Exam 9: Aggregate Demand and Aggregate Supply

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s). -Recall the Application. Recessions can occur either when there is a(n)________ in aggregate demand or a(n)________ in aggregate supply.

Figure 9.2 -Refer to Figure 9.2. A movement from point b to point a could be caused by a(n)

Aggregate demand determines output in the short run if prices are flexible.

During an economic boom

The price system always works instantaneously.

What are some reasons why coordination of economic affairs through the price system may not work perfectly?

Suppose the demand for hot dogs decreases. In the short run, firms that produce hot dogs will experience a fall in prices, which will induce them to

Figure 9.2 -Refer to Figure 9.2. A movement from point a to point c could be caused by a(n)

The purchasing power of money increases as the

If the government increased its purchases of goods and services by $12,000, and this resulted in an eventual increase in GDP and income of $60,000, the MPS would be equal to

Name a supply shock that has affected the U.S. economy on more than one occasion.

Prices for industrial commodities such as steel rods or machine tools are

If actual output exceeds potential output, the short-run aggregate supply curve shifts downward over time.

The relationship between the level of prices and total quantity of goods and services producers are willing to supply is represented by the

Aggregate demand is the total demand for intermediate goods and services in an entire economy.

Any change in demand from ________ will also change aggregate demand.

The economy's ability to coordinate economic activity is hindered by

When interest rates are lower, consumers and companies are able to borrow money cheaply in order to make major purchases. As a result, the demand for goods in an economy will generally

Stickiness of wages

For most firms, the biggest cost of doing business is wages.