Exam 13: The Aggregate Demandaggregate Supply Model

All else being equal, as the population ages and many people leave the labor force:

If short-run equilibrium output is above full employment output, then in the long run input prices will:

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation. Having taken an economics class, due to this expected change in prices, you predict that spending today will _________ and aggregate demand today will _________.

An increase in long-run aggregate supply can be expected to _________ the price level and _________ the natural rate of unemployment.

Menu costs help to explain:

__________ would cause a rightward shift of the aggregate demand curve.

Consider the wealth effect, interest rate effect, and international trade effect. Of these, the __________ effect is the most significant and the __________ effect is the least significant.

Which of the following would cause an upward movement along the aggregate demand curve?

The wealth effect, interest rate effect, and international trade effect all explain why the:

According to the interest rate effect, an increase in the price level leads to __________ in the interest rate, and therefore to __________ in the quantity of aggregate demand.

How does the wealth effect explain the slope of the aggregate demand curve?

What is the difference between a movement along the aggregate demand curve and a shift of the aggregate demand curve? Explain in terms of what causes a movement and what causes a shift.

When saving declines, the quantity of investment will __________, and therefore aggregate demand will __________.

If large emerging economies continue to grow rapidly, we can expect U.S. aggregate:

Suppose a hurricane destroys 20% of the capital stock in a country. In the long run, output will _________ and the price level will _________.

Which of the following is true?

A severe drought hits a country and reduces farm output by 50%. This will impact:

Explain and illustrate how the short-run and long-run equilibrium levels of output and the price level are affected by successful efforts by the government to reduce the budget deficit.

When firms invest less because people are saving less, it is called the:

Refer to the following figure to answer the next questions. -Based on the figure, if the economy is at point F, then in the long run, we can expect: