Econ chapter 13

a rapid increase in the price of oil will tend to

shifts short- run aggregate supply to the left

Ceteris paribus, a decrease in the expected price of an important natural resource would be represented by a movement from

supply curve will shift to the right

Workers and firms both expect that prices will be 2.5% higher next year than they are this year. As a result

the short-run aggregate supply curve will shift to the left as wages increase.

_______ of unemployment during ________ make it easier for workers to ________ wages.

Low levels; an expansion; negotiate higher

Interest rates in the economy have risen. How will this affect aggregate demand and equilibrium in the short run?

Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall.

The impact of Hurricane Katrina on consumers in the economy was to make them very pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve?

his will shift the aggregate demand curve to the left.

Suppose there has been an increase in investment. As a result, real GDP will ________ in the short run, and ________ in the long run.

increase; decrease to its initial value

An increase in investment causes the price level to ________ in the short run and ________ in the long run.

increase; increase further

According to the real business cycle model,

increases in aggregate demand raise GDP.

Which of the following would not be considered a positive addition to household wealth?

a credit card balance

Which of the following is considered a negative supply shock?

an unexpected increase in the price of natural gas

The level of real GDP in the long run is

potential GDP

The aggregate demand curve shows the relationship between the ________ and ________.

price level; quantity of real GDP demanded

Workers expect inflation to rise from 3% to 5% next year. As a result, this should

shift the short-run aggregate supply curve to the left

Which of the following is not an assumption made by the dynamic model of aggregate demand and aggregate supply?

Aggregate demand and potential real GDP decrease continuously.

Which of the following is one explanation as to why the aggregate demand curve slopes downward?

Decreases in the price level raise real wealth and increase consumption spending.

what is potential GDP?

It is the level of real GDP in the long run.