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

Figure 7-4 -According to the classical economists when output Y rises above the natural rate of employment, wages and prices would

Even in the event of a horizontal LM curve, classicists argued that government intervention would not be required if the IS curve shifts in response to changes in

Which of the following groups was not affected by the redistribution effect

A fall in the price level causes

A doubling of the nominal money supply would create a new AD curve at double the vertical position of the original AD curve because

From an initial AD/SAS/LAS intersection, a fiscal stimulus with no initial change in the nominal wage causes output to ________ while the price level ________.

What was the behavior of nominal wages in the 1930s?

Assuming constant wages implies that

A rise in the price level causes

Classical economists believed that

Classical macroeconomists believed that a market-based economy has ________ self-correcting forces and thus ________ business cycles.

Most classical macroeconomists considered unemployment

A single aggregate demand curve records how IS-LM equilibrium output changes as ________ changes.

The slope of the SAS curve is important because it

Figure 7-5 -In the figure above, we begin with the expansion of aggregate demand in the IS-LM model, with a result transferred into this model as a movement from points A to

The aggregate demand curve may be derived from the IS-LM analysis by shifting

If the labor supply curve shifts to the left, the equilibrium real wage ________ and the equilibrium level of employment ________.

When the real wage falls, as a result of a rise in the price level

Regarding the theoretical operation of the Pigou, expectations, and redistribution effects, does the U.S. experience between 1929 and 1933 provide any evidence?

Keynes said that even should monetary impotence not occur, full self-correction could be short-circuited by