Exam 9: Aggregate Demand and Aggregate Supply Analysis

The automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________.

Inflation is generally the result of total spending growing slower than total production.

Last week, six Swedish kronor could purchase one Canadian dollar.This week, it takes eight Swedish kronor to purchase one Canadian dollar.This change in the value of the dollar will ________ exports from Canada to Sweden and ________ Canadian aggregate demand.

Figure 9.7 Alt text for Figure 9.7: In figure 9.7, a graph comparing real GDP and price level. Long description for Figure 9.7: The x-axis is labelled, real GDP (trillions of dollars), with values 11.0, 11.8, 12.1 marked.The y-axis is labelled, price level, with values 110 and 112 marked.6 lines are shown; SRAS1, SRAS2, AD1, AD2, LRAS1, LRAS2.Line SRAS1 begins near the bottom left and slopes up to the top right corner.Line SRAS2 follows the same slope as line SRAS1, but is plotted to the right.The area between lines SRAS1 and SRAS2 is indicated by a right pointing arrow.Line AD1 begins at the top left corner and slopes down toward the bottom center.Line AD2 follows the same slope as AD1, but is plotted to the right.The area between lines AD1 and AD2 is indicated by a right pointing arrow.Line LRAS1 is perpendicular to the x-axis, and begins from value 11.0.Line LRAS2 perpendicular to the x-axis, and begins from point 12.1.The area between lines LRAS1 and LRAS2 is indicated by a right pointing arrow.Line LRAS1 intersects lines AD1 and SRAS1 at point A (11.0, 110).Lines AD2 and SRAS2 intersect at point B (11.8, 112).Points A and B are connected to their respective coordinates on the x-axis and y-axis with dotted lines.Line LRAS2 intersects lines SRAS1 and SRAS2 on the right end of these lines.Similarly, line LRAS2 intersects lines AD1 and AD2 on the right end of these lines. -Refer to Figure 9.7.Given the economy is at point A in year 1, what will happen to the unemployment rate in year 2?

Workers and firms both expect that prices will be 2.5% higher next year than they are this year.As a result

The international trade effect states that a(n)________ in the price level will ________ net exports.

Use the dynamic model of aggregate demand and supply to illustrate a situation where aggregate demand and short-run aggregate supply are both increasing from year 1 to year 2, resulting in a higher price level and higher level of real GDP at macroeconomic equilibrium in year 2.

Governments often attempt to fight a recession by

What is the relationship among the AD, SRAS, and LRAS curves when the economy is in macroeconomic equilibrium?

An economy is likely to recover from a recession quickly (without government intervention)when

Last week, 16 Mexican pesos could purchase one Canadian dollar.This week, it takes 14 Mexican pesos to purchase one Canadian dollar.This change in the value of the dollar will ________ exports from Canada to Mexico and ________ Canadian aggregate demand.

An increase in the price level results in a(n)________ in the quantity of real GDP demanded because ________.

The short-run aggregate supply curve is vertical.

The international trade effect states that

If stricter immigration laws are imposed and many foreign workers in Canada are forced to go back to their home countries,

Long-run macroeconomic equilibrium occurs when aggregate demand ________ short-run aggregate supply and they ________ the long-run supply curve.

Figure 9.1 Alt text for Figure 9.1: In figure 9.1, a graph comparing real GDP and price level. Long description for Figure 9.1: The x-axis is labelled, real GDP, and the y-axis is labelled, price level, with 0 at the vertex.Line AD1 begins in the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as line AD1 but is plotted to the right.Points A and B are plotted along line AD1.Point A is a little less than half way along the left side of the line, and point B is little more than half way on the right side of the line. -Refer to Figure 9.1.Ceteris paribus, a decrease in government spending would be represented by a movement from

Figure 9.1 Alt text for Figure 9.1: In figure 9.1, a graph comparing real GDP and price level. Long description for Figure 9.1: The x-axis is labelled, real GDP, and the y-axis is labelled, price level, with 0 at the vertex.Line AD1 begins in the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as line AD1 but is plotted to the right.Points A and B are plotted along line AD1.Point A is a little less than half way along the left side of the line, and point B is little more than half way on the right side of the line. -Refer to Figure 9.1.Ceteris paribus, an increase in interest rates would be represented by a movement from

During the winter of 2015, incredible snowfall in the Maritimes and Ontario brought down power lines and closed whole cities.The result of this extreme weather was

Figure 9.3 Alt text for Figure 9.3: In figure 9.3, a graph comparing real GDP and price level. Long description for Figure 9.3: The x-axis is labelled, real GDP, with 0 at the vertex, and the y-axis is labelled, price level.2 lines are shown; SRAS1 and SRAS2.Line SRAS1 begins a little above the vertex and slopes up to the top right corner.Line SRAS2 follows the same slope as line SRAS1, but is plotted to the right.Points A and B are plotted on line SRAS1.Point A is near the left end of the line and point B is near the center of the line. -Refer to Figure 9.3.Ceteris paribus, an increase in the labour force would be represented by a movement from