Exam 20: Aggregate Demand and Aggregate Supply: Part A

Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve.

A recession with inflation is know by what term?

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Figure 33-17. -Refer to Figure 33-17.Suppose the economy starts at P₃ and Y₂.Explain how government purchases would need to change to move the economy to P₂ and Y₁.What about taxes?

Suppose a country experiences an increase in its capital stock.Which curve(s)in the aggregate demand and aggregate supply model would be affected,and which way would it (they)shift?

List the three alternative explanations for the upward slope of the short run aggregate supply curve.

A decrease in what variable will raise the quantity of goods and services supplied,and shift only the short run aggregate supply curve to the right?

Who said about classical economic theory: "the long run is a misleading guide to current affairs.In the long run we are all dead"?

Suppose people anticipate an increase in the expected price level.Which curve(s)in the aggregate demand and aggregate supply model would be affected,and which way would it (they)shift?

Explain how an increase in the price level changes interest rates.How does this change in interest rates lead to changes in investment and net exports?

Identify the variables that could cause shifts in both the short-run and long-run aggregate-supply curves.

Suppose the government raises taxes.Which curves in the aggregate demand and aggregate supply model would be affected,and which way would they shift?

Identify the direction of the change during a recession in each of the following: consumption expenditures,investment expenditures,and unemployment.

Suppose a country experiences a change in weather patterns that makes farming more difficult.Which curve(s)in the aggregate demand and aggregate supply model would be affected,and which way would it (they)shift?

Figure 33-15. -Refer to Figure 33-15.Suppose the economy begins at point A.Decreases in what four variables could result in a movement to point D?

What curve shows the quantity of goods and services that households,firms,the government,and customers abroad want to buy at each price level?

Suppose a recession overseas reduces a country's exports.Which curve(s)in the aggregate demand and aggregate supply model would be affected,and which way would it (they)shift?

Figure 33-14. -Refer to Figure 33-14.Identify which long run aggregate-supply curve(s)would be consistent with long-run equilibrium.

Suppose a country offers a new investment tax credit.Which curve(s)in the aggregate demand and aggregate supply model would be affected,and which way would it (they)shift?

Make a list of things that would shift the aggregate demand curve to the right.