HW Econ Chapter 12 HW

In general, a change in the price level, all other things unchanged, causes:

a movement along the aggregate demand curve.

A recessionary gap occurs if

actual real GDP is less than potential output

In an inflationary gap:

aggregate output is above potential output.

(Figure: Shifts of the AD-AS Curves) Refer to Figure: Shifts of the AD-AS Curves. A decrease in wages in the short run is illustrated by panel:

c. SRAS1 to SRAS2. an increase in nominal wages short run will reduce production costs, shifting SRAS to the right

The aggregate demand curve is negatively sloped in part because of the impact of interest rates on:

consumption and investment spending.

Changes in aggregate demand can be caused by changes in:

government spending.

In the short run, a positive demand shock _____ aggregate output and _____ the aggregate price level.

increases; increases

An inflationary gap caused by a demand shock can be addressed by _____ to _____.

lowering government spending; lower the aggregate price level

. (Figure: AD-AS Model I) Refer to Figure: AD-AS Model I. If the economy is at point X, there is a(n) _____ gap with _____ unemployment.

recessionary; high

When the aggregate price level rises:

there will be a movement along the SRAS curve