Exam 12: Aggregate Demand and Aggregate Supply

Use the following to answer questions: Figure: AD-AS Model I -(Figure: AD-AS Model I) Refer to Figure: AD-AS Model I. If the economy is at point X, there is a(n) _____ gap with _____ unemployment.

Stagflation is usually caused by a _____ shock.

The _____ curve shows the positive relationship between the aggregate price level and the quantity of aggregate output supplied when wages and prices are not fully flexible.

An increase in the price of oil is likely to shift the short-run aggregate supply curve to the right.

Use the following to answer questions: Figure: AD-AS -(Figure: AD-AS) Refer to Figure: AD-AS. Suppose the economy is in an inflationary gap so that SRAS₁ intersects AD₂. The size of the gap is equal to:

Profit per unit equals:

Use the following to answer questions: Figure: AD-AS Model II -(Figure: AD-AS Model II) Refer to Figure: AD-AS Model II. Which occurrence will raise the price level?

A(n) _____ will shift the aggregate demand curve.

Between 1929 and 1933, real GDP increased by a large amount.

As a recessionary gap self-corrects, the equilibrium price level _____ and the equilibrium real output _____.

Use the following to answer questions: Figure: Shifts of the AD-AS Curves -(Figure: Shifts of the AD-AS Curves) Refer to Figure: Shifts of the AD-AS Curves. A short run decrease in investment spending is illustrated by panel:

The Great Depression was caused by _____ shocks, and the stagflation of the 1970s was caused by _____ shocks.

The economic slump in the 1970s looked different from the slump at the beginning of the Great Depression because it was:

If government increases income tax rates, the aggregate demand curve is likely to:

The interest rate effect of the price level is reflected in the:

The three consequences of the decline in demand during the Great Depression were _____ prices, _____ output, and a surge in unemployment.

The positive relationship between the aggregate price level and aggregate output supplied gives the short-run aggregate supply curve a(n) _____ slope.

Aggregate demand will decrease if:

If the SRAS curve intersects the aggregate demand curve to the right of LRAS, the result will be:

Use the following to answer questions: Figure: Inflationary and Recessionary Gaps -(Figure: Inflationary and Recessionary Gaps) Refer to Figure: Inflationary and Recessionary Gaps. If the economy is in short-run equilibrium at Y₁ in panel (b), a contractionary policy to bring the economy back to potential output at Y_P would attempt to shift the: