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16. A temporary rise in the price of agricultural crops due to a drought is likely...

16. A temporary rise in the price of agricultural crops due to a drought is likely to cause a(n):
increase in the short-run aggregate supply.
decrease in the long-run aggregate supply.
increase in the long-run aggregate supply.
decrease in the short-run aggregate supply.
17. Which of the following curves is vertical?
aggregate expenditures line
short-run aggregate supply
long-run aggregate supply
aggregate demand
18. If disposable income is $250 and saving is $50, how much is the average propensity to consume?
0.2
0.25
0.8
0.5
19. Approximately what share of U.S. GDP is consumption?
70%
90%
80%
60%
20. Which of the following is a critical dilemma when implementing fiscal policy in reference to timing lags?
Short-term variations in key indicators are common and present randomness in the data.
The economy may already be in a recovery before fiscal policy is enacted.
Fiscal policy requires a short and contentious legislative process.
The information lag takes up too much time and is too costly.
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Homework Answers

Answer #1

1.

a decrease in the short-run aggregate supply

A temporary in the price of agricultural crops due to a drought is likely to cause a decrease in the short-run aggregate supply.

2.

long-run aggregate supply

The long-run aggregate supply curve is vertical reflecting the belief that changes in AD cause a temporary change in output.

3.

0.8

Consumption=250-50=200

The average propensity to consumer=200/250=0.8

4.

70%

Approximately 70% share of U.S. GDP is personal consumption.

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