1. Which of the following components of aggregate demand typicallyabsorb almost

Question

1. Which of the following components of aggregate demand typicallyabsorb almost 70 percent of total
economic activity, as measured by GDP?
a. investment
b. consumption
c. government purchases
d. net exports

2. If the prices of inputs rise, what happens to short-runaggregate supply?
a. It shifts left.
b. It doesn't shift, but the economy moves up along the SRAScurve.
c. It shifts right.
d. It doesn't shift, but the economy moves down along the SRAScurve.

3. During the 1970s, U.S. prices generally rose faster than pricesin other parts of the world. Which of the
following changes would the Open Economy Effect predict took placein response to these price level
changes?
a. Americans reduced the proportion of foreign goods bought sincetheir foreign prices
became relatively lower.
b. Americans reduced the amount of investment they undertookbecause interest rates
increased.
c. Americans reduced the amount of goods and services they wantedto purchase for
consumption because they felt less wealthy.
d. Americans reduced the fraction of purchases they made fromdomestic producers of goods
and services since foreign prices became relatively lower.

4. Recent scientific study has concluded that the spotted wood fleais an endangered species, and is
protected by the Endangered Species Act. To protect the flea,lumber operations throughout the
southeastern United States are halted. What effect would this haveon short-run aggregate supply in the
United States?
a. It would shift right (an increase in short-run aggregatesupply).
b. It would shift left (a decrease in short-run aggregatesupply).
c. It would shift right (a decrease in short-run aggregatesupply).
d. It would shift left (an increase in short-run aggregatesupply).

5. Brent, a brilliant inventor, found a way to grind up discardednewspapers and create a new, far lower cost, effective plaster.This innovation would have what affect on short-run aggregatesupply?
a. If it is able to substantially lower the costs of homeinsulation products, it would shift SRAS to the right.
b. If it is able to replace existing products with its superiorcharacteristics, it will shift SRAS
to the right.
c. By providing a readier market to use discarded papers, it wouldreduce disposal costs for many producers and thereby shift SRAS tothe right.
d. All of the above are possible answers.

6. Lower production cost will:
a. increase short-run aggregate supply, illustrated by an upwardshift in the SRAS curve.
b. increase short-run aggregate supply, illustrated by a rightwardshift in the SRAS curve.
c. decrease short-run aggregate supply, illustrated by an downwardshift in the SRAS curve.
d. decrease short-run aggregate supply, illustrated by a rightwardshift in the SRAS curve.

7. If there is an increase in the capital stock and that capitalalso embodies improved technology as well,
a. LRAS will shift to the right.
b. LRAS will shift to the left.
c. LRAS will be unchanged.
d. LRAS could shift either to the right or to the left.

8. An increase in investment, combined with an increase in imports,would have what effect on aggregate demand?
a. AD would increase.
b. AD would decrease.
c. AD would stay the same.
d. AD could either increase or decrease, depending on which changewas of a greater magnitude.

Explanation / Answer

I answered these questions in another post, so I am just goingto mark out the answers this time. If you have more questions justask me. Also, to get more people to answer your question, you needto split them up into 10 posts
1. Which of the following components of aggregate demand typicallyabsorb almost 70 percent of total
economic activity, as measured by GDP?
a. investment
b. consumption- usually the biggest chunk sincewe are spending money buying stuff almost every day
c.government purchases
d. net exports

2. If the prices of inputs rise, what happens to short-runaggregate supply?
a. It shifts left.- in put is one factor thataffects supply curve
b. It doesn't shift, but the economy moves up along the SRAScurve.
c. It shifts right.
d. It doesn't shift, but the economy moves down along the SRAScurve.

3. During the 1970s, U.S. prices generally rose faster than pricesin other parts of the world. Which of the
following changes would the Open Economy Effect predict took placein response to these price level
changes?
a. Americans reduced the proportion of foreign goods bought sincetheir foreign prices
became relatively lower.
b. Americans reduced the amount of investment they undertookbecause interest rates
increased.
c. Americans reduced the amount of goods and services they wantedto purchase for
consumption because they felt less wealthy.
d. Americans reduced the fraction of purchasesthey made from domestic producers of goods
and services since foreign prices became relatively lower.- cheaperforeign goods eventually evened out

4. Recent scientific study has concluded that the spotted wood fleais an endangered species, and is
protected by the Endangered Species Act. To protect the flea,lumber operations throughout the
southeastern United States are halted. What effect would this haveon short-run aggregate supply in the
United States?
a. It would shift right (an increase in short-run aggregatesupply).
b. It would shift left (a decrease in short-runaggregate supply).- reduction in place to produce lumber
c. It would shift right (a decrease in short-run aggregatesupply).
d. It would shift left (an increase in short-run aggregatesupply).

5. Stagflation occurs when:
a. real output rises and the price level falls.
b. real output rises and the price level rises.
c. real output falls and the price level falls.
d. real output falls and the pricelevel rises. Stagflation isan economic situation in which inflation and economic stagnationoccur simultaneously and remain unchecked for a period oftime

6. Suppose that the saving rate in the United States increases, andfirms use the increased saving to invest. What will happen tolong-run aggregate supply?
a. The LRAS will not shift, but the economy moves along the LRAScurve to a higher price
level.
b. The LRAS will not shift, but the economy moves along the LRAScurve to a lower price
level.
c. It will decrease.
d. It will increase.

7. Educational reforms begin to significantly raise test scores ofgraduating high school seniors in the United States, and they enterthe workforce with improved reading, math, and reasoning skills.What effect would this have on aggregate supply?
a. It will shift the LRAS right, but not theSRAS.
b. It will shift the SRAS left, but not the LRAS.
c. It would shift both the SRAS and the LRASright.
d. It will not shift either SRAS or LRAS.

8. A temporary increase in the supply of a major input will:
a. increase SRAS but not LRAS.
b. increase SRAS and LRAS.
c. decrease SRAS but not LRAS.
d. decrease SRAS and LRAS.

9. A permanent increase in the supply of a major input will:
a. decrease real output in the short run but not the long run.
b. decrease real output in both the short run and the long run.
c. increase real output in the short run but not in the longrun.
d. increase real output in both the short runand the long run.

10. If the government eliminated for only one year many of thecostly paperwork requirements imposed on businesses andindividuals,
a. SRAS would increase but LRAS wouldnot.
b. SRAS and LRAS would both increase.
c. SRAS would decrease but LRAS would not.
d. SRAS and LRAS would both decrease.

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