Exam 24: Aggregate Demand and Aggregate Supply Analysis

When the price level rises from 110 to 115,the aggregate level of GDP supplied rises from $80 billion to $120 billion.This ________ relationship represents the ________ relationship between the quantity of real GDP firms are willing to supply and the price level.

A decrease in disposable income will shift the aggregate demand curve to the left.

Stagflation occurs when

Full-employment GDP is also known as

Explain how the economy moves back to full employment from recession.Be sure to detail what happens to short-run aggregate supply,unemployment,equilibrium GDP and the price level.

Which of the following best describes the "interest rate effect"?

The impact of Hurricane Katrina on consumers in the economy was to make them very pessimistic about their future incomes.How does this increased pessimism affect the aggregate demand curve?

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

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP does not rise?

Using aggregate demand and aggregate supply,explain what happens in the short run if the Federal Reserve raises interest rates in the economy.Be sure to detail what happens to aggregate demand,the price level,the level of GDP,and unemployment.Assume that the economy is at full employment before the interest rate increase.

Figure 24-2 -Refer to Figure 24-2.Ceteris paribus,a decrease in the capital stock would be represented by a movement from

The long-run aggregate supply curve is vertical.

The long-run adjustment to a negative supply shock results in

Figure 24-2 -Refer to Figure 24-2.Ceteris paribus,a decrease in the labor force would be represented by a movement from

At the beginning of the recession of 2007-2009,real GDP in the United States was ________ potential GDP,and in June 2009,real GDP was ________ potential GDP.

Figure 24-4 -Refer to Figure 24-4.In the figure above,LRAS1 and SRAS1 denote LRAS and SRAS in year 1,while LRAS2 and SRAS2 denote LRAS and SRAS in year 2.Given the economy is at point A in year 1,what is the growth rate in potential GDP in year 2?

Inflation is generally the result of total spending growing faster than total production.

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

An increase in the price level will

Briefly describe monetarism and the monetary growth rule.