Exam 12: Aggregate Demand and Aggregate Supply

Use the following to answer questions: Figure: An Increase in Aggregate Demand -(Figure: An Increase in Aggregate Demand) Refer to Figure: An Increase in Aggregate Demand. Assume that the economy is initially in long-run equilibrium at Y_P and P₁. Now suppose that there is an increase in the level of government purchases at each price level. This will:

Aggregate demand will increase if:

Graphically, a recessionary gap is measured as the:

In the long run, wages and prices are considered to be:

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

Use the following to answer questions: Figure: Policy Alternatives -(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. Assume that the economy depicted in panel (a) is in short-run equilibrium at a real GDP level of Y₁. The economy will correct itself:

If the price level falls by 10%, the purchasing power of $10,000 will:

The short-run aggregate supply curve may shift to the right if:

Using monetary policy to address a recessionary gap caused by a supply shock involves _____ to _____.

A simultaneous rise in productivity and nominal wages would shift the short-run aggregate supply curve to the:

Use the following to answer questions: Figure: Inflationary and Recessionary Gaps -(Figure: Inflationary and Recessionary Gaps) Refer to Figure: Inflationary and Recessionary Gaps. The intersection of AD with SRAS in panel (b) indicates:

When the aggregate price level increases, the purchasing power of many assets falls, causing a decrease in consumer spending. This, the _____ effect, is a reason the _____ curve slopes _____.

In the long run, nominal wages are:

Which factor would shift the aggregate demand curve to the LEFT?

Suppose the economy is in a short-run equilibrium and actual output is greater than potential output. The economy is in:

If nominal wages fall, then the short-run aggregate _____ curve shifts to the _____.

Use the following to answer questions: Figure: Inflationary and Recessionary Gaps -(Figure: Inflationary and Recessionary Gaps) Refer to Figure: Inflationary and Recessionary Gaps. The level of income associated with Y₁ in panel (b):

The economy is in a recession. The desired FISCAL policy is a(n):

The intersection of an economy's aggregate demand and long-run aggregate supply curves:

A decrease in the supply of money shifts the aggregate _____ curve to the _____.