Exam 15: Aggregate Demand and Aggregate Supply

If the central bank increased the money supply in response to a decrease in short-run aggregate supply, unemployment would return towards its natural rate, but prices would rise even more.

Keynes explained that recessions and depressions occur because of

As the price level rises,

Other things the same, a decrease in the price level motivates people to hold

Figure 33-8. -Refer to Figure 33-8. Suppose the economy starts at Z. Stagflation would be consistent with the move to

An increase in the expected price level shifts the short-run aggregate supply curve to the right.

Suppose the economy is in long-run equilibrium. If there is an increase in the supply of labor as well as an increase in the money supply, then we would expect that in the short-run,

Keynes thought that the behavior of the economy in the short run was influenced by what he called "animal spirits." By this he meant that business people sometimes felt good about the economy, and carried out lots of investment, and at other times felt bad about the economy, and so cut back on their investment spending. Explain how such fluctuations in investment would lead to fluctuations in real GDP and prices.

The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?

Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this

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

Which of the following is correct?

The aggregate demand and aggregate supply graph has the

A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run: 1. increase immigration from abroad 2. make trade more open between the US and other countries.

Suppose the economy is in long-run equilibrium. If there is a sharp decline in government purchases combined with a significant increase in immigration of skilled workers, then in the short run,

The price level rises in the short run if

During a recession the economy experiences

Other things the same, an increase in the price level causes the interest rate to

The recessions associated with the business cycle come at regular intervals.

Which of the following would raise the price level in both the short and long run?