Exam 25: Demand-Side Equilibrium: Unemployment or Inflation

Figure 9-4 In Figure 9-4, which expenditure level will cause an inflationary gap?

Table 9-1 In Table 9-1, at output of 4,000, inventories are

Table 9-1 In Table 9-1, the equilibrium level of output is

An increase in the U.S. price level (foreign prices held constant) will cause a leftward shift in the aggregate demand curve.

The basic reason for the multiplier effect is that when you spend money,

Equilibrium is the point where total spending equals total output, or GDP.

In the circular flow diagram, saving

An expenditure schedule that lies below the full employment level of GDP will cause

The slope of the aggregate demand curve illustrates that real GDP demanded will increase when

When aggregate demand exceeds current production

The federal government could stimulate investment spending by

If total spending is less than total output, then price levels will

If retail managers are ordering extra merchandise from their wholesale distributors, then it is probably true that

If the multiplier is 4, a decrease in spending equal to $80 billion will be accompanied by a decrease in GDP of

If net exports decrease, the expenditure schedule will

Investment spending

Economists are very good at explaining how individual markets work. Economists are less successful at explaining

Economists before Keynes assumed that equilibrium GDP occurred

Free markets coordinate economic activity in such a way as to eliminate the possibility of inflation or unemployment.

Which of the following questions can be answered by the process of demand side GDP determination?