Exam 24: Aggregate Demand and Aggregate Supply Analysis

Most economists agree that an automatic mechanism brings the economy back to potential GDP in the long run. In mid-2011, two years after the recession of 2007-2009 had ended, real GDP in the United States

If potential GDP is equal to $600 billion, what does the long-run aggregate supply curve look like?

Stagflation occurs when short-run aggregate supply decreases.

Figure 24-3 -Refer to Figure 24-3. Which of the points in the above graph are possible long-run equilibria?

Workers and firms both expect that prices will be 2.5% higher next year than they are this year. As a result,

Figure 24-3 -Refer to Figure 24-3. Suppose the economy is at point A. If the economy experiences a supply shock, where will the eventual short-run equilibrium be?

Potential GDP refers to the level of

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

The "interest rate effect" can be described as an increase in the price level that raises the interest rate and chokes off

All of the following are reasons why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services except

An increase in aggregate demand causes an increase in ________ only in the short run, but causes an increase in ________ in both the short run and the long run.

Figure 24-2 -Refer to Figure 24-2. Ceteris paribus, an increase in workers and firms adjusting to having previously underestimated the price level would be represented by a movement from

Figure 24-1 -Refer to Figure 24-1. Ceteris paribus, a decrease in personal income taxes would be represented by a movement from

Suppose the U.S. GDP growth rate is faster relative to other countries' GDP growth rates. This will

President Obama has discussed raising income taxes for individuals earning over $250,000 in income. Explain how these higher income taxes will affect the aggregate demand curve.

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

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Workers expect inflation to rise from 3% to 5% next year. As a result, this should

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

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.