Exam 33: Aggregate Demand and Aggregate Supply

Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from

Refer to Financial Crisis. Suppose the economy reaches long-run equilibrium without the Fed responding. Now suppose the financial crisis ends and the ability of banks to lend returns to normal. In which case is the price level lower compared to its value prior to the crisis?

In which case can we be sure that real GDP and the price level rise in the short run?

We depart from the assumptions of classical economics when we focus on the relationship between

The aggregate-demand curve shows that a decrease in the price level

Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage. They may infer that the reward to working is

When the dollar depreciates, U.S.

When the dollar appreciates, U.S.

An economic expansion caused by a shift in aggregate demand causes prices to

Other things the same, when the price level falls, interest rates

Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift

Which of the following shifts short-run aggregate supply left?

If the dollar depreciates because of speculation or government policy, U.S.

From 2006 to 2008 there was a dramatic fall in the price of houses. If this fall made people feel less wealthy, then it would have shifted

Of the following theories, which is consistent with a vertical long-run aggregate supply curve?

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Technological progress shifts the long-run aggregate supply curve to the right.

Refer to Optimism. How is the new long-run equilibrium different from the original one?

The aggregate supply curve is

Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, they can offset the initial shift by shifting