Exam 7: Aggregate Demand and Aggregate Supply

Use the following to answer questions Exhibit: Aggregate Demand and Aggregate Supply at Different Price Levels -The short-run aggregate supply curve is vertical at the level of real output that corresponds to the natural rate of employment.

Use the following to answer questions Exhibit: Using the Aggregate Demand/Aggregate Supply Model 2 -(Exhibit: Using the Aggregate Demand/Aggregate Supply Model 2) Suppose the economy is initially in short-run equilibrium at point K.If the policy-makers adopt a nonintervention policy, over time, I.real wages will fall as long as unemployment remains above the natural rate. II.lower nominal wages will result in a gradual shift from SRAS₂ to SRAS₁. III.long-run equilibrium will be established at Y_P and P_h.

Use the following to answer questions Exhibit: Using the Aggregate Demand/Aggregate Supply Model 2 -(Exhibit: Using the Aggregate Demand/Aggregate Supply Model 2) A shift from SRAS₁ to SRAS₂ could have been caused by all of the following except

The long run in macroeconomics is a period in which wages and prices are flexible and there is full market adjustment.

Use the following to answer questions Exhibit: Aggregate Demand and Aggregate Supply at Different Price Levels -The aggregate demand curve shifts due to changes in consumption expenditures, investment expenditures, government purchases, or net exports.

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.What happens in the new short run?

The long-run aggregate supply curve

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.As a result,

Using the aggregate demand-aggregate supply model, predict what happens in the short run when the federal government enacts a cut in the personal income tax rates.

Suppose that an increase in government purchases of $100 million caused the aggregate demand curve to shift to the right by $350 million at each price level.What is the value of the multiplier?

The intersection of the economy's aggregate demand and long-run aggregate supply curves I.determines its equilibrium real GDP in both the long run and the short run. II.determines its equilibrium price level in both the long run and the short run. III.occurs at the economy's potential output.

Suppose the economy is initially in long-run equilibrium.Which of the following events leads to an increase in the price level and real GDP in the short run?

As a recessionary gap is eliminated through an economy's self-correcting adjustments process,

Use the following to answer questions Exhibit: The Aggregate Demand/Aggregate Supply Model 1 -(Exhibit: The Aggregate Demand/Aggregate Supply Model 1) What are the prevailing price level and the output level in the economy?

In the long run, the output level is determined by

Use the following to answer questions Exhibit: The Aggregate Demand/Aggregate Supply Model 2 -(Exhibit: The Aggregate Demand/Aggregate Supply Model 2) Which of the following statements is true?

Suppose net exports decreases by $100 million due to a slump in foreign economies.If the the value of the multiplier is 2, what happens to the domestic aggregate demand curve?

In the long run, an increase in aggregate demand, all other things unchanged, will cause the price level to

Suppose an economy's exports increase and its imports decrease.All other things unchanged, this results in

When the Great Depression reached its trough in 1933, real GDP had fallen by ________ since the depression began in 1929.