Econ Ch 20 Aplia

T/F: The aggregate-demand curve slopes downward because a fall in the price level raises the overall quantity of goods and services demanded

True

T/F: The long-run aggregate-supply curve is vertical because the price level does not affect long-run aggregate supply.

True

According to the sticky-wage theory of aggregate supply, nominal wages at the initial equilibrium are ____________ nominal wages at the short-run equilibrium resulting from the increase in the money supply, and ______________ nominal wages at the long-run equilibrium.

equal to, less than

A sudden crash in the stock market shifts:

the aggregate-demand curve.

A change in the expected price level shifts

the short-run aggregate-supply curve, but not the long-run aggregate-supply curve.

If firms adjusted prices quickly, then the short-run aggregate-supply curve would be:

vertical

The aggregate-demand curve slopes downward through which effects?

wealth effect interest-rate effect exchange-rate effect

An economy could enter a recession if either the _________ or the ___________ were to shift to the left.

AD curve, short-run AS curve

Households decide to save a larger share of their income. Graph:

AD shifts left

Economy is in a long-run equilibrium, and a stock market crash causes aggregate demand to fall. Graph:

AD shifts left, AS shifts right

President proclaimed that Thanksgiving would fall a week earlier than usual so that the shopping period before Christmas would be longer. Graph:

AD shifts right, increases output back to long-run equilibrium level

Florida orange groves suffer a prolonged period of below-freezing temperatures. Graph:

AS shifts left

Economy is in long-run equilibrium. The central bank raises the money supply by 5 percent. Graph:

AS shifts left, AD shifts right

Increased job opportunities overseas cause many people to leave the country. Graph:

As shifts left, AD shifts left

T/F: If firms adjusted their prices every day, then the short-run aggregate-supply curve would be horizontal.

False

T/F: The aggregate-demand curve slopes downward because it is the horizontal sum of the demand curves for individual goods.

False

T/F: Whenever the economy enters a recession, its long-run aggregate-supply curve shifts to the left.

False

The idea that economic downturns result from an inadequate aggregate demand for goods and services is derived from the work of which economist?

John Maynard Keynes

What causes the economy to move from its short-run equilibrium to its long-run equilibrium after an increase in money supply?

Nominal wages, prices, and perceptions adjust upward to this new price level.

What are reasons that explain why the aggregate quantity of output supplied changes?

People have misperceptions about the price level. Prices are sticky. The price level has risen.

Stagflation is caused by:

a leftward shift in the aggregate-supply curve.

The aggregate quantity of output demanded ____________ between the short run and the long run because the price level ___________.

decreases, rises

LRAS ___________ when Congress raises the minimum wage to $15 per hour.

decreases

LRAS ___________ when severe hurricane damages factories along the East Coast.

decreases

When the economy goes into a recession, real GDP ________, and unemployment ________.

falls, rises

Real wages at the initial equilibrium are __________ real wages at the short-run equilibrium resulting from the increase in the money supply, and ___________ real wages at the long-run equilibrium.

greater than, equal to

According to the sticky-wage theory, the economy is in a recession because the price level has declined so that real wages are too _________; thus, labor demand is too ___________.

high, low

An increase in the aggregate demand for goods and services has a larger impact on output ________ and a larger impact on the price level ________.

in the short run, in the long run

LRAS ___________ when Intel invents a new and more powerful computer chip.

increases

LRAS ___________ when the United States experiences a wave of immigration.

increases

Proposition: Money has _________ in the short run but is ________ in the long run.

real effects, neutral

The investment boom might cause the long-run aggregate-supply curve to shift to the ___________if it results in a larger capital stock that increases productivity and output in the future.

right

As a result of the stock market crash, the unemployment rate ________.

rises