Exam 33: Aggregate Demand and Aggregate Supply

Suppose a country offers a new investment tax credit. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift?

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this?

Scenario 33-2 Imagine that in the current year the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. -Refer to Scenario 33-2. In the long run, the change in price expectations created by the rise in stock prices

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

Figure 33-8 ​ ​ -Refer to Figure 33-8. Explain how the aggregate demand and aggregate supply model changed during periods 1 and 2.

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

If U.S. speculators gained greater confidence in foreign economies so that they wanted to move more of their wealth into foreign countries, the dollar would

Scenario 33-2 Imagine that in the current year the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. -Refer to Scenario 33-2. In the short run what happens to the price level and real GDP?

The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level.

According to the misperceptions theory of short-run aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produce had

Figure 33-6 ​ -Refer to Figure 33-6. Suppose the economy starts at A. If changes occur that move the economy to a new short-run equilibrium of P₁ and Y₁ , then it must be the case that

Name two macroeconomic variables that decline when an economy goes into recession, and name one macroeconomic variable that rises.

Figure 33-13 ​ ​ -Refer to Figure 33-13. Suppose the economy starts at P₃ and Y₂. Explain how government purchases would need to change to move the economy to P₂ and Y₁. What about taxes?

Suppose technology advances within a nation. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Figure 33-8 ​ ​ -Refer to Figure 33-8. Identify periods 1 and 2.

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

Figure 33-4 -Refer to Figure 33-4. The short-run equilibrium is defined by the given AD and SRAS curves. Which of the long-run aggregate-supply curves is consistent with the economy being in an expansion?

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because monetary neutrality would mean that

Policymakers who influence aggregate demand can potentially mitigate the severity of economic fluctuations.

Figure 33-3 -Refer to Figure 33-3. In Figure 33-3, Point B represents a