Exam 23: Aggregate Demand and Supply Analysis

Everything else held constant, an increase in planned investment expenditure ________ aggregate ________.

Everything else held constant, a decrease in planned investment expenditure ________ aggregate ________.

Economists believe the natural rate of unemployment is approximately ________ percent.

Enumerate the four implications for aggregate output from algebraic expression of the aggregate demand curve.

Everything else held constant, if workers expect an increase in the price level, ________ aggregate supply ________.

A decrease in the availability of raw materials that increases the price level is called a ________ shock.

What is the unemployment gap?

The price of a barrel of oil doubled between 2007 and the middle of 2008. To make matters worse, a financial crisis hit the U.S. economy starting in August of 2007. Which of the following is true of the United Kingdom's experience?

Suppose the economy is producing below the natural rate of output and the government is suffering from large budget deficits. To deal with the deficit problem, suppose the government takes a policy action to reduce the size of the deficits. This policy action will cause ________ in the unemployment rate in the short run and ________ in the aggregate price level in the short run, everything else held constant.

The short-run aggregate supply curve is upward sloping because in the short run, costs of many factors that go into producing goods and services are ________, meaning that the price for a unit of output will ________ relative to input prices and the profit per unit will rise.

This theory views shocks to tastes (workers' willingness to work, for example)and technology (productivity)as the major driving forces behind short-run fluctuations in the business cycle because these shocks lead to substantial short-run fluctuations in the natural rate of output.

The aggregate demand curve has the usual downward slope, since a higher price level reduces the real money supply, ________ interest rates, and ________ the equilibrium level of aggregate output, everything else held constant.

The expectations-augmented Phillips curve concludes that ________.

Suppose the economy is producing at the natural rate of output and the government passes legislation that severely restricts a company's ability to reduce production costs via outsourcing. Everything else held constant, this policy action will cause ________ in the unemployment rate in the short run and ________ in the aggregate price level in the short run.

Suppose the economy is producing at the natural rate of output. An open market purchase of bonds by the Bank of Canada will cause ________ in real GDP in the long run and ________ in the inflation rate in the long run, everything else held constant.

Everything else held constant, aggregate demand increases when ________.

A theory of aggregate economic fluctuations called real business cycle theory holds that ________.

The aggregate supply curve is ________.

By analyzing aggregate demand through its component parts, we can conclude that, everything else held constant, a decline in the inflation rate causes ________.

Everything else held constant, when financial frictions increase, the real cost of borrowing ________ so that planned investment spending ________ at any given inflation rate.