iVAT Chapter 9 Part 1

A  Horizontal because it shows that in the long run a higher price level will not bring about higher output.

B  Vertical because it shows that in the long run higher output will not bring about a higher price level.

C  Horizontal because it shows that in the long run higher output will not bring about a higher price level.

D  Vertical because it shows that in the long run a higher price level will not bring about higher output.

A  Input prices increase

B  Productivity declines

C  Wages increase

D  Wages decrease

A  Wages increase

B  Input prices decline

C  Oil prices fall.

D  Productivity increases

A  The SAS curve becomes steeper.

B  Input prices decrease.

C  Input prices are held constant.

D  Input prices increase.

A  The recipients of the government spending will in turn save that money, which will cause a multiplier effect to occur.

B  An increase in government spending will cause the AD curve to become steeper.

C  The recipients of the government spending will in turn spend that money in the economy, which will cause a multiplier effect to occur.

D  An increase in government spending will cause the AD curve to shift left.

A  Shift to the left

B  Shift to the right

C  Become flatter

D  Become steeper

A  Become steeper

B  Shift right

C  Shift left

D  Become horizontal

A  Shift the U.S. aggregate demand curve to the left.

B  Cause the U.S. to move up its aggregate demand curve.

C  Cause the U.S. to move down its aggregate demand curve.

D  Shift the U.S. aggregate demand curve to the right.

A  The AD curve will become steeper.

B  Aggregate expenditures will decrease at any given price level.

C  Aggregate expenditures will increase at any given price level.

D  Aggregate expenditures will stay constant at any given price level.

A  When the price level drops, which causes people to expect further increases in the prices of goods and services.  This expectation causes people to increase their consumption.

B  When the price level drops, which causes people to expect further decreases in the prices of goods and services.  This expectation causes people to reduce their consumption in order to purchase goods and services at a later date and at a lower price.

C  When the price level increases, which causes people to reduce consumption and expect further increases in the prices of goods and services. This expectation creates a negative feedback effect and can cause dramatic recessions.

D  When the price level drops the prices of assets can increase.  This can increase present day consumption and investment.

A  Because the profits for firms that export goods and services can increase, which can increase employment and investment.

B  Because a decrease in the price level will cause people to feel poorer, which will increase aggregate expenditures.

C  Because an increase in the price level will cause people to feel poorer, which will decrease aggregate expenditures.

D  Because the profits for firms that export goods and services can decrease, which can decrease employment and investment.

A  Shift to the left

B  Slope downward

C  Shift to the right

D  Shift upwards

A  Net exports to increase because U.S. produced goods and services have become more expensive for rest of the world.

B  Net exports to decrease because U.S. produced goods and services have become less expensive for rest of the world.

C  Net exports to increase because U.S. produced goods and services have become less expensive for rest of the world.

D  Wages to increase because domestic industries are less competitive.

A  None of the available answers

B  As the price level drops people have extra money, which is deposited into banks and this leads to a drop in interest rates.  The drop in interest rates leads to an increase in investment.

C  As the price level drops people have less money, which is deposited into banks and this leads to an increase in interest rates.  The increase in interest rates leads to an increase in investment.

D  As the price level increases people have extra money, which is removed from banks and this leads to a drop in interest rates.  The drop in interest rates leads to an increase in investment.

A  Because potential output is vertical, which means the AD curve should be vertical.

B  All of the available answers are correct.

C  Because as the price level increases, and goods and services become less expensive, wages are also increasing. This increase in wages cancels out the decrease in the prices of goods and services.

D  Because as the price level drops, and goods and services become less expensive, wages are also declining. This decrease in wages cancels out the decrease in the prices of goods and services.

A  Upward sloping

B  Horizontal

C  Vertical

D  Downward sloping

A  Individuals at the micro level attempt to increase their total savings, but at the macro level this reduces income in the economy, which reduces total savings for these individuals.

B  Individuals at the micro level attempt to decrease their total savings, but at the macro level this increases income in the economy, which increases total savings for these individuals.

C  The increase in the total amount of savings leads to an increase in investment.

D  The fallacy of composition is not present and savings increases total income.