Exam 26: Demand-Side Equilibrium: Unemployment or Inflation

For a given price level, a downward shift of the expenditures schedule corresponds to an

For a given price level, an upward shift of the expenditures schedule corresponds to an

Figure 9-3 -In Figure 9-3, saving at equilibrium GDP is.

When aggregate demand exceeds current production

In the simplified circular flow diagram, leakage can occur when consumers save some income.

If the expenditure schedule lies above the level of potential GDP, then there is a(n)

Figure 9-3 -In Figure 9-3, at $5,000 billion GDP, inventories will be

Leakages are offset by investment and government spending in the circular flow model.

In a market economy, the decisions about what to produce and how much of each good or service to produce are made by

Leakages from the circular flow include saving and imports.

In a simple economy (no government sector), the equilibrium level of GDP will be less than the full employment level of income if, at the full employment level of income, the

The recessionary gap is the

In the 2007-2009 period, the expenditure level in the United States intersected the 45-degree line below potential GDP, causing

Free markets coordinate economic activity in such a way as to eliminate the possibility of inflation or unemployment.

One of the primary functions of markets could be labeled

A rising price level should shift the expenditure schedule

If, at the full employment level of income, the amount that businesses plan to invest is greater than the amount that consumers plan to save, then

Economists are very good at explaining how individual markets work.Economists are less successful at explaining

When equilibrium GDP falls below potential GDP, an inflationary gap exists.

The amount by which equilibrium real GDP exceeds full-employment GDP is known as