Exam 7: Aggregate Demand and Aggregate Supply

Use the following to answer questions Exhibit: Aggregate Demand and Aggregate Supply at Different Price Levels -The aggregate demand curve shifts when the quantity of real GDP demanded at every price level changes.

Use the following to answer questions Exhibit: The Aggregate Demand/Aggregate Supply Model 1 -(Exhibit: The Aggregate Demand/Aggregate Supply Model 1) For the economy represented in the figure,

Use the following to answer questions Exhibit: Using the Aggregate Demand/Aggregate Supply Model 1 -(Exhibit: Using the Aggregate Demand/Aggregate Supply Model 1) Suppose the economy is initially at point A.Now suppose an increase in government purchases shifts the aggregate demand curve to AD₂.Which of the following statements best explains how the economy responds to restore long-run macroeconomic equilibrium?

Which of the following occurs if an economy experiences a recessionary gap? I.Actual real GDP is less than potential output. II.Actual real GDP is greater than potential output. III.Unemployment is less than the natural rate. IV.Unemployment is greater than the natural rate.

An economic analysis of the short run is useful to explain

Use the following to answer questions Exhibit: Using the Aggregate Demand/Aggregate Supply Model 1 -(Exhibit: Using the Aggregate Demand/Aggregate Supply Model 1) Suppose the economy is initially at point A.All of the following statements are true except

Use the following to answer questions Exhibit: Long-run Equilibrium -(Exhibit: Long-run Equilibrium) If the real GDP is $7,000 billion and the implicit price deflator is 1.16, what is the value of nominal GDP?

Use the following to answer questions Exhibit: Short-run Aggregate Supply -(Exhibit: Short-run Aggregate Supply) Suppose that the economy is in long-run equilibrium at point A.Now suppose the stock market crashes, significantly reducing household wealth.What happens in the long-run, all other things unchanged?

Use the following to answer questions Exhibit: Aggregate Demand -(Exhibit: Aggregate Demand) What could have caused the aggregate demand curve to shift to the right from AD₁ to AD₂?

Use the following to answer questions Exhibit: Short-run Aggregate Supply -(Exhibit: Short-run Aggregate Supply) Suppose that the economy is in long-run equilibrium at point A.Now suppose net exports increase.What happens in the short run?

Use the following to answer questions Exhibit: Using the Aggregate Demand/Aggregate Supply Model 1 -(Exhibit: Using the Aggregate Demand/Aggregate Supply Model 1) Suppose the economy is initially in short-run equilibrium at B.If policy-makers decide to intervene to close the gap, which of the following can it do?

A decrease in aggregate demand, all other things unchanged, in the long run will generate

The aggregate demand curve slopes downward I.for the same reasons that an ordinary demand curve does. II.in part because when the price level falls, the real wealth of the public falls, and this induces people to change their consumption. III.because as the price level falls, the net export component of aggregate demand increases.

Using the aggregate demand-aggregate supply model, predict what happens in the short run when the consumer confidence index falls as consumers become pessimistic about their economic prospects.

What happens in the domestic economy when there is a decrease in foreign prices, all other things unchanged?

An economy adjusts on its own to close a recessionary gap because there is

Use the following to answer questions Exhibit: Long-run Equilibrium -(Exhibit: Long-run Equilibrium) If the real GDP is $7,000 billion and the implicit price deflator is 1.08, what is the value of nominal GDP?

All other things unchanged, an increase in government spending will

Which of the following will decrease the short-run aggregate supply?

Using the aggregate demand-aggregate supply model, predict what happens in the short run when there is a general decrease in raw materials cost.