All questions true or false 1. assuming that natural gas for firm X is an import
ID: 1094665 • Letter: A
Question
All questions true or false
1. assuming that natural gas for firm X is an important input to the production process, an increase in the availability of natural gas that lowers the price of natural gas, will result in a leftward shift of firm X's supply curve.
2. if labor markets become loose and wages fall all else constant, short run aggregate supply curve will shift to the left.
3. the more sticky nominal wages and other inputs costs are, the steeper the slope of the aggregate supply curve and threfore, the less effective demand side policies in terms of effecting real output.
4. if the us economy is growing faster than the rest of the world, then we would expect a surge in US exports.
5. suppose that expected inflation is at 5% and thus nominal wages rise, along with all other input pries by 5%. suppose also that actual inflation over this period was only 2%. in terms of the behavior of the short run aggregate supply curve, it would shift up given the expectations of higher inflation and then shift downward to adjust for the actual rate of inflation.
6. the more sensitive soncumption is to real wealth, the steeper the aggregate demand curve.
7. during the great recession, we argued that the aggregate expenditure curve shifted downward and the short run aggregate supply curve and aggregade demand both shifted to the left.
8. anything that shifts the investment demand curve to the right will also shift the aggregate demand curve to the right.
9. the obama administration in 2013 let a tax hiliday expire which effectively increases income taxes for all workers who pay into social security. the effect of this increase in taxes, all else constant, would shift the consuption function down, the aggregate expenditure curve down, and teh short run aggregate supply curve to the left.
10. given that the working age population is shrinking in Japan, our disscusion about the determinatnts of the potential growth rate of the economy suggests that this demographic reality would lower the potential growth rate of the economy for Japan, all else constant.
11. one reason the short run aggregate supply curve slopes upward is due to the stickiness of input prices relative to output prices. we saw this in the example when we let output prices rise and kept nominal wages constant. this being the case, the firm's profit maximizing output rises with the rise in prices, all else constant.
12. according to our discussion about the cyclicality of the aggregate supply curve, the closer the economy is to potential output, the more keynesian the world and thus, the more effective aggregate demand side policies are in terms of effecting real gdp.
13. if output prices rise without the nominal wage rising, than real wages rise and workers are willing to work more. this is one of the main reasons that the short run aggregate supply curve slopes upward.
14. when we discussed the stagflation of the 1970's we aregued that policymakers should ahve acted more aggressively with expansionary policies the fight the recession that occurred during that time.
15. the more fleible wages and prices, the steeper the short run aggregate supply curve. in fact, if prices and wages are perfectly flexible then we are in a classical world, where the short run aggregate supply curve is verticle.
Explanation / Answer
1. False (As the supply of natural gas has increased, which causes a decrease in the price of natural gas which is used as an input in the production of good X. So, the cost of production falls. Hence, sellers would increase the supply for good x and the supply curve shifts rightward.)
2. False (When wages fall, the short run aggregate supply curve will not move to the left. In fact, the exact opposite is true. If wages fall, the short run aggregate supply curve actually moves to the right. The curve only moves to the left if wages increase.)
3. False.
4. False (this is not always true. The economy can be a net imported of goods even though it is growing faster)
5. True.
6. False. It would be flatter
7. True.
8. True, because AD= C+I+G+NX
9. False.
10. True
11. True
12. False
13. False.
14. False
15. True