Exam 19: Aggregate Supply and Aggregate Demand

Moving along the potential GDP line, when the price level changes, the i. real wage rate stays at the full-employment equilibrium level. Ii. money wage rate changes by the same percentage. Iii. money prices of non-labor resources change by the same percentage.

Which of the following does NOT shift the aggregate demand curve?

Along the aggregate supply curve, the quantity of real GDP supplied increases when the price level rises because

If investment spending increases by $1 million, then the aggregate demand curve shifts

If the price level falls and the money wage rate does not change, some firms ________ and there is ________.

The economy is at full employment and then aggregate demand increases. Describe what happens as an immediate result of the increase in aggregate demand. Describe how the economy adjusts back to full employment.

A combination of recession and inflation is called

Which of the following best describes the effect on the aggregate supply curve if political negotiations result in a substantial decrease in the price of oil?

A year over year ________ in the buying power of money means that definitely ________ from one year to the next.

Initially, demand-pull inflation will

Other things remaining the same, an increase in the price level

Which of the following shifts the aggregate supply curve leftward?

If the price of oil rises, the

Give examples of factors that decrease aggregate supply. Which way does the AS curve shift?

Suppose that the money prices of raw materials increase so that short-run aggregate supply decreases. If the Federal Reserve does not respond, the higher money price of raw materials will i. repeatedly shift the aggregate demand curve rightward and raise the price level. Ii. shift the aggregate demand curve rightward and the aggregate supply curve leftward, raising prices. Iii. result initially in lower employment and a higher price level.

Cost-push inflation can start with

Can actual real GDP exceed potential GDP?

When the macroeconomic equilibrium is such that real GDP exceeds potential real GDP, the economy is suffering from ________, and the government policy to eliminate this gap will ________ real GDP to ________ the price level.

At the beginning of 2015, a country is at full-employment. During 2015, oil-producing countries decrease oil production leading to much higher oil prices. The higher oil prices can

A fall in the price level produces a ________ the aggregate supply curve.