Chapter 20
Suppose workers notice a fall in their nominal wage but are slow to notice that the price of thing they consume have fallen by the same percentage. They may infer that the reward to working is
temperature low and so supply is a smaller quantity of labor
When the Fed buys bonds the supply of money
increases and so aggregate demand shifts left.
According to classical macroeconomic theory changes in the money supply change real GDP but not the price level.
False
Fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply.
False
Because the price level does not affect the long run determinates of real GDP, the long run aggregate supply is vertical.
True
Most macroeconomic variables that measure some type of income, spending, or production fluctuate closely together
True
The AD and AS model helps us understand both short run economic fluctuations and how the economy moves from short run to long run.
True
The recessions associated with the business cycle come at regular intervals.
True
When output rises, unemployment falls.
True
Imagine that in the current year the economy is in the long run equilibrium then the Federal government reduces its purchases of goods by 50%. Which curve shifts in which direction?
aggregate demand shifts left
An increase in household savings causes consumption to
fall and aggregate demand to decrease
Other things the same, if technology increases, then in the long run
output is higher and prices are lower
How is the new long-run equilibrium different from the original one?
the price level is the same and real GDP is lower
The wealth effect, interest rate effect, and exchange rate effect are all explanations for
the slope of the aggregate demand curve