Exam 20: Aggregate Demand and Aggregate Supply

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

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

According to classical macroeconomic theory, changes in the money supply affect

A relatively mild period of falling incomes and rising unemployment is called a(n)

Optimism Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time. -Refer to Optimism. What happens to the expected price level and what's the result for wage bargaining?

When production costs rise,

As the price level rises

Which of the following by itself is consistent with the directions that the price level and real GDP changed at the onset of the Great Depression?

According to classical macroeconomic theory, changes in the money supply affect

The aggregate-demand curve

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

An increase in the money supply causes output to rise in the long run.

People had been expecting the price level to be 170 but it turns out to be 165. Diamond Power Tools increases the number of workers it employs. What could explain this?

When the price level falls, people want to

The sticky-price theory implies that

Other things the same, an increase in the price level causes the interest rate to

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

The position of the long-run aggregate supply curve

Other things the same, as the price level falls, the real value of a dollar

Increased output and prices in the United States in the early 1940s were mostly the result of increased government expenditures.