Exam 23: Aggregate Demand and Supply Analysis

Figure 24-1 -In Figure 24.1 above, at point 2, the shift of the aggregate supply curve from AS₁ to AS₂ is a result of ________ wages that ________ production cost.

According to aggregate demand and supply analysis, the rising oil prices coupled with the subprime financial crisis in 2007-2008 caused the unemployment rate to ________ and the level of real aggregate output to ________.

Assuming the economy is starting at the natural rate of output and everything else held constant, the effect of ________ in aggregate ________ is a rise in both the inflation rate and output in the short-run, but in the long-run the only effect is a rise in the inflation rate.

One way to derive aggregate demand is by looking at its four component parts, which are ________.

Suppose the economy is producing at the natural rate of output. An increase in consumer and business confidence will cause ________ in real GDP in the long run and ________ in the inflation rate in the long run, everything else held constant.

Explain and demonstrate graphically the effects of a negative supply shock. What happens to the economy if no action is taken? What happens if monetary and or fiscal policy is used to reduce unemployment?

Everything else held constant, a decrease in net exports ________ aggregate ________.

Everything else held constant, an increase in net taxes ________ aggregate ________.

Everything else held constant, when actual output exceeds the natural rate of output ________ aggregate supply ________.

The empirical Phillips curve describes a ________ correlation between ________ and inflation.

Suppose the economy is producing at the natural rate of output. An increase in consumer and business confidence will cause ________ in real GDP in the short run and ________ in the inflation rate in the short run, everything else held constant.

Everything else held constant, a decrease in the cost of production ________ aggregate ________.

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

In the long run, following a combination of a negative demand shock and a temporary negative supply shock, ________.

The run-up of oil prices in 2007 led to ________.

Suppose the economy is producing at the natural rate of output. A decrease in consumer and business confidence will cause ________ in real GDP in the short run and ________ in the inflation rate in the short run, everything else held constant.

Suppose the economy is producing at the natural rate of output. Assuming a fixed natural rate of output and everything else held constant, the development of a new, more productive technology will cause ________ in the unemployment rate in the short run and ________ in the inflation rate in the short run.

Autonomous monetary policy ________ real interest rates and ________ aggregate output temporarily.

The Friedman-Phelps critique of the Phillips curve focused on the observation that ________.

Suppose the Canadian economy is producing at the natural rate of output. An appreciation of the Canadian dollar will cause ________ in real GDP in the short run and ________ in the aggregate price level in the short run, everything else held constant. (Assume the appreciation causes no effects in the supply side of the economy.)