Exam 13: The Aggregate Demandaggregate Supply Model

A decrease in aggregate demand is harmful in the short run because __________, but beneficial in the long run because __________.

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February. Starting in February, these students are likely to __________ spending and __________ saving.

Refer to the following figure to answer the next questions. -Based on the figure, a negative supply shock is best represented by a movement from:

When inflation pushes up prices in the economy, input prices are _________ and revenues _________ in the short run.

Input prices are _________ in the short run and _________ in the long run.

Suppose a country's population is growing due to immigration. In the long run, output will _________ due to _________.

Explain and illustrate how the short-run and long-run equilibrium levels of output and the price level are affected by legislation that increases the employer's cost of providing health care to workers.

Shifts in the long-run aggregate supply curve are caused by:

If the current short-run equilibrium level of output is greater than full employment output, we can then expect that in the long run:

In the long run, the output of an economy:

All else being equal, an increase in _________ would shift the long-run aggregate supply curve to the left.

Suppose new drilling techniques increase the world oil supply. In the long run, output will _________ and the price level will _________.

Aggregate demand is about _________ and aggregate supply is about _________.

A rightward shift of the long-run aggregate supply curve means there has been:

You read in the paper that there has been a significant increase in the consumer confidence index. Having taken an economics class, you predict that spending in the economy will __________ and aggregate demand will __________.

When a change in the price level leads to a change in the interest rate and thus a change in the quantity of aggregate demand, it is called the:

Explain how a change in real wealth can sometimes cause a movement along the aggregate demand curve and how sometimes it can cause a shift of the aggregate demand curve.

Refer to the following figure to answer the next questions. -Based on the figure, starting at point A, if there is an increase in government spending, then in the short run we would move to point __________ and in the long run to point __________.

An increase in short-run aggregate supply could be the result of:

Shifts in the aggregate demand curve are caused by: