Intro to Macro Exam 2 Study Guide CH 11

अब Quizwiz के साथ अपने होमवर्क और परीक्षाओं को एस करें!

The aggregate demand curve slopes downward because

an increase in the price level causes the demand for money to​ rise, driving up the interest rate and discouraging​ investment, which causes aggregate demand to fall

The level of aggregate output ​(Y0)

potential output or potential GDP.

The derivation of an​ economy's aggregate demand (AD) curve

requires knowledge regarding the interaction between the goods market and the money market.

When the interest rate​ falls, the planned aggregate expenditure curve shifts​ ________ because planned investment is​ ________.

up; higher

A decrease in government spending shifts the​ ________, and a decrease in the price level shifts the​ ________.

IS curve to the​ left; Fed rule to the right

Which of the following will generate an increase in aggregate​ demand?

Increased government expenditures for war.

exogenous

relating to or developing from external factors.

Which of the following events would NOT produce a rightward shift in the​ short-run AS​ curve?

A significant decrease in the​ country's labor force participation rate.

real wealth effect

The change in consumption brought about by a change in real wealth that results from a change in the price level.

True/False The Fed rule is an equation that shows how the interest rate behavior of the Fed depends on the state of the economy.

True

True/False The IS curve shows the relationship between output and the interest rate.

True

The relationship between the price level and aggregate output​ (income)

aggregate supply curve

A sudden increase in oil prices results in a supply​ shock, shifting the​ short-run aggregate supply curve to the​ ________, resulting in society getting a​ ________ aggregate output at any price level.

left; smaller

According to the real wealth effect ​(or real balance​ effect), an increase in the price level

decreases ​consumers' expenditures due to a decrease in the purchasing power of household wealth

The negative slope of a simple demand curve

depends on the price of a single product relative to other product prices

the​ short-run aggregate supply curve​ (AS) is​ upward-sloping. This positive slope is explained in part by the fact that

in the​ short-run, input prices—particularly wage rates—are slower to adjust to increasing aggregate demand than are output prices.

The​ Fed's tendency to​ "lean against the​ wind" occurs when it​ _______ the money supply to​ _______ interest rates to counteract contraction of the​ economy, and​ _______ the money supply to​ _______ interest rates to counteract rapid expansion. These policies are designed to​ _______ the economy.

increases; lower;​ decreases; raise; stabilize

The​ long-run aggregate supply curve

is vertical because all prices​ (both input and output​ prices) change at the same rate in the long run.

The somewhat unique shape of the short run​ aggregate supply curve is based in part on how firms respond to an increase in aggregate demand. As firms and the economy move closer to full​ capacity, the response of firms is likely to change from

mainly increasing output to mainly increasing prices.

The aggregate demand​ (AD) and aggregate supply​ (AS) equilibrium may occur at a very steep portion of AS​ curve, when

the economy is operating at or near full employment and output level is above full capacity.

All of the following are exogenous variables to the aggregate​ supply-aggregate demand model except

the price level.

The aggregate demand​ (AD) and aggregate supply​ (AS) equilibrium may occur at a very flat portion of AS​ curve, when

there exists considerable excess capacity and high unemployment in the economy.

In​ reality, however, the​ short-run aggregate supply curve​ isn't flat and then vertical.​ Rather, it becomes steeper as we move from left to right. This somewhat unique shape of the​ short-run aggregate supply curve is based in part on the fact that

when the economy has excess​ capacity, input prices are slow to adjust whereas output adjusts quickly to increases in aggregate​ demand; as the economy approaches full capacity prices increase at a faster rate than does output.


संबंधित स्टडी सेट्स

Ch 39 Corporate Formation and Financing

View Set

Assessment of Respiratory Function

View Set

Intro to Business: Chapter 6 & 7

View Set

pn 104, chapter 33: Assessment and Management of Patients with Allergic Disorders

View Set

***HURST Review Elevate Q-Cards***

View Set

Health and Illness Concept 1- EXAM 2

View Set

MGMT 328 (International Management) - Chapter 4 Leveraging Resources and Capabilities

View Set

chapter 41 drug therapy for diabetes mellitus

View Set

Chapter 8 test review and concept review

View Set

vertex form for parent functions

View Set