Exam 10: Dynamic Change, Economic Fluctuations, and the Ad-As Model

Within the AD/AS model, which one of the following adjustments will cause the economy to return to its long-run capacity when output is temporarily greater than the economy's long-run potential?

Other things constant, an increase in resource prices will

When output is greater than the economy's long-run capacity, which of the following is most likely to occur?

Which of the following will most likely result from an unanticipated decrease in aggregate supply due to unfavorable weather conditions in agricultural areas?

Which of the following will most likely occur in the short run when the long-run equilibrium of an economy is disturbed by an unanticipated decrease in aggregate demand?

Which of the following would be most likely to shift the long-run aggregate supply curve (LRAS) to the right?

If the economy is simultaneously in long-run and short-run equilibrium, which of the following is true?

When an economy experiences long-run economic growth, a larger output can be achieved

Within the AD/AS model, if an unanticipated reduction in aggregate demand results in less than the full-employment rate of output,

Which of the following would cause prices and real GDP to rise in the short run?

Figure 10-18 -As shown in Figure 10-18, and assuming the aggregate demand curve shifts from AD₁ to AD₂, the full-employment level of real GDP is

Use the figure below to answer the following question(s). Figure 10-6 -In the short-run equilibrium depicted in Figure 10-6, the economy's output is

Which of the following will lead to a decrease in aggregate demand in the United States?

Which of the following will most likely accompany an unanticipated increase in aggregate demand?

For the following question(s), assume that the economy is in long-run equilibrium in the aggregate demand/aggregate supply model and that some sort of event takes place. In each case, mark the most likely impact of the event on the aggregate demand/aggregate supply diagram given below. Figure 10-19 -Refer to Figure 10-19. There is an increase in the expected rate of inflation.

If an unanticipated decrease in aggregate demand results in an output below the economy's long-run capacity, long-run equilibrium will eventually be restored by

Figure 10-18 -Beginning in Figure 10-18 from long-run equilibrium at point E₁, the aggregate demand curve shifts to AD₂. The economy's path to a new long-run equilibrium is represented by a movement from

Within the AD/AS model, if consumers and investors become more optimistic about the future direction of the economy,

Explain how each of the following factors would influence aggregate demand in the United States. Be sure to explain which component of aggregate demand would be affected. a.a stock market crash b.an increase in the personal income tax rate c.a decrease in the real interest rate d.an increase in government purchases e.a decline in income in Canada

If a market economy has a self-correcting mechanism, when output is lower than potential or full-employment output,