Exam 14: Economic Growth, the Financial System and Business Cycles

Figure 14.1 -Suppose the economy is at point C in Figure 14.1.If government spending decreases in the economy,where will the eventual long-run equilibrium be?

Figure 14.3 -How does a decrease in government spending affect the aggregate expenditure line in Figure 14.3?

If potential GDP is equal to $1500 billion,what does the long-run aggregate supply curve look like?

What are sticky prices or wages,and how can contracts make them 'sticky'?

During an economic expansion or boom,it is possible for a short-run equilibrium to occur at a point that exceeds potential GDP.

Lower personal income taxes

The experience of recessions in Australia has shown that the unemployment rate

Figure 14.2 -In Figure 14.2,given the economy is at point A in year 1 and point B in year 2,what is the rate of increase in the price level (the inflation rate)between those two years?

An economic contraction begins with a(n)________ in spending by firms on capital goods and a(n)________ in spending on durable goods by households.

Explain how each of the following events would affect the long-run aggregate supply curve. a. A lower price level. b. A decrease in the labour force. c. A decrease in the quantity of capital goods. d. Technological change.

In the dynamic aggregate demand and aggregate supply model,what is the result of aggregate demand increasing faster than potential GDP?

Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?

The long-run adjustment to a supply shock results in

The lengths of the recession and expansion phases and which sectors of the economy are most affected will rarely be the same in any two business cycles.

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy.As a result,the

If the Australian dollar increases in value relative to other currencies,how does this affect the aggregate demand curve,ceteris paribus?

The beginning of an economic contraction coincides with a(n)________ while during an economic expansion ________

The long-run aggregate supply curve is

Explain how the aggregate demand and supply model can be made more dynamic.

Figure 14.4 -If the economy is currently at point N in Figure 14.4,which of the following could cause it to move to point K?