Exam 11: Macroeconomic Equilibrium: Aggregate Demand and Supply

The figure given below represents the equilibrium real GDP and price level in the aggregate demand and aggregate supply model. Figure 8.3 In Figure 8.3, which of the following shifts would result in stagflation (economic stagnation and inflation)?

Suppose a representative household holds a bond that is expected to pay a real return of $100 one year from now.However, over the next year, the inflation rate rises 15 percent more than was originally anticipated.As a consequence:

In the short run, a decrease in the general price level will cause business profits to rise and, hence, the total quantity of output to increase.

A change in foreign demand does not affect aggregate demand.

A lower domestic price level tends to:

Other things remaining unchanged, the flatter the aggregate supply curve:

The _____ is the change in the purchasing power of assets that causes spending to change when the price level changes.

The wealth effect and the interest rate effect are changes in the price level that:

A rightward shift in the aggregate supply curve is generally associated with a reduction in resource prices.

As the general price level in the country of Norweinshire rose, the average interest rate in the economy increased, thereby lowering aggregate expenditure.This relationship between price level, interest rate, and aggregate expenditure is referred to as the:

A simultaneous increase in inflation and decrease in economic growth in a country can be associated with:

_____ is the relation between total expenditures, or total spending, and the price level.

Which of the following does not account for a movement along a given AD curve?

The aggregate supply curve shows the negative relationship between general price level and real GDP.

The table given below reports the inflation rate in the U.S.and Canada for two years. Table 8.1 Refer to Table 8.1.Assume that the exchange rate is fixed at 1.4 CAD = $1 and that price changes for salmon are identical to the inflation rate in each country.If U.S.importers pay 10, 000 CAD for a trailer of Canadian salmon in year 1, what is the approximate price of that salmon in year 2, given that exchange rates do not change?

The figure given below represents the equilibrium real GDP and price level in the aggregate demand and aggregate supply model. Figure 8.3 Refer to Figure 8.3.Movement from point B to point D could be initiated by:

The economic reasons that underlie the shape of the aggregate supply curve are different from those that underlie the shape of the supply curve for a particular good.

If there is a sudden jump in the inflation rate, the purchasing power of financial assets will immediately fall.

The positive slope of the AS curve is a _____ phenomena, when the _____ are held constant.

The degree to which _____ declines during a recession or increases during an expansion depends on the amount by which the ADand/or AS curves shift.