Exam 8: Aggregate Demand and Aggregate Supply

Exhibit 8-1 -Refer to Exhibit 8-1. Assume the economy is originally in equilibrium at point A. If unusually bad weather leads to decreased production of wheat, corn, and other crops, at which point is the economy most likely to end up in the short run?

Short-run equilibrium exists

A rise in foreign real national income tends to raise U.S. __________, shifting the U.S. AD curve to the __________.

Which set of changes is definitely predicted to lower Real GDP in the short run?

The interest rate effect occurs because a change in interest rates causes a change in the price level.

The short-run aggregate supply (SRAS) curve shows the quantity

The dollar appreciates against foreign currencies. This makes foreign-produced goods __________ for Americans and U.S.-produced goods __________ for foreigners. As a result, U.S. __________ fall and U.S. __________ rise.

Suppose Americans buy inputs from foreigners. When the price of foreign inputs falls, the U.S. SRAS curve __________, which tends to __________the U.S. price level.

An appreciation of the U.S. dollar against foreign currencies tends to __________ U.S. net exports and shift the U.S. AD curve to the __________.

The level of Real GDP and the price level always have a direct relationship.

When the dollar appreciates, U.S. net exports fall and aggregate demand decreases.

A change in the money supply can affect one or more of the components of spending and therefore shift the short-run aggregate supply (SRAS) curve.

Which of the following will not lead to a leftward shift in the SRAS curve?

Can a change in the price level cause the aggregate demand curve to shift?

Exhibit 8-4 -Refer to Exhibit 8-4. Which of the following could not have caused a shift in aggregate supply from SRAS₁ to SRAS₂?

Exhibit 8-2 -Refer to Exhibit 8-2. What word (rises or falls) should go in blank (1) and blank (2), respectively, to summarize the resulting impact on short run equilibrium of the given change in the economy?

Suppose the following: (1) the wage rate falls, (2) business taxes decline, (3) any change in SRAS is greater than any change in AD. Based on this information, in the short run Real GDP will __________ and the price level will __________.

A business firm's profitability is based in part on the

Exhibit 8-1 -Refer to Exhibit 8-1. If we assume that the unemployment rate and Real GDP are inversely related, which of the points on this graph is most likely representative of the lowest unemployment rate?

The worker-misperception explanation of the SRAS curve is used to explain why