Exam 24: Aggregate Demand and Aggregate Supply Analysis

Article Summary While sticking with a new strategy of letting market forces determine prices while producing more to keep customers,OPEC has stated that oil prices will not be increasing for the remainder of 2015 due to increased supplies and falling demand in China.OPEC members had initially thought that crude oil prices would rise to $70 - $80 a barrel by the end of 2015,but have revised their forecast down to a price of $40 - $50 a barrel.Despite the drop in price,OPEC has decided to stick with its new production strategy so new supplies from non-OPEC countries would not cut into OPEC's share of the market,even though the low prices are not bringing in enough revenue for the member countries to balance their budgets.In a September 2015 report,the U.S.Energy Information Administration reported that global oil output would exceed projected consumption by more than 2 million barrels a day in 2015. -Refer to the Article Summary.The unexpected increase in the supply of oil mentioned in the article summary resulted in a decrease in the price of oil.When the price of oil falls unexpectedly due to a supply shock,the equilibrium price level ________ and the unemployment rate ________ in the short run.

In the dynamic aggregate demand and aggregate supply model,what is the result of aggregate demand increasing slower than potential real GDP?

How do lower taxes affect aggregate demand?

Changes in the price level

Using an aggregate demand graph,illustrate the impact of an increase in the growth rate of U.S.GDP relative to the growth rate of foreign GDP.

Ceteris paribus,in the long run,a negative supply shock causes

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

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

Figure 24-1 -Refer to Figure 24-1.Ceteris paribus,an increase in government spending would be represented by a movement from

After an unexpected ________ in the price of oil,the long-run adjustment decreases the price level and ________ the unemployment rate as they return to their original levels.

Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico.This subsequently drove up natural gas,gasoline,and heating oil prices.As a result,this should

Figure 24-4 -Refer to Figure 24-4.Given the economy is at point A in year 1,what will happen to the price level in year 2?

An increase in imports increases aggregate demand.

If the short-run aggregate supply increases by less than the long-run aggregate supply,then,at the short-run equilibrium

Last week,six Swedish kronor could purchase one U.S.dollar.This week,it takes eight Swedish kronor to purchase one U.S.dollar.This change in the value of the dollar will ________ exports from the United States to Sweden and ________ U.S.aggregate demand.

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?

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

Which of the following would cause the short-run aggregate supply curve to shift to the left?

The new Keynesians emphasize the importance of

Figure 24-3 -Refer to Figure 24-3.Suppose the economy is at point C.If government spending decreases in the economy,where will the eventual long-run equilibrium be?