Exam 9: Aggregate Demand and Supply

The long-run economic growth model assumes that

Assume initially the economy is at full employment. If aggregate demand increases, the aggregate price level and costs will _____, and ultimately, the short run aggregate supply curve shifts to the _____.

If the marginal propensity to save is 0.25, the multiplier is

Decreased interest rates will shift the aggregate demand curve to the _____ and _____ output demanded.

Cost-push inflation occurs because of a shift to the

In the short run, the aggregate supply curve is _____ because input prices are _____.

Which factor is NOT a determinant of aggregate supply?

(Figure: Determining SRAS Shifts) If there are advancements in technology, the short-run aggregate supply curve will shift from SRAS₀ to _____, and the price level will shift to _____.

What would cause inflation and employment to increase?

Suppose the economy is at full employment, and energy prices spike. In the short run, output will _____; in the long run, output will _____.

An increase in taxes shifts the aggregate demand curve to the left.

The long-run aggregate supply curve is vertical because

The concept of the vertical long-run aggregate supply curve is inconsistent with the classical model.

What happens if business expectations improve?

The long-run aggregate supply curve uses the classical assumptions that all variables are _____ in the long run and that long-run equilibrium occurs at _____ employment.

The long-run aggregate supply curve represents the full-employment capacity of the economy.

A(n) _____ in productivity and a(n) _____ in taxes will shift short-run aggregate supply to the right.

An increase in net export spending will result in a(n)

(Figure: Interpreting Aggregate Shifts) The graph shows a(n)

The aggregate demand curve shows the level of real GDP that firms will produce at different price levels.