Exam 9: Aggregate Demand and Supply

High taxes and/or heavy regulation

The 1973 oil price shock was an example of cost-push inflation.

Which statement regarding the short-run aggregate supply curve is TRUE?

When aggregate prices rise, U.S. goods become more expensive relative to goods from other countries, which leads to an increase in exports.

Consumption would decrease, and the aggregate demand curve would shift to the

If the marginal propensity to consume is 0.9, then the spending multiplier is

The aggregate demand curve slopes _____ and has _____ on the vertical axis.

When the price of a given product declines, consumers' spendable income rises because it takes less income to purchase the same quantity. This is called the _____ effect.

Describe how an increase in the price level affects interest rates (when the money supply is fixed) and the aggregate demand curve.

Describe cost-push inflation if the economy begins in long-run equilibrium at full employment.

An increase in aggregate demand can be caused by

Econia's currency appreciates. This will cause

(Figure: Determining SRAS Shifts) If there is a decrease in input prices, the short-run aggregate supply curve will shift from SRAS₀ to _____, and the price level will shift to _____.

The aggregate supply curve in the long run is vertical because wages and other input prices respond completely to a change in the price level.

If businesses expect to start earning more profit, what will happen to the aggregate demand curve?

If a country's currency appreciates, what impact will it have on aggregate demand or aggregate supply?

Which event causes a decrease in aggregate demand?

Aggregate _____ is the output of goods and services demanded at different price levels.

The U.S. price level rose more than expected after the 2008-2009 stimulus policy actions.

Policymakers can increase output by enacting policies that expand government spending, consumption, investment, or net exports. They could also reduce taxes.