Exam 12: Macroeconomic Instability: Aggregate Demand and Aggregate Supply

According to the interest-rate effect, a higher price level decreases interest rates, which, in turn, causes investment spending on equipment and factories to decrease.

The MPS and MPC always add up to 1 because all consumer income that is not spent on goods and services must be saved.

The economic event that discredited the conclusions of the classical economists was the

In the upward-sloping region of the aggregate supply curve, higher price levels provide an incentive for firms to produce additional real output.

According to Say's Law,

The low inflation of the late 1990s, coupled with strong growth in output and strong financial markets, can best be explained by

If the MPC = 0.82, then the MPS must be 0.18.

Figure 12.1 Aggregate Supply and Aggregate Demand -Refer to Figure 12.1. The type of inflation depicted is called

According to Keynes, which policy would be appropriate for an economy that is experiencing a wave of pessimism on the part of consumers and businesses?

Suppose that a recession in Canada slows growth there, thus decreasing the demand for U.S. computers and automobiles. Therefore, the aggregate demand curve will shift leftward for the United States.

The formula for the multiplier is 1 / MPC or 1 / (1 - MPS).

Figure 12.1 Aggregate Supply and Aggregate Demand -Refer to Figure 12.1. The shape of the aggregate supply curve AS₀ shows that the economy is initially operating in a range at which the economy is

According to the multiplier effect, changes in aggregate supply are magnified into larger changes in output and income.

According to the classical economists, which of the following is impossible?

During the late 1970's, what economic situation was the most pressing in the U.S.?

Say's Law indicates that when something is produced, this process will create the income necessary to purchase that production.

Demand-pull inflation would take place if the level of total spending rises in the economy and the aggregate supply curve is horizontal.

Figure 12.1 Aggregate Supply and Aggregate Demand -Refer to Figure 12.1. The shift from AS₀ to AS₁ could have been caused by

Cost-push inflation would be the result of a(n)

Increased productivity growth puts a damper on inflation.