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The Producer Price Index (PPI) {Ans: measures the change over time in the cost of buying a "market basket" of inputs purchased by producers}The open economy effect is observed when a decrease in the price level causes the real exchange rate to depreciate, which subsequently causes an increase in net exports. (T/F) {Ans: True}long-run aggregate supply curve {Ans: is vertical and the location of the curve depends on the economy's supply of land, capital, labor, and entrepreneurial ability and the productivity of these resources. LRAS located at the economy's potential real GDP, which is defined as the economy's maximum sustainable output level given the supply of factors of production, the state of technology, and formal and informal institutions supporting the economy and NOT the price level.}average total cost {Ans: equals the total cost divided by the quantity produced, or it is the sum of average fixed cost plus average variable cost}Exports {Ans: final goods and services produced in the U.S. and purchased by foreigners living outside the U.S.}Policy instrument: federal marginal income tax rates. The President and Congress should _______ federal marginal income tax rates if the economy is in a deflationary gap. {Ans: