Exam 23: Aggregate Demand and Supply Analysis

Suppose the economy is producing below the natural rate of output and the government is suffering from large budget deficits. To deal with the deficit problem, suppose the government takes a policy action to reduce the size of the deficits. This policy action will cause ________ in the unemployment rate in the short run and ________ in inflation in the short run, everything else held constant.

The Phillips curve indicates that when the labor market is ________, production costs will ________ and aggregate supply decreases.

According to aggregate demand and supply analysis, the favorable supply shock of 1995-1999 had the effect of

According to aggregate demand and supply analysis, the rising oil prices coupled with the global financial crisis in 2007-2008 caused the unemployment rate to ________ and the level of real aggregate output to ________.

Everything else held constant, an increase in the cost of production ________ aggregate ________.

Suppose the economy is producing at the natural rate of output. An open market sale of bonds by the Fed will cause ________ in real GDP in the long run and ________ in inflation in the long run, everything else held constant.

Suppose the U.S. economy is operating at potential output. A negative supply shock that is accommodated by an open market purchase by the Federal Reserve will cause ________ in real GDP in the long run and ________ in inflation in the long run, everything else held constant.

According to aggregate demand and supply analysis, the negative demand shock of 2000-2004 had the effect of

The long-run aggregate supply curve shifts to the right when there is

This theory views shocks to tastes (workers' willingness to work, for example) and technology (productivity) as the major driving forces behind short-run fluctuations in the business cycle because these shocks lead to substantial short-run fluctuations in the natural rate of output.

The Phillips curve indicates that when the labor market is ________, production costs will ________ and aggregate supply increases.

Everything else held constant, an autonomous monetary policy tightening ________ aggregate ________.

Everything else held constant, which of the following does not cause aggregate demand to increase?

Using the aggregate demand-aggregate supply model, explain and demonstrate graphically the short-run and long-run effects of an increase in the money supply.

A theory of aggregate economic fluctuations called real business cycle theory holds that

Explain through the component parts of aggregate demand why the aggregate demand curve slopes down with respect to the inflation rate. Be sure to discuss two channels through which changes in inflation rates affect demand.

Which of the following increases aggregate supply in the short-run, everything else held constant?

Explain and demonstrate graphically the effects of a negative supply shock in both the short-run and long-run.

Everything else held constant, a decrease in net exports ________ aggregate ________.

Everything else held constant, aggregate demand increases when