Exam 7: Aggregate Demand, Aggregate Supply, and the Self-Correcting Economy

Falling prices tend to redistribute income from ________, which plausibly ________ the Pigou effect.

The first two years of the Great Depression were dominated by

The 1933 real GDP per person had fallen to ________ of the 1929 value in the United States, to ________ in Germany, and to ________ in the U.K. and Japan.

When AD curve is curved line, this indicates:

Suppose we have an initial IS-LM equilibrium at a certain price level. A rise in the price level puts ________ pressure on the interest rate as the money market re-equilibrates, which in turn causes commodity market equilibrium to occur at an output level ________ the initial one.

The ________ effect is a destabilizing effect associated with a falling price level.

If there are perfectly flexible prices and the economy is operating at Y(N), then an increase in government expenditures

Suppose an economy falls into a recession. The central bank responds by rapidly increasing the money supply. Best for the central bank is the case where

The redistribution effect refers to the situation in which

The term monetary impotence refers to the

An increase in the nominal money supply will shift

If labor unions negotiate an increase in the nominal wage rate the SAS curve will shift

If firms are willing to produce and sell more output when prices rise, this implies

Figure 7-5 -In the figure above, from point A suppose the shift in aggregate demand is due to a 6 percent rise in the money supply. Suppose that at the same time the nominal wage also rises by 6 percent. We would move from points A to

In the figure above, from initial point E, suppose AD1 shifts to AD0. Under the assumptions of classical macroeconomics, we would

Suppose we are at the natural real GDP when the aggregate demand curve suddenly shifts downward. In Classical macroeconomics, the price level would ________, and real output would ________.

Keynes' argued that monetary policy would be impotent during the Great Depression because a

At every point to the right of the AD curve there is

In the figure above, at point C, the real wage is ________ its equilibrium value, leading to changes in the nominal wage that ________.

Figure 7-1 -Employing Figure above, assume that the initial equilibrium Y was 2500 at E0 prior to a change in the nominal money supply. The movement from E0 to represents