Exam 10: Aggregate Demand and Aggregate Supply Analysis

Explain how the static aggregate demand and aggregate supply model gives us misleading results about the price level, particularly with respect to decreases in aggregate demand. Describe how the aggregate demand curve is different in the dynamic model as compared to the static model, and describe how potential GDP is different in the dynamic model as compared to the static model. _ _

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Question 21

Starting from long-run equilibrium, use the basic (static)aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth. _ _

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Question 22

Explain how each of the following events would affect the long-run aggregate supply curve. a.A lower price level. b.A decrease in the labour force. c.A decrease in the quantity of capital goods. d.Technological change. _ _

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Question 23

If potential GDP is equal to $1 800 billion, what does the long-run aggregate supply curve look like?

(Multiple Choice)

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Question 24

During economic contractions, the Reserve Bank of Australia often reduces interest rates. Explain how this policy affects the aggregate demand curve. _ _

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Question 25

The main result of which of the following models is that the quantity of money should be increased at a constant rate?

(Multiple Choice)

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Question 26

The result of lower personal income taxes is:

(Multiple Choice)

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Question 27

Rational expectations means that workers and firms form their expectations using:

(Multiple Choice)

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Question 28

What is the relationship among the AD, SRAS and LRAS curves when the economy is in long-run equilibrium? _ _

(Essay)

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Question 29

The dynamic aggregate demand and aggregate supply model illustrates that during most years, aggregate demand and long-run aggregate supply increase.

(True/False)

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Question 30

Refer to Figure 10.1 for the following questions. Figure 10.1 -In Figure 10.1, which of the points are possible long-run equilibriums?

(Multiple Choice)

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Question 31

The aggregate demand curve shows the relationship between the price level and the quantity of real GDP demanded by households and firms, excluding government spending.

(True/False)

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Question 32

Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects? _ _

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Question 33

Explain how the economy moves back to full employment after a recession. _ _

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Question 34

According to Karl Marx (1867), which of the following factors of production did not contribute anything of value to production?

(Multiple Choice)

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Question 35

Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?

(Multiple Choice)

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Question 36

The long-run aggregate supply curve shows the maximum output possible for an economy and, therefore, does not shift.

(True/False)

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Question 37

What is the level of real GDP called in the long-run?

(Multiple Choice)

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Question 38

Beginning at long-run equilibrium, (i)use the basic (static)aggregate demand and aggregate supply model to illustrate what happens in the short run when the economy suffers a supply shock, and (ii)use the basic (static)aggregate supply and demand model to illustrate what happens in the long run following this supply shock. _ _

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Question 39

How do changes in income tax policies affect aggregate demand?

(Multiple Choice)

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Question 40

Starting from long-run equilibrium, use the basic (static)aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth. _ _

Explain how each of the following events would affect the long-run aggregate supply curve. a.A lower price level. b.A decrease in the labour force. c.A decrease in the quantity of capital goods. d.Technological change. _ _

If potential GDP is equal to $1 800 billion, what does the long-run aggregate supply curve look like?

During economic contractions, the Reserve Bank of Australia often reduces interest rates. Explain how this policy affects the aggregate demand curve. _ _

The main result of which of the following models is that the quantity of money should be increased at a constant rate?

The result of lower personal income taxes is:

Rational expectations means that workers and firms form their expectations using:

What is the relationship among the AD, SRAS and LRAS curves when the economy is in long-run equilibrium? _ _

The dynamic aggregate demand and aggregate supply model illustrates that during most years, aggregate demand and long-run aggregate supply increase.

Refer to Figure 10.1 for the following questions. Figure 10.1 -In Figure 10.1, which of the points are possible long-run equilibriums?

The aggregate demand curve shows the relationship between the price level and the quantity of real GDP demanded by households and firms, excluding government spending.

Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects? _ _

Explain how the economy moves back to full employment after a recession. _ _

According to Karl Marx (1867), which of the following factors of production did not contribute anything of value to production?

Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?

The long-run aggregate supply curve shows the maximum output possible for an economy and, therefore, does not shift.

What is the level of real GDP called in the long-run?

How do changes in income tax policies affect aggregate demand?

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Expenditure and Output in the Short Run

Money, Banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 10: Aggregate Demand and Aggregate Supply Analysis

If potential GDP is equal to $1 800 billion, what does the long-run aggregate supply curve look like?

The main result of which of the following models is that the quantity of money should be increased at a constant rate?

The result of lower personal income taxes is:

Rational expectations means that workers and firms form their expectations using:

What is the relationship among the AD, SRAS and LRAS curves when the economy is in long-run equilibrium? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The dynamic aggregate demand and aggregate supply model illustrates that during most years, aggregate demand and long-run aggregate supply increase.

Refer to Figure 10.1 for the following questions. Figure 10.1 -In Figure 10.1, which of the points are possible long-run equilibriums?

The aggregate demand curve shows the relationship between the price level and the quantity of real GDP demanded by households and firms, excluding government spending.

Explain how the economy moves back to full employment after a recession. _____________________________________________________________________________________________ _____________________________________________________________________________________________

According to Karl Marx (1867), which of the following factors of production did not contribute anything of value to production?

Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?

The long-run aggregate supply curve shows the maximum output possible for an economy and, therefore, does not shift.

What is the level of real GDP called in the long-run?

How do changes in income tax policies affect aggregate demand?

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Expenditure and Output in the Short Run

Money, Banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

What is the relationship among the AD, SRAS and LRAS curves when the economy is in long-run equilibrium? _ _

Explain how the economy moves back to full employment after a recession. _ _