Exam 23: Aggregate Demand and Aggregate Supply

Suppose the economy is in long-run equilibrium.In a short span of time,there is a sharp decline in the stock market,a tax cut,an increase in the money supply and a decline in the value of the dollar.In the short run

Which of the following shifts short-run,but not long-run aggregate supply right?

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

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

Consider the exhibit below for the following questions. Figure 23-1 -Refer to Figure 23-1.If the economy starts at A and moves to D in the short run,the economy

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.In the long run,the change in price expectations created by optimism shifts

Other things the same,a decrease in the price level makes the dollars people hold worth

Political Instability Abroad Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets. -Refer to U.S.Financial Crisis.U.S.net exports would

According to the classical model,which of the following would double if the quantity of money doubled?

As the price level rises,

In which case can we be sure real GDP rises in the short run?

In which case can we be sure that real GDP rises in the short run?

According to the misperceptions theory of the short-run aggregate supply curve,if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent,then the firm would believe that the relative price of what it produces had

Other things the same,the aggregate quantity of goods demanded in the U.S.increases if

Which of the following shifts aggregate demand to the right?

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.Suppose the economy reaches long-run equilibrium without the Fed responding.Now suppose the financial crisis ends and the ability of banks to lend returns to normal.In which case is the price level lower compared to its value prior to the crisis?

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

The classical dichotomy refers to the separation of

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

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left.If there is no policy response,then eventually