by the intersection of the _____________ curve and the _____________ curve.
Only a short-run equilibrium that is at _____________ output is also a long-run equilibrium.
_____________ supply shocks, such as natural disasters, can increase the costs of production.
A fall in input prices, which shifts SRAS right, shifts LRAS right only if _____________ has risen, and this situation only occurs if the _____________ of those inputs is increased.
If the price of steel rises, it will shift SRAS _____________, while the LRAS will _____________ as long as the capacity to make steel has not been reduced.
The most important of the factors that shift SRAS but do not impact LRAS are a change in _____________ prices and _____________.
A(n) _____________ in government regulations on businesses would lower the costs of production and expand potential real output, causing both SRAS and LRAS to shift to the right.
_____________ output per worker causes production costs to rise and potential real output to fall, resulting in a(n) _____________ shift in both SRAS and LRAS.
An increase in the number of workers in the labor force, ceteris paribus, tends to _____________ wages and _____________ short-run aggregate supply.
A(n) _____________ in the amount of natural resources available would result in a leftward shift of both SRAS and LRAS.
Investments in human capital would cause productivity to _____________.
A decrease in the stock of capital will _____________ real output in the short run and _____________ real output in the long run, ceteris paribus.
A permanent increase in the available amount of capital, entrepreneurship, land, or labor can shift the LRAS and SRAS curves to the _____________.
_____________ production costs will motivate producers to produce less at any given price level, shifting the short-run aggregate supply curve _____________.
The underlying determinant of shifts in short-run aggregate supply is _____________.
Long-run equilibrium will only occur where AS and AD intersect along the _____________.
The long-run equilibrium level is where the economy will settle when undisturbed and all resources are _____________ employed.
The vertical LRAS curve will always be positioned at the _____________ of output.
The level of RGDP producers are willing to supply in the long run is _____________ by changes in the price level.
Along the LRAS curve, two sets of prices are changing:the prices of _____________ and the prices of _____________.
The long run is a period long enough for the price of ____________ to fully adjust to changes in the economy.
If the overall price level is rising, producers can be fooled into thinking that the _____________ price of their output is rising and as a result supply _____________ in the short run.
If the price level falls, output prices _____________, producers’ profits will _____________, and producers will _____________ their level of output.
When the price level rises in the short run, output prices _____________ relative to input prices (costs), _____________ producers’ short-run profit margins.
The two explanations for why producers would be willing to supply more output when the price level increases are the _____________ effect and the _____________ effect.
In the short run, at a higher price level, producers are willing to supply _____________ real output, and at lower price levels, they are willing to supply _____________ real output.
In the short run, the aggregate supply curve is _____________ sloping.
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