Aggregate demand
Price level increasing, causing a movement along the aggregate demand curve, can be explained by:
a decrease in net exports.
If the purchasing power of the U.S. dollar falls relative to other currencies, it is known as:
a depreciation of the U.S. dollar.
If firms are producing more output because of the higher price level, that's:
a movement along the aggregate supply.
The percentage increase in the overall price of goods and services in an economy from one time period to another is called the ___.
inflation rate
Suppose the full-employment level of real GDP is $12 trillion and the economy is actually producing $13 trillion. In this case, the economy is in a(n) gap.
inflationary
Stagflation is caused by negative shocks such as rising input costs that shift aggregate supply to the
left
Government refer only to those payments made by the government for final goods and services that it consumes.
Blank 1: purchases, spending, expenditures, purchase, or expenditure
A decrease in aggregate demand may lead to a(n)
Blank 1: recession or contraction
If costs rise, each additional unit of output will cost more to produce.
Blank 1: resource, input, factor, or production
In the short run, when wages are fixed, output (GDP):
will expand if the price level increases because profit margins increase and increasing production is profitable.
In the long run, as prices adjust for all firms, falls and the economy returns to the full-employment level of real GDP.
Blank 1: input, resource, or factor Blank 2: output or GDP
Equilibrium in the aggregate demand and supply model consists of a price and a quantity of
Blank 1: level Blank 2: real Blank 3: GDP
In the long run, the equilibrium price level is determined by the intersection of the -run aggregate supply curve and the aggregate curve.
Blank 1: long Blank 2: demand
In the run, the level of real GDP is determined by the long-run aggregate curve.
Blank 1: long Blank 2: supply
When there is a(n) supply shock, real GDP rises above the full-employment level and unemployment is lower than the natural rate.
Blank 1: positive
Aggregate demand relates the level to real GDP (one word).
Blank 1: price
When we draw an aggregate demand curve, we are assuming that the only thing that is changing as we move up and down the curve is the level. (Enter one word in the blank.)
Blank 1: price
Aggregate demand shows a negative relationship between the level and the quantity of real or output demanded. (Use one word for each blank.)
Blank 1: price Blank 2: gdp, GDP, or gross domestic product
Assume an economy starts out in equilibrium. When the price level rises: (Place the impacts listed below in the proper order.)
1. The purchasing power of assets such as savings stocks and bonds decreases. 2. Firms and consumers can purchase fewer goods and services. 3. The aggregate expenditures schedule downward.
What might lead to an expansion in the business cycle?
An increase in SRAS
Which of the following will result in a rightward shift of the aggregate demand curve?
An increase in consumption spending An increase in investment
Stagflation is used to describe an economy that is not growing, but has rising together with high
Blank 1: inflation or prices Blank 2: unemployment
Government policies, natural disasters, and a variety of other events can shift the aggregate supply and demand curves moving the economy away from its -run full-employment level of real GDP.
Blank 1: long
The -run aggregate supply curve is a vertical line originating at the full-employment level of real GDP. (Enter one word for the blank.)
Blank 1: long
Aggregate determine the level of real GDP.
Blank 1: expenditures, expenditure, or spending
GDP =
C + I + G + NX
Holding the price level constant, a(n) in net exports causes the aggregate demand curve to shift to the right.
increase
Suppose incomes rise in foreign countries. This will:
increase U.S. exports, net exports, and aggregate demand.
Input prices tend to be sticky because:
labor contracts might commit firms to paying a certain wage over multiple years.
The aggregate demand and supply model can be used to explain the business cycle. An initial decrease in aggregate demand will cause the economy to go into ____. Over time, as input prices decrease the aggregate supply curve shifts to the right and the economy enters the _______ phase of the business cycle.
recession; recovery
A decline in investment will:
shift the AE line downward and shift the AD curve to the left.
The aggregate demand curve is sloping. (Enter one word in the blank.)
Blank 1: negative, inverse, down, or downward
According to the foreign purchases effect, if prices in the United States rise and prices in other countries remain stable without a corresponding adjustment in exchange rates, U.S. consumers will buy foreign goods and services and imports will . Foreigners will buy fewer goods and services produced in the United States and exports will . The quantity of net exports will reducing the quantity of real GDP demanded.
Blank 1: more or increase Blank 2: rise, raise, or increase Blank 3: decrease, fall, lower, or decline Blank 4: lower, decline, decrease, or fall
Aggregate demand illustrates a(n) relationship between the price level and the quantity of real GDP or output demanded.
Blank 1: negative or inverse
Stagflation is caused by shocks such as rising input costs that shift aggregate supply to the left
Blank 1: negative or supply
The fact that wages are sticky -ward means the government has a stronger incentive to intervene in the economy in a(n)
Blank 1: nominal or money Blank 2: down or downward Blank 3: recession or contraction
As wages rise, firms cut back production in the long run and falls.
Blank 1: output, GDP, supply, or production
Improved productivity means that we can produce more with fewer
Blank 1: output, product, products, goods, or outputs Blank 2: input, inputs, resources, or factors
If the price level rises, aggregate expenditure:
falls the aggregate expenditure line shifts down and there is a movement to a higher point along the aggregate demand line.
If consumption gross investment or net exports are increasing because of the lower price level, there will be a:
movement along the AD curve.
Input tend to be sticky.
prices
The income effect for an individual good is similar to the:
real balances effect for the aggregate demand.
If the government increases the amount of spending, aggregate demand shifts to the
right
In the short run, a shift of the aggregate supply curve to the indicates increasing production at every price level.
right
When foreign incomes rise, aggregate demand shifts to the
right
If the price level falls, aggregate expenditure:
rises the aggregate expenditure line shifts up and there is a movement to a lower point along the aggregate demand line.
If consumption gross investment or net exports are increasing because of some non-price change, there will be a:
shift of the AD curve.
If consumption, gross investment ,or net exports are increasing because of some non-price change, there will be a:
shift of the AD curve.
If net exports are increasing because of some non-price change, there will be a:
shift of the AD curve.
If there is a dramatic reduction in inputs such as electricity prices, there will be a:
shift of the AS curve.
If consumption or gross investment increase for any reason other than the price level, that's a:
shift of the aggregate demand.
Supply shocks cause a _____ the aggregate supply curve. A change in the price level would cause _____ the aggregate supply curve.
shift of; movement along
Supply shocks cause a _____ the aggregate supply curve. A change in the price level would cause a _____ the aggregate supply curve.
shift of; movement along
An increase in investment will:
shift the AE line upward and shift the AD curve to the right.
Assume that an economy is initially in equilibrium. If the level of investment falls, the aggregate demand curve will
shift to the left.
Generally changes to social institutions that inhibit production decrease aggregate:
supply
If the aggregate demand shifts in the short run, aggregate will eventually shift in the long run to bring the economy back to full employment.
supply
It doesn't matter what kind of shock an economy experiences, in the standard aggregate demand and aggregate supply model, all long-run adjustments are made through changes in aggregate
supply
Stagflation is caused by negative shocks such as rising input costs that shift aggregate to the left.
supply
The aggregate curve slopes upward in the short run because input prices are sticky and take time to adjust.
supply
The aggregate shocks of the 70s caused by oil embargoes and domestic economic policies drove both inflation and unemployment higher.
supply
Suppose that the government increases paperwork and raises fees for starting a business. This will cause aggregate:
supply to decrease, shifting to the left.
Suppose that the price of oil falls worldwide. This will cause aggregate:
supply to increase, shifting the aggregate supply curve to the right.
demand relates the price level to real GDP (one word).
Aggregate
A negative demand shock shifts the aggregate demand to the
left
Higher resource costs will shift the aggregate supply curve to the
left
The argument can be made that demand-pull inflation is better than cost-push inflation because with:
demand-pull inflation there is a positive relationship between output and inflation.
Increases in productivity mean output or real GDP can be produced at every price level.
more
A movement along the aggregate supply curve is due to a change in the level.
price
A negative shock causes aggregate demand or supply to fall at every level.
price
A positive shock causes aggregate demand or supply to rise at every level.
price
Aggregate supply illustrates how the total amount of goods and services produced in an economy relates to the level.
price
In the short run, an increase in the level will increase the quantity of real GDP supplied.
price
The equilibrium level is determined by the intersection of the short-run aggregate supply curve and the aggregate demand curve
price
The equilibrium level is determined by the intersection of the short-run aggregate supply curve and the aggregate demand curve.
price
In the short run, an increase in the ________ will increase the quantity of real GDP supplied.
price level
In the aggregate demand and supply model, the:
price level is on the vertical axis of the graph and real GDP is on the horizontal axis.
Aggregate demand and aggregate supply are connected to the business cycle through GDP.
real
The downward-sloping line that represents the negative or inverse relationship between the rate of inflation and the unemployment rate in the short run is called:
the Phillips Curve.
As nominal wages and the costs of other resources rise during an expansion:
the aggregate supply curve shifts to the left real output falls and the price level rises further.
This percentage increase in the overall price of goods and services in the economy from one time period to another is called:
the inflation rate
When there is a negative demand shock, real GDP falls below the -employment level and unemployment is higher than the rate.
Blank 1: full Blank 2: natural
When aggregate demand increases, there is inflation and unemployment.
Blank 1: higher, more, increased, high, or greater Blank 2: lower, less, decreased, or low
Generally changes to social institutions that inhibit production shift aggregate to the left.
Blank 1: supply
If aggregate demand shifts in the short run, aggregate will eventually shift in the long run to bring the economy back to full employment.
Blank 1: supply
In the classical model of aggregate demand and aggregate supply, it is aggregate that adjusts in the long run to return the economy to its long run equilibrium.
Blank 1: supply
In the short run, the aggregate curve slopes upward.
Blank 1: supply
Inflation that results from a decrease in aggregate is called cost-push inflation.
Blank 1: supply
The term stagflation was coined in the 1970s during a period of high in the United States.
Blank 1: unemployment or inflation
The aggregate supply curve slopes in the short run because input prices are sticky and take time to adjust.
Blank 1: up, upward, or upwards
The long-run aggregate supply curve is a(n) line originating at the full-employment level of real GDP.
Blank 1: vertical
Changes in government purchases and net exports directly affect the aggregate demand for real
GDP
_______ is found at the intersection of the aggregate expenditures schedule and the equilibrium line.
The equilibrium level of real GDP
When the price level in the short run, output will expand because profit margins increase.
increases
According to the Phillips curve relationship, an increase in unemployment is coupled with:
A decrease in the inflation rate
Aggregate demand relates the price level to real . (Use one word for the blank.)
Blank 1: GDP
The downward-sloping line that represents the negative or inverse relationship between the rate of inflation and the unemployment rate in the short run is called the curve.
Blank 1: Phillips, Phillip's, Philips, or Philip's
The equilibrium price level and real GDP are determined by the intersection of the demand and -run supply curves.
Blank 1: aggregate Blank 2: short Blank 3: aggregate
In deriving the aggregate demand curve from the aggregate expenditures model, a(n) in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is higher than before the price level change.
Blank 1: decrease, fall, drop, or decline
Aggregate demand can be interpreted as the overall demand for real GDP from broadly four different sources such as consumption, gross investment, , and net exports. (Enter one word in each blank.)
Blank 1: government Blank 2: purchases
Higher U.S. incomes tend to increase U.S. and reduce net
Blank 1: imports or import Blank 2: exports or export
Cost-push inflation occurs as a(n) (one word) in resource costs shifts aggregate supply to the left.
Blank 1: increase or rise
If consumers the amount of spending, aggregate demand curve shifts to the right.
Blank 1: increase, raise, increases, or raises
Higher U.S. incomes tend to U.S. imports and net exports.
Blank 1: increase, raise, or lower Blank 2: reduce, drop, or decrease
If consumers the amount of goods and services they purchase given constant prices then aggregate shifts to the right since more goods and services are being purchased at every level. (Use one word per blank.)
Blank 1: increase, raise, rise, or increases Blank 2: demand Blank 3: price
When aggregate demand decreases, there is lower and higher
Blank 1: inflation Blank 2: unemployment
According to the foreign purchases effect, if prices in the United States rise and prices in other countries remain stable without a corresponding adjustment in exchange rates, U.S. consumers will buy foreign goods and services and will rise. Foreigners will buy goods and services produced in the United States and will fall. The quantity of net exports will fall reducing the quantity of real GDP demanded.
Blank 1: more Blank 2: imports or import Blank 3: less or fewer Blank 4: exports or export
Suppose that an increase in personal income taxes causes aggregate demand to decrease so that the economy moves to a new -run equilibrium. In this _ phase of the business cycle, real GDP declines. The economy will reach a trough, or the lowest point in the business cycle. Over time, as nominal wages and costs of other resources fall, the economy begins to recover. Aggregate supply shifts to the _ so that output expands and the price level falls further. Eventually, the economy moves to a new _-run equilibrium at a lower price level and full-employment output.
Blank 1: short Blank 2: recession or recessionary Blank 3: right Blank 4: long
Formal rules like minimum wage laws, insurance requirements, and worker safety requirements are examples of institutions that influence the aggregate
Blank 1: social Blank 2: supply
The short-run aggregate supply curve slopes upward because input prices are
Blank 1: sticky, constant, fixed, or static
Which of the following events can shift the aggregate supply curve and the aggregate demand curve, moving the economy away from its full-employment level of real GDP?
Natural disasters Government policies
Short-run equilibrium occurs where ______ and _____ intersect.
SRAS; AD
Before the 1970s, rising inflation and unemployment called was unknown in the U.S.
Stagflation
The term was coined in the 1970s during a period of high unemployment in the United States.
Stagflation
is a combination of the words stagnation and inflation.
Stagflation
Which of the following are correct?
The Phillips Curve is downward-sloping. The Phillips Curve shows the relationship between unemployment and inflation.
Suppose there is an economy-wide decrease in business taxes. What can we expect to see in the business cycle model?
The business cycle enters an expansion.
If the amount of output firms are willing to produce at each possible price level increases, that's:
a shift of the aggregate supply.
The demand and supply model can be used to describe changes in an economy's price level and real GDP in the short and the long run.
aggregate
demand can be interpreted as the overall demand for real GDP from four different sources.
aggregate
The pressure on prices and nominal wages that results when an economy produces beyond its full-employment level of output is called:
an inflationary gap.
In deriving the aggregate demand curve from the aggregate expenditures model, a(n) _______ in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is _______ before the price level change.
decrease; higher than
A decrease in consumer confidence causes aggregate to fall.
demand
When aggregate increases, there is higher inflation and lower unemployment.
demand
Inflation that results from an increase in aggregate demand is called:
demand-pull inflation.
We use _______ to talk about the price and quantity of a single good or service produced in a specific market. We use _______ to describe the overall, or total, demand for all final goods and services produced in an economy.
demand; aggregate demand
If the purchasing power of the U.S. dollar falls relative to other currencies, it is known as a(n) of the U.S. dollar.
depreciation
Aggregate demand is:
downward sloping.
The equilibrium level of real GDP is found at the intersection of the aggregate schedule and the equilibrium line.
expenditure
A negative supply shock shifts the aggregate supply to the
left
As nominal wages and the costs of other resources rise during an expansion, aggregate supply shifts to the
left
Cost-push inflation occurs as an increase in resource costs shifts aggregate supply to the
left
If consumers decrease the amount of spending, aggregate demand shifts to the
left
If the government decreases the amount of spending, aggregate demand shifts to the
left
In the short run, a shift of the aggregate supply curve to the indicates decreasing production at every price level.
left
As wages rise, firms cut back production in the run and output falls.
long
Full-employment real GDP is often used to describe:
long-run aggregate supply.
The natural rate of real GDP is often used to describe:
long-run aggregate supply.
If net exports are increasing because of the lower price level, there will be a:
movement along the AD curve.
If consumption or gross investment is increasing because of the lower price level, that's a:
movement along the aggregate demand.
Increased government spending spurs a short-run expansion. Over time, aggregate supply eventually __________, returning the economy to the full-employment level of output. In this new long-run equilibrium, the distribution of _________ in the economy changes.
shifts to the left; output and resources
Aggregate illustrates how the total amount of goods and services produced in an economy relates to the price level.
supply
As nominal wages and the costs of other resources rise during an expansion aggregate shifts to the left.
supply
Generally changes to social institutions that inhibit production decrease aggregate
supply
The long-run equilibrium occurs where:
the AD and AS and LRAS curves intersect.
The short-run equilibrium occurs where:
the AD and AS curves intersect.
The Phillips Curve refers to:
the downward-sloping line that represents the negative or inverse relationship between the rate of inflation and the unemployment rate in the short run.
The inflation rate refers to:
the percentage increase in the overall price of goods and services in the economy from one time period to another.
The unemployment rate refers to:
the percentage of workers in the labor force who are unemployed; a good indicator of the overall health of the economy.
The percentage of workers in the labor force who are unemployed, a good indicator of the overall health of the economy, is called:
the unemployment rate.
One of the challenges of using government expenditures to stimulate the economy is that:
when spending needs to be cut it can cause a recession.
expenditures determine the level of real GDP.
Aggregate
Increased government spending spurs a short-run expansion. Over time, aggregate supply eventually shifts to the left, returning the economy to the full-employment level of output.
In this new long-run equilibrium, the distribution of output and resources in the economy changes.
Which of the following explain why the Aggregate Demand (AD) curve slopes downward?
The interest-rate effect The real-balances effect The foreign-purchases effect
During the Great Recession from 2007 to 2009, most countries increased government expenditures to boost aggregate demand. (True or False)
True
In the short run, a significant increase in savings may actually have harmful effects on the economy.
True
The short-run equilibrium level of real GDP is not necessarily the full-employment level of output that is consistent with the long run. (True or False)
True
The percentage of workers in the labor force who are unemployed, a good indicator of the overall health of the economy, is called the rate.
Unemployment
Which of the following statements about demand and aggregate demand are true?
We use aggregate demand to describe the overall or total demand for all final goods and services produced in an economy. We use demand to talk about the price and quantity of a single good or service produced in a specific market.
Increased government spending spurs a short-run expansion. Over time, aggregate supply eventually shifts to the left, returning the economy to the full-employment level of output. In this new long-run equilibrium, the distribution of output and resources in the economy changes. This really happened in practice during:
World War II in the United States.
Equilibrium in the aggregate demand and supply model consists of:
a price level and a quantity of real GDP.
demand describes the overall or total demand for all final goods and services produced in an economy.
aggregate
The equilibrium price level and real GDP are determined by the intersection of the:
aggregate demand and short-run aggregate supply curves.
A schedule or curve that shows the relationship between the quantity of real GDP demanded and the price level is called:
aggregate demand.
The equilibrium level of real GDP is found at the intersection of the:
aggregate expenditures schedule and the equilibrium line.
Suppose there is a negative supply shock. In the short-run, the economy moves to a new equilibrium where real GDP is:
below the full-employment level and unemployment is higher than the natural rate.
A decrease in aggregate demand:
causes a movement down along the Phillips Curve.
An increase in aggregate demand:
causes a movement up along the Phillips Curve.
A movement along the AD curve is due to:
changes in the price level.
A shock to aggregate supply that affects the economy in a positive way includes:
cost-saving technologies.
A(n) in consumer confidence causes aggregate demand to fall.
decrease
Suppose every household decreases its consumption by 10% and consumption is roughly 70% of total output. A 10% decrease in consumption represents a 7% decrease in output. Aggregate demand will:
decrease by more than 7% because of the expenditures multiplier.
Some of the challenges of using government expenditures to stimulate the economy are that:
eventually spending will need to be cut, leading to recession. increasing government expenditures can increase the deficit.
When foreign incomes , the aggregate demand curve shifts to the left
fall
According to the real-balances effect, when the price level rises, the real value of savings:
falls, consumption falls, the quantity of real GDP demanded decreases, resulting in a downward sloping aggregate demand curve.
The substitution effect for an individual good is similar to the:
foreign-purchases effect for the aggregate demand.
Payments made by the government for final goods and services and transfer payments are called:
government expenditures.
Both recessions and expansions can cause or a general increase in the level of prices.
inflation
Demand-pull occurs as consumers compete with each other for goods and services shifting aggregate demand to the right.
inflation
Recessions and expansions can cause or a general increase in the level of prices.
inflation
When an economy produces beyond potential real GDP, it can lead to:
inflation
According to the interest rate effect, when the price level rises, people need:
more money to make the same number of purchases causing interest rates to rise reducing consumption investment and the quantity of real GDP demanded resulting in a downward sloping aggregate demand curve.
If consumption, gross investment, or net exports are increasing because of a lower price level, there has been a:
movement along the AD curve.
Resource prices tend to adjust slowly in response to changes in the market. Another way to state this is to say that
resource prices are sticky.
As nominal wages and the costs of other resources fall during a recession, aggregate supply shifts to the
right
If consumers increase the amount of spending, aggregate demand shifts to the
right
If consumers increase the amount of spending, the aggregate demand curve shifts to the
right
Changes in consumption and gross investment can:
shift the aggregate demand curve.
In the run, the aggregate supply curve slopes upward.
short
Cost-push inflation occurs as an increase in resource costs shifts aggregate to the left
supply
When the price level rises, people need more money to make the same number of purchases, so the demand for money increases. As a result, interest rates rise, which lowers consumption and investment causing the quantity of real GDP demanded to decrease. This describes the:
the interest rate effect.
Economic contraction can be shown as:
the long-run aggregate supply curve shifts to the left. an inward shift of the production possibilities frontier.
If we increase our resources or productivity,:
the long-run aggregate supply curve shifts to the right. the production possibilities frontier will shift out.
The determination of the the long-run equilibrium occurs where the AD and SRAS curves intersect the:
the long-run aggregate supply curve.
The determination of the the long-run equilibrium price level and real GDP is found by using:
the long-run aggregate supply curve.
________ can be interpreted as the overall demand for real GDP from Consumption Gross Investment Government Purchases and Net Exports.
Aggregate demand
______ determine(s) the level of real GDP.
Aggregate expenditures
Indicate the likely effect of a wide-reaching increase in wages paid to workers on the AD-AS model.
Aggregate supply decreases
As nominal wages and the costs of other resources fall during a recession, the curve shifts to the right.
Blank 1: aggregate Blank 2: supply
If the purchasing power of the U.S. dollar rises relative to other currencies, it is known as a(n) of the U.S. dollar.
Blank 1: appreciation
There is a(n) correction mechanism in our economy which operates through the aggregate supply.
Blank 1: automatic, auto, or self
Suppose there is a negative demand shock. In the short run, the economy moves to a new equilibrium where real GDP is the full-employment level and unemployment is than the natural rate. In the long run, wages and production costs fall. Firms produce more at every price level. The short-run aggregate supply curve shifts to the , moving the economy to a new equilibrium. The price level falls, and real GDP rises. Eventually, the economy returns to its full-employment level of real GDP.
Blank 1: below or lower than Blank 2: higher, above, or more Blank 3: right Blank 4: higher
If -push inflation is occurring, it is because the aggregate curve is shifting to the resulting in lower output and higher prices.
Blank 1: cost Blank 2: supply Blank 3: left
A(n) in investment will shift the AE line downward and shift the AD curve to the left.
Blank 1: decrease, decline, drop, or fall
Lower U.S. incomes tend to (increase/decrease) U.S. imports and (increase/decrease) net exports. (Use wording provided.)
Blank 1: decrease, drop, reduce, or lower Blank 2: increase or raise
Holding the price level constant, a(n) in net exports reduces the aggregate for real GDP.
Blank 1: decrease, fall, drop, reduction, or decline Blank 2: demand
When the price level falls in the short run, output will contract because profit margins
Blank 1: decrease, fall, or drop
If consumers the amount of spending, the aggregate demand curve shifts to the left.
Blank 1: decrease, reduce, lower, limit, or decreases
If consumers the amount of goods and services they purchase, given constant prices, then aggregate shifts to the left since goods and services are being purchased at every price level.
Blank 1: decrease, reduce, or lower Blank 2: demand Blank 3: fewer or less
According to the real-balances effect, when the price level rises, the real value of savings and people are willing or able to buy goods and services.
Blank 1: decreases, decrease, decline, declines, falls, fall, or lowers Blank 2: less
If resource costs rise, output at every price level.
Blank 1: decreases, falls, drops, shrinks, lowers, lessens, decrease, fall, drop, shrink, or lower
If the government the amount of spending, the aggregate demand curve shifts to the left. (Enter one word in the blank.)
Blank 1: decreases, lowers, reduces, cuts, decrease, lower, reduce, or cut
Changes in government purchases and net exports directly affect the aggregate for real GDP.
Blank 1: demand
Until the 1970s, most fluctuations in unemployment and inflation were due to changes in aggregate
Blank 1: demand
When foreign incomes rise, aggregate shifts to the right.
Blank 1: demand
If -pull inflation is occurring, it is because the aggregate curve is shifting to the resulting in higher output and higher prices.
Blank 1: demand Blank 2: demand Blank 3: right
Holding the price level constant, a decrease in net exports causes aggregate to shift to the
Blank 1: demand Blank 2: left
Consider nominal or money wages for example. Wages tend to be stickier moving -ward than -ward.
Blank 1: down Blank 2: up
A decrease in investment will shift the AE line and shift the AD curve to the left.
Blank 1: down or downward
Exports from the U.S. will tend to fall when foreign incomes
Blank 1: fall, decrease, decline, or lower
In the short run, the price level decreases. Firms hire workers and production. The quantity of real GDP . As the demand for labor decreases and labor contracts expire, workers will accept lower wages. As wages fall in the run, firms increase production in the long run and output rises.
Blank 1: fewer, less, decrease, or decreases Blank 2: contract or cut Blank 3: decreases, contracts, falls, or shrinks Blank 4: long
The long-run aggregate supply curve is a vertical line originating at the -employment level of real GDP.
Blank 1: full
The aggregate supply shocks of the 70s caused by oil embargoes and domestic economic policies drove both and higher.
Blank 1: inflation, prices, or unemployment Blank 2: unemployment, inflation, or prices
The long-run aggregate supply curve is a vertical line originating at the full-employment level of real GDP. It is vertical because all prices are flexible in the run.
Blank 1: input or resource Blank 2: long
According to the foreign purchases effect, if prices in the United States rise and prices in other countries remain stable without a corresponding adjustment in exchange rates, imports will , exports will , and net exports will reducing the quantity of real GDP demanded resulting in a(n) sloping aggregate demand curve.
Blank 1: rise or increase Blank 2: decrease, reduce, decline, lower, or fall Blank 3: decline, lower, fall, decrease, or reduce Blank 4: downward, down, or negative
Exports from the U.S. will tend to when foreign incomes increase.
Blank 1: rise, increase, or increases
According to the real-balances effect, when the price level rises, the real value of falls and people are less willing or able to buy goods and services.
Blank 1: savings, saving, or money
Aggregate demand is sloping (one word).
Downward
If the economy is producing above equilibrium, unemployment is very:
low, wages will start to rise, which puts upward pressure on prices.