Exam 9: Real GDP and the Price Level in the Long Run

Suppose a country has no trade with other countries and people can borrow as many funds as they want at the current interest rate. An increase in the price level will generate

Suppose that an economy is initially producing at the full-employment level of output. Now suppose there is a reduction in the money supply. Other things being equal we can expect

A rise in the price level has a direct effect on spending because

A country's long-run aggregate supply curve will shift to the left when there is (are)

According to the interest rate effect, an increase in the price level, if other factors are held constant, will lead to

If long-run economic growth is not accompanied by a change in aggregate demand, the result will be

If persistent inflation was due to declines in long-run aggregate supply, what pattern would be observed?

Which of the following is a factor that determines the shape of the aggregate demand curve?

When a change in the price level causes a change in the purchasing power of currency, which then changes planned real expenditures at all income levels, it is called

The long-run aggregate supply curve occurs at the level of real GDP consistent with

A decrease in U.S. prices relative to European prices

Economic growth is demonstrated by the LRAS as it

Economic growth takes place

All of the following explain the downward slope of the aggregate demand curve EXCEPT

A persistently declining price level resulting from economic growth and unchanged aggregate demand is called

The long-run aggregate supply will increase when

When the economy is in long-run equilibrium, the price level adjusts so as to equate which two values with one another?

Secular deflation occurs when

Which of the following will NOT lead to a rightward shift of the long-run aggregate supply curve?

-Refer to the above figure. Suppose the economy's initial equilibrium is represented by the intersection of LRAS₂ and AD₂. Now there is an increase in labor productivity which increases total planned production at any given price level and aggregate demand remains stable. The resulting change in the economy's long-run equilibrium position would be represented by a