Exam 20: Aggregate Demand and Aggregate Supply

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the minimum wage, a major new discovery of oil, a large influx of immigrants, and new environmental regulations that raise the cost of electricity production. In the short run

Aggregate demand shifts right when the government

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

If the price level falls, the real value of a dollar

Which of the following shifts the long-run aggregate supply curve to the right?

During the 2008-2009 unemployment rose from about 4.4% to about

When looking at a graph of aggregate demand, which of the following is correct?

Which of the following shifts aggregate demand to the left?

Political Instability Abroad Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets. -Refer to Political Instability Abroad. What would the change in the interest rate created by foreigners wanting to buy more U.S. assets do to investment spending in the U.S.?

If the government provides an investment tax credit and increases income taxes,

In the early 1930s in the United States, there was a

Which of the following shifts the short-run aggregate supply curve right?

If output is above its natural rate, then according to sticky-wage theory

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to

The classical dichotomy refers to the separation of

Changes in the price level affect which components of aggregate demand?

Other things the same, as the price level decreases it induces greater spending on

The aggregate demand and aggregate supply model helps us to understand both short-run economic fluctuations and how the economy moves from the short to the long run.

Real GDP

Financial Crisis Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time. -Refer to Financial Crisis. What happens to the price level and real GDP in the short run?