Exam 14: Aggregate Demand and Aggregate Supply

An aggregate-supply (AS)curve is described by the equation Y = YLR + a × (P - PEXP),where Y is current output,YLR is the long run level of output,a is a positive constant,P is the current price level,and PEXP is the expected price level.Suppose YLR = 50,a = 1,and PEXP = 40. a. Draw the long-run aggregate-supply curve in an AD - AS (aggregate demand - aggregate supply) diagram. b. Using the AS equation, find the output corresponding to price levels P = 40 and P = 80 and place the 2 points on your diagram. Draw the short-run AS curve that passes through the two points. c. Identify the expected price level on your graph. d. Suppose the expected price level decreases to PEXP = 30. For current price levels P = 40 and P = 60, recalculate the output levels using the AS formula. Draw the new AS curve and identify the new expected price level.

Why is the long-run aggregate-supply curve vertical?

An increase in the money supply shifts the long-run aggregate-supply curve to the right.

Which of the following shifts aggregate demand to the left?

Which of the following would cause stagflation?

Which of the following best characterizes the aggregate-demand curve?

Suppose the economy is in long-run equilibrium.If there is a tax cut at the same time that major new sources of oil are discovered in the country,what would we expect will happen in the short run?

Which of the following is included in the aggregate demand for goods and services?

Which of the following shifts the short-run aggregate and the long-run aggregate supply left?

Which of the following is NOT included in aggregate demand?

Which of the following characterizes the long-run aggregate-supply curve?

Why does an increase in the price level cause a decrease in the aggregate quantity of goods and services demanded?

What is the current estimate of the natural rate of unemployment in Canada?

When taxes decrease,consumption increases.How is this situation represented in the aggregate demand and aggregate supply model?

What are the effects of an increase in the price level?

If speculators bid up the value of the dollar in the market for foreign-currency exchange,aggregate demand will shift to the left.

What are the effects of a decrease in Canadian interest rates?

Technological progress shifts the long-run aggregate-supply curve to the right.

In which of the following situations would the long-run aggregate-supply curve shift right?

Economists mostly agree that the Great Depression was the result of a very large adverse supply shock.