Exam 13: The Aggregate Demandaggregate Supply Model

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

Business-cycle theory focuses on time horizons of less than

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

An increase in the general price level will lead to

Suppose firms increase investment spending to replace worn-out equipment. In the short run, aggregate demand will _____and output will ______.

Refer to the following figure to answer the next questions. -Based on the figure, if the economy is currently at point B, then in the long run, we can expect the economy to naturally adjust to point

A supply shock causes a shift in

Refer to the following figure to answer the next questions. -Based on the figure, which points represent long-run equilibrium?

Suppose new drilling techniques increase the world oil supply. In the long run, output will ____and the price level will_____ .

The term " _______cycle" is a popular way to describe the recession-expansion pattern followed by the economy.

If short-run equilibrium output is above full-employment output, then in the long run input prices will

If prices fall, then real wealth _____and the quantity of aggregate demand_______ .

A fall in the price level that causes a change in the real value of wealth results in

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

In the long run, the output of an economy

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

Explain and illustrate how the short-run and long-run equilibrium levels of output and the price level are affected by successful efforts by the government to reduce the budget deficit.

A severe drought hits a country and reduces farm output by 50 percent. In the short run, this will _____output and _______employment.

An increase in the price level will_____ the real value of wealth and, as a result, there will be the_____ aggregate demand curve.

The aggregate demand curve illustrates the