Exam 23: Aggregate Demand and Aggregate Supply

Imagine two economies that are identical except that for a long time,economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion.It follows that

Suppose a stock market boom makes people feel wealthier.The increase in wealth would cause people to desire

Consider the exhibit below for the following questions. Figure 23-1 -Refer to Figure 23-1.If the economy is in long-run equilibrium,then an adverse shift in aggregate supply would move the economy from

Other things the same,if the capital stock increases,then in the long run

Suppose the economy is in long-run equilibrium.If the government increases its expenditures,eventually the increase in aggregate demand causes price expectations to

Suppose that a decrease in the demand for goods and services pushes the economy into recession.What happens to the price level? If the government does nothing,what ensures that the economy still eventually gets back to the natural rate of output?

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.If nominal wages are sticky,which of the following helps explains the change in output?

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

Pessimism Suppose the economy is in long-run equilibrium.Then because of corporate scandal,international tensions,and loss of confidence in policymakers,people become pessimistic regarding the future and retain that level of pessimism for some time. -Refer to Pessimism.What happens to the expected price level and what's the result for wage bargaining?

Wages tend to be sticky

During recessions investment

As the price level rises

Other things the same,an increase in the price level makes consumers feel

The aggregate quantity of goods and services demanded changes as the price level rises because

Suppose that during the Great Depression long-run aggregate supply shifted left.To be consistent with what happened to the price level and output,what would have had to happen to aggregate demand?

Which of the following would shift the long-run aggregate supply curve right?

Tax cuts shift aggregate demand

If speculators bid up the value of the dollar in the market for foreign-currency exchange,U.S.aggregate demand would shift to the left.

Other things the same,if the money supply rises by 2% and people were expecting it to rise by 5%,then some firms have