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

If the combination r = 5% and Y = $450 billion is on the IS curve, we know that the combination r = 5% and Y = $300 billion would represent

Assuming a long-run aggregate supply curve, an increase in government spending results in ________ in output and ________ in prices.

Potential output is the most that can be produced in an economy at a particular point in time.

Natural gas is used as a source of energy in many manufacturing processes. Assume large new deposits of natural gas are discovered in Nebraska, which increase the supply of natural gas and decreased the price of natural gas. This would cause

An increase in aggregate demand when the economy is operating at high levels of output is likely to result in

When the aggregate supply curve is horizontal

A decrease in government spending shifts aggregate demand to the left.

Other things equal, a decrease in government spending ________ the equilibrium interest rate and ________ equilibrium output.

The Federal Reserve's policy to "lean against the wind" means that

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. Which of the following causes the economy to move from Point E to Point A?

If there is an increase in the percentage of employees whose wages adjust automatically with changes in the price level, the aggregate supply curve will become

Refer to the information provided in Figure 26.8 below to answer the question(s) that follow. Figure 26.8 -Refer to Figure 26.8. For this economy to produce Y₁ and sustain it without inflation

Other things equal, an increase in the Z factors shifts

Refer to the information provided in Figure 26.3 below to answer the question(s) that follow. Figure 26.3 -Refer to Figure 26.3. During the 1980s, many firms in the United States were not investing in new capital. This would have caused

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. An increase in the Z factors shifts the ________ to the ________.

Refer to the information provided in Figure 26.6 below to answer the question(s) that follow. Figure 26.6 -Refer to Figure 26.6. Suppose the equilibrium output is initially $600 billion. A decrease in wages and an increase in government spending will, for sure, increase

A leftward shift of the short-run aggregate supply curve means that society can get a larger aggregate output at any price level.

To increase output the government could

Refer to the information provided in Figure 26.8 below to answer the question(s) that follow. Figure 26.8 -Refer to Figure 26.8. This economy cannot continue to produce Y_{2 (or at Point D)} because

Other things equal, an increase in the Z factors ________ the equilibrium interest rate and ________ equilibrium output.