Exam 14: Aggregate Demand and Aggregate Supply

Recall the Application about the behavior of prices in retail catalogs to answer the following question(s). Economist Anil Kashyap of the University of Chicago examined the prices of 12 selected goods from L.L. Bean, REI, and The Orvis Company, Inc. Kashyap tracked the prices from the companies' catalogs which were reissued every six months. -This Application examines the concept of

Figure 14.2 -Refer to Figure 14.2. A movement from point d to point a could be caused by a simultaneous ________ and ________.

Suppose that demand for a product falls, but prices are sticky. What is likely to happen to prices and output in that market, in the short run?

Stickiness of wages

Describe how adjustments in wages and prices take the economy from the short-run equilibrium to the long-run equilibrium.

Which of the following would cause an increase in aggregate demand in the short run?

Real business cycle theory emphasizes the role of

The term "stagflation" is used to define an economic situation where there are adverse supply shocks which cause a fall in output but with increasing price level.

In which market would the price be least likely to be "sticky"?

What is the total demand for goods and services in an entire economy called?

One reason the aggregate demand curve is downward sloping is because of the

In the long run, output is determined solely by the supply of capital and the supply of labor, not the price level.

Explain how the interest rate effect can increase aggregate demand.

Figure 14.1 -Figure 14.1 shows three aggregate demand curves. A movement from curve AD₀ to curve AD₁ could be caused by a(n)

Suppose the demand for hamburgers increases. In the short run, firms that produce hamburgers will experience a rise in prices, which will induce them to

The purchasing power of money increases as the

Output in the short run is determined by which of the following factors when an economy operates at full employment?

The economy's ability to coordinate economic activity is hindered by

Figure 14.1 -Figure 14.1 shows three aggregate demand curves. A movement from point b to point c could be caused by a(n)

During an economic boom, output exceeds potential output.