Exam 9: Aggregate Demand and Aggregate Supply Analysis

Explain why the long-run aggregate supply curve is vertical.

On the long-run aggregate supply curve,

Short-run macroeconomic equilibrium occurs when

What variables cause the short-run aggregate supply curve to shift? For each variable, identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left.

Starting from long-run equilibrium, use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is an increase in wealth.

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Explain how the static aggregate demand and aggregate supply model gives us misleading results about the price level, particularly with respect to decreases in aggregate demand.Describe how the aggregate demand curve is different in the dynamic model as compared to the static model.Describe how potential GDP is different in the dynamic model as compared to the static model.

The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation.What did this technological change do the short-run supply curve?

If workers leave a country to seek out better opportunities in another country, then this will

The level of long-run aggregate supply is affected by all of the following, except

In September of 2007, the Bank of Canada dramatically reduced interest rates.Explain how lower interest rates affect the aggregate demand curve.

When the economy enters into a recession, your employer is ________ to reduce your wages because ________.

There has been a decrease in investment.As a result, real GDP will ________ in the short run, and ________ in the long run.

Beginning with long-run equilibrium, use the aggregate demand and aggregate supply model to illustrate what happens in the short run when the economy suffers a negative supply shock.

When potential GDP increases, short-run aggregate supply also increases, but long-run aggregate supply does not change.

Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico which subsequently drove up natural gas, gasoline, and heating oil prices.Three years later, once the refining capacity was restored, these prices came back down.The restoration of refining capacity should

Explain how each of the following events would affect the aggregate demand curve. a.lower interest rates b.a decrease in net exports c.a decrease in the price level d.slower income growth in other countries e.a decrease in imports

In the long run,

A decrease in the price level will

In Canada, because shipping plays such an important role in the economy, declines in cargo volumes reflect