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Exam 13: Aggregate Demand and Aggregate Supply Analysis

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Question 81

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Which of the following is considered a negative supply shock?

A) increasing immigration in the economy causes the labor supply to rise
B) an improvement in technology
C) an increase in unemployment
D) an unexpected decrease in the refining capacity for oil

E) None of the above
F) A) and C)

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Question 82

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Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,a decrease in interest rates would be represented by a movement from

A) AD₁ to AD₂.
B) AD₂ to AD₁.
C) point A to point B.
D) point B to point A.

E) B) and C)
F) A) and C)

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Question 83

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President Bush lowered income taxes for individuals in 2001.Explain how lower income taxes affect the aggregate demand curve.

What are sticky prices,and how can contracts make them "sticky"?

Stagflation occurs when

In the dynamic aggregated demand and aggregate supply model,if AD shifts faster than AS,

New classical macroeconomic theory emphasizes the role of "sticky" prices in the economy.

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

Most recessions in the United States since World War II have begun with

Which of the following models relies on emphasizing the importance of sticky wages and prices?

Suppose there has been an increase in investment.As a result,real GDP will ________ in the short run,and ________ in the long run.

Figure 13-4 -Refer to Figure 13-4.Given the economy is at point A in year 1,what is the inflation rate between year 1 and year 2?

Hurricane Katrina resulted in a decline in oil production infrastructure along the gulf coast.As a result there was an unexpected decline in oil and natural gas supplies in 2005.Suppose that this caused an increase in the price level and a decline in real GDP in 2006.Also assume that potential real GDP continued to grow due to other factors.You can assume the aggregate demand curve did not change.Show the macroeconomic equilibrium for 2005 and 2006 using the dynamic aggregate supply and aggregate demand model.

Figure 13-3 -Refer to Figure 13-3.Which of the points in the above graph are possible short-run equilibria but not long-run equilibria? Assume that Y₁ represents potential GDP.

Starting from long-run equilibrium,use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth.

Figure 13-3 -Refer to Figure 13-3.Which of the points in the above graph are possible short-run equilibria?

According to the "wealth effect," when the ________ falls,the ________ rises.

An increase in the price level shifts the aggregate demand curve to the left.

Lower personal income taxes

Figure 13-3 -Refer to Figure 13-3.Suppose the economy is at point C.If government spending decreases in the economy,where will the eventual long-run equilibrium be?