Exam 9: Aggregate Demand and Aggregate Supply Analysis

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 workers and firms adjusting to having previously overestimated the price level would be represented by a movement from

Figure 9.8 Alt text for Figure 9.8: In figure 9.8, a graph comparing real GDP and price level. Long description for Figure 9.8: The x-axis is labelled, real GDP (trillions of dollars), with values 1.60, 1.64, 1.65 marked.The y-axis is labelled, price level (CPI), with values 125 and 127 marked.6 lines are shown; SRAS1, SRAS2, AD1, AD2, LRAS1, LRAS2.Line SRAS1 begins in the bottom left corner 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 to the bottom center.Line AD2 follows the same slope as line 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 the value 1.60.Line LRAS2 is perpendicular to the x-axis, and begins from the value 1.65.The area between lines LRAS1 and LRAS2 is indicated by a right pointing arrow.Line LRAS1 intersects lines AD1 and SRAS1 at point A (1.60, 125).Lines AD2 and SRAS2 intersect at point B (1.64, 127).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 near the right end of these lines.Similarly, line LRAS2 intersects lines AD1 and AD2 near the right end of these lines. -Refer to Figure 9.8.Given the economy is at point A in year 1, what is the difference between the actual growth rate in GDP in year 2 and the potential growth rate in GDP in year 2?

Which of the following best describes the "wealth effect"?

Figure 9.6 Alt text for Figure 9.6: In figure 9.6, a graph depicting short-run equilibrium and long-run equilibrium. Long description for Figure 9.6: The x-axis is labelled, real GDP (trillions of 2007 dollars), and the y-axis is labelled, price level (CPI).5 lines are shown; SRAS1, SRAS2, AD1, AD2, and LRAS.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.Line AD1 begins at the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as AD1, but is plotted to the right.Line SRAS1 intersects line AD1 at point C, more than half way along both lines.Line SRAS1 intersects line AD2 at point B, approximately 3 quarters of the way along both lines.Line SRAS2 intersects line AD1 at point D, approximately 3 quarters of the way along both lines.Line SRAS2 intersects the line AD2 at point A, more than half way along both lines.Line LRAS is perpendicular to the x-axis, passing through points A and C and intersecting all 4 lines. -Refer to Figure 9.6.Which of the points in the above graph are possible long-run equilibria?

Changes in ________ do not affect the level of aggregate supply in the long run.

Suppose there has been an increase in government spending.As a result, real GDP will ________ in the short run, and ________ in the long run.

Suppose the economy is at full employment and firms become more pessimistic about the future profitability of new investment.Which of the following will happen in the short run?

________ of unemployment during ________ make it more likely that workers will ________ wages.

The level of aggregate supply in the long run is not affected by

How do changes in income tax policies affect aggregate demand?

Suppose the Canadian GDP growth rate is slower relative to other countries' GDP growth rates.This will

When people became less concerned with the underlying value of their houses and instead focused on the expectations of the prices of their houses increasing, ________ occurred.

Figure 9.5 Alt text for Figure 9.5: In figure 9.5, a graph comparing real GDP and price level. Long description for Figure 9.5: The x-axis is labelled, real GDP (trillions of 2007 dollars), and the y-axis is labelled, price level (CPI).5 lines are shown; SRAS1, SRAS2, AD1, AD2, and LRAS.Line SRAS1 begins 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.Line AD1 begins at the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as AD1, but is plotted to the right.Line SRAS1 intersects line AD1 at point C, more than half way along both the lines.Line SRAS1 intersects line AD2 at point B, approximately 3 quarters of the way along both lines.Line SRAS2 intersects line AD1 at point D, approximately 3 quarters of the way along both lines.Line SRAS2 intersects line AD2 at point A, more than half way along both lines.Line LRAS is perpendicular to the x-axis, passing through the points A and C, and intersecting all the 4 lines. -Refer to Figure 9.5.Suppose the economy is at point A.If the economy experiences a supply shock, where will the eventual short-run equilibrium be?

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

The dynamic aggregate demand and aggregate supply model assumes that potential GDP increases over time.

Which of the following would not be considered a positive addition to household wealth?

What is potential GDP?

Which of the following is the most likely explanation for Canada's mini recession in 2015?

At a short-run macroeconomic equilibrium, real GDP is always equal to potential GDP.

If aggregate demand just decreased, which of the following may have caused the decrease?