Exam 7: Aggregate Demand and Aggregate Supply

Table 7-1 Table 7-1 shows the aggregate demand and short-run aggregate supply curves for an economy. The potential level of output is $7.6 trillion. -Refer to Table 7-1. If policymakers choose to close the gap by using stabilization policy, they should use

Which of the following is false about potential output?

Which of the following best explains why cities want business conventions, political conventions, and major sports events to be held in their town?

In the short run, the equilibrium price level and the equilibrium level of total output are determined by the intersection of

The aggregate demand curve shifts when the quantity of real GDP demanded at every price level changes.

Suppose the price of an important natural resource such as oil falls. What will be the effect on the short-run aggregate supply curve?

The intersection of the economy's aggregate demand and long-run aggregate supply curves I. determines its equilibrium real GDP in both the long run and the short run. II. determines its equilibrium price level in both the long run and the short run. III. occurs at the economy's potential output.

In the short run, all prices are flexible.

Suppose the economy is initially in long-run equilibrium. Which of the following events leads to a decrease in the price level and an increase in real GDP in the short run?

A change in the aggregate quantities of goods and services demanded at each price level is called a

Figure 7-7 -Refer to Figure 7-7. Suppose the economy is initially in short-run equilibrium at K. Policy makers could either pursue a stabilization policy or allow the economy to adjust on its own. What is the difference between the two policy choices, if any?

What do economists mean by the term "sticky wage"?

The long-run aggregate supply curve

An economic analysis of the short run is useful to explain

All of the following are held constant along a short-run aggregate supply curve except

Which of the following will not cause a change in aggregate demand?

Long-run aggregate supply corresponds to the level of potential output.

All other things unchanged, an increase in personal income tax rates will

All other things unchanged, an increase in exports relative to imports will

Which of the following is a source of wage stickiness? I. fixed wage contracts II. minimum wage laws III. workers and firms want to avoid complexity of negotiating contracts frequently