Figure 152 Gross investment 19672011 Gross investment has averaged about 135 of

Figure 152 gross investment 19672011 gross investment

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Figure 15.2: Gross investment, 1967–2011
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*Gross investment has averaged about 13.5% of GDP and new investment about 5.5%, with both dropping relative to GDP during the recession years 1975, 1982, 1991, and especially 2009, when net investment fell to 0%. Learn by Doing: 13. When aggregate demand shifts to the right, output and the price level rise in the short run, but only prices rise in the long run. Correct . Aggregate supply is upward-sloping in the short run, but is vertical in the long run. Did I Get This : 14. The fracking of oil that occurred after 2010 decreased the price of oil and shifted short-run aggregate supply rightward. Correct. A decrease in the price of oil will shift the short-run aggregate supply to the right. 15. A rightward shift of the short-run aggregate supply causes the equilibrium price level to decrease, and the equilibrium output level to increase. Correct. Prices fall and output increase when aggregate supply shifts right. 16. True or false. Economists disagree on why aggregate supply shifts. False Correct . Many economists tend to agree on the reasons for aggregate supply shifts. 17. True or false. In the short run, when aggregate supply slopes upward, expansionary policies can stimulate production and job creation. True Correct. Expansionary policies cause aggregate demand to shift to the right.
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18. "Fill in the blank" question: A permanent reduction in income tax rates is likely to cause aggregate demand to shift to the right and is also likely to cause aggregate supply to shift to the right . Following these two shifts, equilibrium output will increase . Correct. Encouragement of production through reduced taxes or regulations that lower costs to firms will shift the aggregate supply curve to the right. Correc t. When both demand and supply shift to the right, equilibrium output definitely increases, although the effect on equilibrium price level depends on the relative size of the two shifts. Correct . Reduced tax rates give people more disposable income, resulting in an increase in spending. 19. True or false. Events that shift the aggregate supply curve to the right lead to economic growth. True Correct . Anything that shifts the aggregate supply curve to the right is a source of economic growth because it will produce a rise in real output and income 20. True or false. If something causes the short-run aggregate supply curve to shift, it will also cause the long-run aggregate supply curve to shift. False Correct. The short-run aggregate supply curve can shift without shifting the long-run aggregate supply curve. 21. "Fill in the blank" question: in response to increases in the capital stock, improvement in the size or quality of the labor force, additional natural resources, improvements in productivity, or technological advances. If policymakers allow aggregate demand to change at the same pace, the economy will experience growth combined with stable prices .
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