Exam 22: Aggregate Demand and Supply Analysis

Explain through the component parts of aggregate demand why the aggregate demand curve slopes down with respect to the inflation rate.Be sure to discuss two channels through which changes in inflation rates affect demand.

Everything else held constant,a decrease in the cost of production ________ aggregate ________.

________ flexible wages and prices imply that the short-run aggregate supply curve is ________.

This theory views shocks to tastes (workers' willingness to work,for example)and technology (productivity)as the major driving forces behind short-run fluctuations in the business cycle because these shocks lead to substantial short-run fluctuations in the natural rate of output.

The Phillips curve indicates that when the labor market is ________,production costs will ________ and aggregate supply decreases.

A decrease in the availability of raw materials that increases the price level is called a ________ shock

If firms and households form their expectations about inflation by looking at past inflation,this form of expectations formation is known as ________ expectations.

A temporary supply shock that raises prices will cause the real interest rate to

The more willing monetary policymakers are to raise interest rates when faced with inflation,the ________ the AD curve is,and the ________ responsive equilibrium output is to the inflation rate.

By looking at aggregate demand via its component parts,we can conclude that the aggregate demand curve is downward sloping because

Suppose the economy is producing at the natural rate of output.Assuming a fixed natural rate of output and everything else held constant,the development of a new,more productive technology will cause ________ in the unemployment rate in the short run and ________ in inflation in the short run.

Everything else held constant,when output is ________ the natural rate level,wages will begin to ________,decreasing short-run aggregate supply.

One way to derive aggregate demand is by looking at its four component parts,which are

Everything else held constant,a change in workers' expectations about inflation will cause ________ to change.

The price of a barrel of oil doubled between 2007 and the middle of 2008.To make matters worse,a financial crisis hit the U.S.economy starting in August of 2007.Which of the following is TRUE of the United Kingdom's experience?

Suppose the U.S.economy is producing at the natural rate of output.A depreciation of the U.S.dollar will cause ________ in real GDP in the short run and ________ in inflation in the long run,everything else held constant.(Assume the depreciation causes no effects in the supply side of the economy.)

The aggregate supply curve is the total quantity of

Suppose the economy is producing at the natural rate of output and the government passes legislation that severely restricts a company's ability to reduce production costs via outsourcing.Everything else held constant,this policy action will cause ________ in the unemployment rate in the short run and ________ in inflation in the short run.

A positive spending shock ________ real interest rates and ________ output in the short run,thereby its effect on stock prices is ________.

A permanent negative supply shock leads to ________ real interest rates ________.