When the price level increases, the real value of wealth falls andtherefore buyers want to purchase less.When the price level increases, U.S. exports become relatively more expensive for foreign buyers and they want to purchase less.Incorrect Answer(s)When the price of one domestic good rises, people may substitute away from that good in favor of a cheaper domestic good.p. 404Fill in the blanks to complete the following passage regarding ±rms’ short-run supply.Drag word(s) below to fll in the blank(s) in the passage.A simple model of a ±rm describes it as an entity that buys inputs(for example, labor) and sells outputs (goods and services). A ±rm’s input prices, which a²ect costs, are generally stickyin the short run, while a ±rm’s output prices, which a²ect revenue, are ³exible. Therefore, an increase in the short-run price level raises revenue more than costs, so ±rms produce more in the short run. Consequently, the SRAS curve slopes upward.
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p. 400Which of the following would result in a decrease in U.S. aggregate demand?Correct Answer(s)Buyers become less optimistic about their future income.A stock market crash erodes U.S. citizens’ retirement savings.South American nations experience a recession.Incorrect Answer(s)Buyers become more optimistic about their future income.An increase in the price level leads foreign consumers to substitute away from U.S. goods.p. 395Consider the following graph. Assuming that the U.S. economy begins with an aggregate demand curve equal to AD1, click on the aggregate demand curve you would expect to see following a rise in the U.S. price level.answer AD1p. 413Imagine that the U.S. economy has an initial unemployment rate equal to the natural rate of unemployment. Identify each event as a factor that will either increase or decrease unemployment in the short run.
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increaseThe U.S. dollar gains value against foreign currencies.
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