Econ. Exam III

Factors that shift the aggregate demand curve pg. 592

1. Change in consumer spending 2. Change in investment spending 3. Change in government spending 4. Change in net export spending

Changes in the Aggregate Supply pg. 598

1. Change in input prices 2. Change in productivity 3. Change in legal-institutional environment

The equilibrium price level and level of real output occur where:

the aggregate demand and supply curves intersect.

Which of the following would most likely shift the aggregate demand curve to the right?

An increase in stock prices that increases consumer wealth.

Short run

Input prices are fixed, but output prices cam vary.

Foreign Purchases Effect

The final reason the aggregate demand curve slopes downward. The rise of a price level reduces the quantity of US goods demanded as exports.

Interest-rate

The price that is charged for the use of monies. A reason the aggregate demand curve slopes downward.

Which one of the following would not shift the aggregate demand curve?

a change in the price level

Other things equal, a decrease in the real interest rate will:

expand investment and shift the AD curve to the right.

Real-balances effect

Change in the price level

Equilibrium GDP

Equilibrium occurs at the price level that equalizes the amounts of real output demanded and supplied. The intersection of aggregate demand(AD) and aggregate(AS).

Immediate short run

Input prices as well as output prices are fixed.

Long run

Input prices as well as output prices can vary.

Aggregate Supply

Schedule or curve showing the relationship between a nation's price level and the amount of real domestic output that firms in the economy produce. Immediate short run, short run, and long run.

Aggregate Demand

Schedule or curve that shows the amount of a nation's output(real GDP) that buyers collectively desire to purchase at each possible price level.

Demand pull inflation

The increase in aggregate demand beyond the full-employment level of output causes inflation.

If investment decreases by $20 billion and the economy's MPC is .5, the aggregate demand curve will shift:

leftward by $40 billion at each price level.

The aggregate supply curve:

shows the various amounts of real output that businesses will produce at each price level

(Consider This) The ratchet effect is the tendency of:

the price level to increase but not to decrease.

When aggregate demand declines, wage rates may be inflexible downward, at least for a time, because of:

wage contracts.

The aggregate demand curve is:

downsloping because of the interest-rate, real-balances, and foreign purchases effects.

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will:

increase U.S. exports and decrease U.S. imports.