Exam 13: The Aggregate Demandaggregate Supply Model

The economy is in long-run equilibrium when:

An increase in short-run aggregate supply could be the result of:

If the price level rises by 10%,then all else being equal,the long-run quantity of aggregate supply will:

Suppose that many countries in Europe sink into recession.In the short run,output in the United States will __________ and the price level will __________.

You read in the paper that there has been a significant increase in the consumer confidence index.Having taken an economics class,you predict that spending in the economy will __________ and aggregate demand will __________.

Suppose a country's population is aging and the size of the workforce is declining.In the long run,output will _________ and the price level will _________.

The wealth effect,interest rate effect,and international trade effect all explain why the:

How does the interest rate effect explain the slope of the aggregate demand curve?

Suppose that an increase in the price level reduces the value of real wealth,which then causes a reduction in consumption but no change in saving.In this case:

Explain and illustrate how the long-run equilibrium levels of output and the price level are affected by a technological advance that increases labor productivity.

Refer to the following figure to answer the next two questions. -An increase in aggregate demand is beneficial in the short run because __________,but harmful in the long run because __________.

If short-run equilibrium output is above full employment output,then in the long run input prices will:

The model used to study business cycles is the:

A severe drought hits a country and reduces farm output by 50%.This will impact:

Which of the following would cause an increase in the price level in the long run?

Suppose the government permanently reduces spending in an effort to reduce the budget deficit.In the new long-run equilibrium,output will __________ and the price level will __________.

When prices in the economy have not fully adjusted,we say that:

Suppose a prolonged war in a country destroys 30% of the capital stock.In the long run,the price level will _________ as _________.

Shifts in the long-run aggregate supply curve are caused by:

If workers actively demand pay increases when the price level is rising and are willing to accept pay cuts when the price level is falling,then the short-run aggregate supply curve would be: