Exam 14: Aggregate Demand and Aggregate Supply

Suppose the Canadian economy is in long-run equilibrium. Then suppose the value of the Canadian dollar increases. At the same time, people in Canada revise their expectations so that the expected price level falls. What would we expect will happen in the short run?

Make a list of things that would shift the long-run aggregate-supply curve to the right.

What happens when the dollar appreciates?

Which of the following happens during recessions?

By how much did the real GDP per person increase during World War II?

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

Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, how can they offset the initial shift?

Which statement best describes what happens when the price level rises?

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?

How does real GDP change over time?

Suppose that there has been bad weather resulting in a temporary decrease in the availability of oil and the economy has reached its new short-run equilibrium. What happens as the economy moves from this short-run equilibrium to long-run equilibrium?

Scenario 14-1 The economy is in long-run equilibrium. Suddenly, due to improved international relations, a boom experienced by a major trading partner, and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time. -Refer to the Scenario 14-1. Initially, which curve shifts in which direction?

According to the sticky-wage theory, which statement is consistent with a more-than-expected increase in the price level?

According to the aggregate demand and aggregate supply model, in the long run what is the impact of an increase in the money supply?

Which statement best describes the effects of a fall in the price level?

What is the effect of a temporary decrease in the availability of raw materials?

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

What happens when the price level rises?

During Canada's three last recessions, investment spending accounted for what percentage of the decline in GDP?