Exam 14: Aggregate Demand and Aggregate Supply

The long-run aggregate supply curve is vertical because, in the long run:

If the real wage is sticky, then the short-run aggregate supply curve will be:

If the marginal propensity to consume for an economy is 0.8 and the overall income in the economy increases by $1,000, then the total saving in the economy will increase by:

If the nominal wage of workers decreases by 5% and the real wage of workers increases by 5%, then the overall price level must have:

Using the aggregate demand and aggregate supply framework (include graphs), show the short-run and long-run effects of an increase in the money supply on the price level and real GDP. Provide an economic explanation for the observed changes in the variables. (Assume that the original macroeconomic equilibrium is on the upward-sloping section of the short-run aggregate supply and on the long-run aggregate supply curve.)

If the nominal wage is sticky, then a decrease in the overall price level leads to _____ in the real wage firms have to pay. The firms respond by hiring _____ workers.

An economy's _____ is measured along the vertical axis of an aggregate demand curve.

Suppose that the short-run macroeconomic equilibrium occurs in the upward-sloping range of the short-run aggregate supply curve. If the government increases the federal income tax, then in the short run, _____ will fall. However, in the long run, the _____ will return to the level that it was prior to the imposition of the tax.

If the overall price level in the economy increases by 10% and the workers in the economy are able to afford the same amount of goods as before the price change, then which of the following statements is true?

According to the foreign trade effect, when all else is equal, when the price level in a country increases, its exports _____, and its imports:

A decrease in the overall price level in the economy leads to all of the following EXCEPT:

The _____ effect and the _____ effect can help explain the downward slope of the aggregate demand curve.

In an economy where the only leakage economy is saving, the marginal propensity to consume for the economy is 0.8. If government spending in the economy increases by $200, then the overall spending in the economy will _____ by:

If an economy has no other leakages except savings and the spending multiplier in the economy is 5, then the marginal propensity to consume for the economy is:

In the upward-sloping range of the short-run aggregate supply curve, firms are willing to supply _____ output at _____ price level.

Use Figure: Macroeconomic Equilibrium. The figure shows four different macroeconomic equilibria for an economy. Which of the following can shift the macroeconomic equilibrium from point A to point D? ​ Figure: Macroeconomic Equilibrium

The ______ effect does NOT explain the downward slope of an aggregate demand curve.

Which of the following can lead to economic growth?

Use Figure: Macroeconomic Equilibrium. The figure shows four different macroeconomic equilibria for an economy. Which one of the following can shift the macroeconomic equilibrium from point D to point A? ​ Figure: Macroeconomic Equilibrium

When the government of a country injects $100 into an economy by purchasing new military equipment, the total spending in the economy increases by $500. The marginal propensity to save for the economy is: