Exam 13: Spending and Output in the Short Run

The AS curve slopes upward because:

When actual output equals potential output, there is ______ output gap and the inflation rate will ____.

The aggregate supply curve shows the relationship between the amount of output firms want to produce and the ______.

A demand shock is a change in planned spending that is:

High expected inflation leads to ____ increases in wages and costs and to ____ actual inflation.

Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ______ gap in the short-run and ____ inflation and ____ output in the long-run

When the inflation rate increases, PAE ______, which in turn causes Y to ______ because of ______.

An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ______ in the inflation rate, leading to a(n) ______ in output.

A large increase in oil prices is an example of:

The AD curve ______ because, holding all else constant, an increase in ______ causes C, I^P and NX to fall.

Shifts in ______ can push the economy out of long-run equilibrium.

When actual output equals potential output there is ____ output gap and the rate of inflation will tend to ____.

Graphically, long-run equilibrium occurs at the intersection of the aggregate demand curve and:

The fact that output gaps will not last indefinitely, but will be closed by rising or falling prices is the economy's:

Suppose the economy is currently operating at potential output; an expansionary gap may be caused by each of the following EXCEPT:

If the interest rate in the U.S. rises, U.S. financial assets become ______ attractive to buyers and the ______ U.S. dollars will rise.

As the number or quality of available resources improves, ______ shifts to the _____.

When the interest rate in the U.S. falls, U.S. financial assets:

For a given inflation rate, if bright prospects for the future of the economy cause businesses to increase their spending on new capital, then the ______ shifts _____.

Starting from potential output, if firms become more optimistic about the future and decide to increase their investment in new capital, then this will generate a(n) _____ gap and inflation will _____.