Exam 7: Aggregate Demand and Aggregate Supply

Use the following to answer questions . Exhibit: Aggregate Demand and Aggregate Supply at Different Price Levels -(Exhibit: Aggregate Demand and Aggregate Supply at Different Price Levels) The table shows the aggregate demand and short-run aggregate supply curves for an economy. The potential level of output is $7.6 trillion. If policymakers adopt a nonintervention policy, the economy gap

As an inflationary gap is eliminated through an economy's self-correcting adjustments process,

The short-run aggregate supply curve is vertical at the level of real output that corresponds to the natural rate of employment.

Use the following to answer questions. Exhibit: The Aggregate Demand/Aggregate Supply Model 1 -(Exhibit: The Aggregate Demand/Aggregate Supply Model 1) Which of the following statements is true?

Aggregate demand is defined as

The long run in macroeconomic analysis is a period

All other things unchanged, a higher exchange rate

According to the wealth effect, if the average price level rises, the value of consumers'

Using the aggregate demand-aggregate supply model, predict what happens in the short run when there is a general decrease in raw materials cost.

What is the difference between a change in aggregate demand and a change in aggregate quantity of real GDP demanded?

Use the following to answer questions . Exhibit: Aggregate Demand -(Exhibit: Aggregate Demand) A movement from point A to point B

Use the following to answer questions . Exhibit: Short-run Aggregate Supply -(Exhibit: Short-run Aggregate Supply) Suppose that the economy is in long-run equilibrium at point A. Now suppose the stock market crashes, significantly reducing household wealth. As a result,

The potential level of real GDP is the level of output a society can achieve when labor is employed at its natural level.

An economic analysis of the short run is useful to explain

All else constant, a lower price level

Suppose the economy is initially in long-run equilibrium. Which of the following events leads to a decrease in the price level and real GDP in the short run?

An increase in the prices of natural resources will lead to a decrease in short-run aggregate supply.

Use the following to answer questions . Exhibit: Aggregate Demand -(Exhibit: Aggregate Demand) What could have caused a movement from point A to point D?

Which of the following best explains why cities want business conventions, political conventions, and major sports events to be held in their town?

An economy adjusts on its own to close a recessionary gap because there is