Exam 15: Aggregate Demand and Aggregate Supply

Which of the following statements concerning the aggregate demand and aggregate supply model is correct?

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

Figure 33-4 -Refer to Figure 33-4. The economy would be moving to long-run equilibrium if it started at

An increase in the price level and a reduction in output would result from

Financial Crisis Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time. -Refer to Financial Crisis. How is the new long-run equilibrium different from the original one?

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U. S. Which pair of GDP growth rates and unemployment rates is realistic?

Optimism Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time. -Refer to Optimism. How is the new long-run equilibrium different from the original one?

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

Economists mostly agree that the Great Depression was principally caused by factors that shifted short-run aggregate supply left.

Aggregate demand shifts right if at a given price level

Other things the same, as the price level rises,

Most economists believe that classical macroeconomic theory is a good description of the economy

Other things the same, as the price level falls, the exchange rate rises. A rise in the exchange rate leads to a decrease in net exports.

The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level.

In order to understand how the economy works in the short run, we need to

In which case can we be sure that real GDP and the price level rise in the short run?

The model of aggregate demand and aggregate supply explains the relationship between

Which of the following shifts aggregate demand to the left?

The initial impact of an increase in an investment tax credit is to shift

The exchange-rate effect is the idea that a higher U.S. price level causes the value of the dollar to increase in foreign exchange markets, and this effect contributes to the downward slope of the aggregate-demand curve.