Exam 13: The Aggregate Demandaggregate Supply Model

Suppose that an increase in the price level reduces the value of real wealth, which then causes a reduction in consumption but no change in saving. In this case, there is

Why would a change in the price level lead to a change in interest rates?

An increase in ________ can be expected to shift the aggregate demand curve to the right.

How does the interest rate effect explain the slope of the aggregate demand curve?

Explain the difference between the short-run and long-run aggregate supply curves.

When firms invest less because people are saving less, it is called the ________ effect.

If the economy is in a recession caused by lower aggregate demand, then in the absence of policy action, the price level will ________, output will ________, and employment will ________ in the long run.

When a change in the price level leads to a change in saving, this is known as the ________ effect.

When inflation pushes up prices in the economy, input prices are ________ and revenues ________ in the short run.

The economy is in short-run equilibrium when

During the latter part of the 1990s, firms purchased new computer systems so that they could establish web sites and eventually online ordering systems. How is this likely to impact the short-run and long-run aggregate supply?

Aggregate demand is about ________ and aggregate supply is about ________.

The price index used to illustrate the aggregate demand curve is the

Input prices are ________ in the short run and ________ in the long run.

Which of the following would shift aggregate demand to the right?

Severe winter weather makes it difficult to transport goods between locations. This can be expected to

Suppose a change in health care laws increases the cost of hiring an employee. We can expect output in the short run to ________ and output in the long run to ________.

An economy has experienced a rightward shift of its long-run aggregate supply curve and is now producing on that new long-run aggregate supply curve. It is reasonable to expect that

Refer to the following figure to answer the next questions. -Based on the figure, a negative supply shock is best represented by a movement from

A new government program reduces the cost of a college education at public universities by 50 percent. In the long run, this can be expected to ________ long-run aggregate supply and ________aggregate demand.