Exam 33: Aggregate Demand and Aggregate Supply

Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4. The economy would be moving to long-run equilibrium if it started at

In order to understand how the economy works in the short run, we need to

Refer to Optimism. In the short run what happens to the price level and real GDP?

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run.

A recession with inflation is know by what term?

Make a list of things that would shift the long-run aggregate supply curve to the right.

An increase in the actual price level does not shift the short-run aggregate supply curve, but an expected increase in the price level shifts the short-run aggregate supply curve to the left.

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

Other things the same, as the price level decreases it induces greater spending on

Figure 33-14. -Refer to Figure 33-14. Identify which long run aggregate-supply curve(s) would be consistent with long-run equilibrium.

Refer to Stock Market Boom 2015. How is the new long-run equilibrium different from the original one?

​Other things the same, an increase in the price level induces less spending on

In the aggregate demand and aggregate supply model, the point where the aggregate demand curve crosses the long run aggregate supply curve, and the expected price level equals the actual price level, is known as what?

The long-run aggregate supply curve

If the government repeals an investment tax credit and increases income taxes,

Other things the same, an increase in the price level causes the interest rate to

Keynes explained that recessions and depressions occur because of

The sticky-price theory implies that

Other things the same, when the price level falls, interest rates

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.