Exam 12: Macroeconomic Instability: Aggregate Demand and Aggregate Supply

According to the ______ effect, a lower price level decreases interest rates, which results in additional spending on investment goods and so increases the aggregate quantity of goods and services demanded.

According to Keynesian economics, a nation's level of economic activity primarily depends on the

The aggregate supply curve would shift leftward if there is a decrease in resource prices, an increase in the availability of resources, or an increase in labor productivity.

Rising prices in the economy tend to

Stagflation would be the result of a(n)

With stock prices rising, Americans who hold stocks suddenly become less concerned about saving for retirement and increase their current consumption. As a result, the

An increase in aggregate demand will increase the economy's real output and price level if the aggregate supply curve is

Due to expectations of a future recession, companies do not think that they can sell all of their output and therefore purchase less equipment and machinery. As an immediate result, the

According to John Maynard Keynes, a nation's level of economic activity depends primarily on the amount of international trade it generates.

An increase in the economy's price level will reduce the size of the spending multiplier.

A decrease in the aggregate supply curve generally results in a(n)

In the aggregate supply-aggregate demand model, an increase in the economy's price level reduces the size of the multiplier.

Along the horizontal portion of the aggregate supply curve, the economy is assumed to be at full employment.

For the full multiplier effect to occur, there must be

To combat demand-pull inflation, policy makers could reduce the growth rate of the money supply or government spending.

To combat demand-pull inflation, government might reduce taxes for households in order to encourage additional consumption spending.

Figure 12.1 Aggregate Supply and Aggregate Demand -Refer to Figure 12.1. The shift from AS₀ to AS₁ results in

An upward movement along the aggregate demand curve is caused by a(n)