Chapter 12 aggregate demand and supply

The negative relationship between the aggregate price level and aggregate output demanded gives the aggregate demand curve:

A downward slope.

A recessionary gap is when:

Aggregate output is below potential output.

The aggregate supply curve shows the relationship between the aggregate price level and:

Aggregate output supplied.

The long-run aggregate supply curve is vertical because in the long run:

All prices are flexible.

Stagflation may result from:

An increased in the price of imported oil.

Suppose that the economy is in long-run macroeconomic equilibrium and aggregate demand increases. As the economy moves to short-run macroeconomic equilibrium, there is:

An inflationary gap with low unemployment.

Which of the following is a factor which can shift the aggregate demand curve?

Changes in expectation, in wealth, and in stock market indices.

The short run aggregate supply curve would shift to the left for all the following reasons:

Decrease-productivity Increase- nominal wages and price of commodities used for production.

A positive demand shock leads to:

Higher prices and higher employment.

The short run aggregate supply curve is positively sloped because:

Higher prices lead to higher profit and higher output.

The point where the long-run aggregate supply curve intercepts the horizontal axis:

Is the economy's potential output.

When the economy is on the short-run aggregate supply curve and to the left of the long-run aggregate supply curve, actual aggregate output will eventually equal potential output as:

Nominal wages fall and the short-run aggregate supply curve shifts to the right.

If there is an inflationary gap, which of the following accurately describes the adjustment to long-run equilibrium?

Nominal wages increase, and the short-run aggregate supply curve shifts left until the economy reaches long-run equilibrium.

According to the aggregate demand curve, when the aggregate price level _____, the quantity of ____.

Rises; aggregate output demanded falls.

An increase in the aggregate price level will increase:

The quantity of aggregate output supplied in the short run.

Which of the following is NOT one of the reasons that the aggregate demand curve slopes downward?

The substitution effect.

The long-run aggregate supply curve is:

Vertical