Exam 26: The Determination of Aggregate Output, the Price Level, and the Interest Rate

Refer to the information provided in Figure 26.4 below to answer the question(s) that follow. Figure 26.4 -Refer to Figure 26.4. Suppose the economy is at Point A, an oil price increase could move the economy to Point

An increase in the price of inputs will most likely lead to a higher price level.

Refer to the information provided in Figure 26.5 below to answer the question(s) that follow. Figure 26.5 -Refer to Figure 26.5. As a result of an increase in the price level, the equilibrium interest rate ________ and the equilibrium output level ________.

The aggregate supply curve shows the relationship between the aggregate quantity of output supplied by ________ and ________.

If the economy is operating on the relatively vertical segment of the aggregate supply curve, an increase in aggregate demand causes a small change in the ________ and a big change in ________.

An increase in the "Z" factors will decrease the equilibrium price level and decrease aggregate output, ceteris paribus.

An increase in the price level is likely to increase the aggregate amount of output supplied in the short run because

The change in ________ brought about by a change in real wealth that results from a change in the ________ is the real wealth effect.

An increase in government purchases shifts the ________ curve to the ________.

Refer to the information provided in Figure 26.7 below to answer the question(s) that follow. Figure 26.7 -Refer to Figure 26.7. Which of the following statements characterizes an output level of $800 billion?

Other things equal, a decrease in the Z factors shifts

Long-run aggregate supply is equal to

________ shifts the Fed rule to the right.

The Federal Reserve's policy to ________ means that interest rates are increased gradually as the economy expands.

A higher interest rate increases both planned investment and consumption spending.

The Fed is leaning against the wind when it sets a high interest rate during a recession.

Other things equal, an increase in the price level ________ the equilibrium interest rate and ________ equilibrium output.

Since aggregate supply is the total supply of all goods and services in the economy, the aggregate supply curve is the sum of the individual supply curves for each of these goods and services.

Other things equal, an increase in government spending ________ the equilibrium interest rate and ________ equilibrium output.

If the economy is operating way below capacity, an increase in aggregate demand causes a big change in the ________ and small change in ________.