Exam 13: Aggregate Demand and Aggregate Supply Analysis

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 a decline in wealth.

Lower personal income taxes

Figure 13-3 -Refer to Figure 13-3.Which of the points in the above graph are possible short-run equilibria but not long-run equilibria? Assume that Y₁ represents potential GDP.

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

New classical macroeconomic theory emphasizes the role of "sticky" prices in the economy.

Most recessions in the United States since World War II have begun with

In the dynamic aggregated demand and aggregate supply model,if AD shifts faster than AS,

What are sticky prices,and how can contracts make them "sticky"?

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,a decrease in interest rates would be represented by a movement from

An increase in the price level shifts the aggregate demand curve to the left.

Which of the following is considered a negative supply shock?

Figure 13-4 -Refer to Figure 13-4.Given the economy is at point A in year 1,what is the inflation rate between year 1 and year 2?

President Bush lowered income taxes for individuals in 2001.Explain how lower income taxes affect the aggregate demand curve.

Stagflation occurs when

Figure 13-3 -Refer to Figure 13-3.Suppose the economy is at point C.If government spending decreases in the economy,where will the eventual long-run equilibrium be?

According to the "wealth effect," when the ________ falls,the ________ rises.

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

Figure 13-3 -Refer to Figure 13-3.Which of the points in the above graph are possible short-run equilibria?

Which of the following models relies on emphasizing the importance of sticky wages and prices?

Hurricane Katrina resulted in a decline in oil production infrastructure along the gulf coast.As a result there was an unexpected decline in oil and natural gas supplies in 2005.Suppose that this caused an increase in the price level and a decline in real GDP in 2006.Also assume that potential real GDP continued to grow due to other factors.You can assume the aggregate demand curve did not change.Show the macroeconomic equilibrium for 2005 and 2006 using the dynamic aggregate supply and aggregate demand model.