ECON 101 Sullivan SDSU Module 9 and 10

Aggregate supply shifts...

1. productivity 2. resource prices 3. social institutions - the government

fiscal policy hinges on what 3 assumptions

1. when a recession starts we know immediately 2. the government can quickly determine and implement the appropriate fiscal policy 3. the policy is immediately effective

Which combination of factors would most likely increase aggregate demand?

An increase in consumer wealth and a decrease in interest rates.

Changes in which two of the factors would most likely cause a shift in aggregate demand due to a change in consumer spending?

Household expectations and personal income tax rates

what factor would shift aggregate demand lower and to the left?

a decrease in consumer wealth

Which of the following factors does not explain the inverse relationship between the price level and the total demand for output?

a substitution effect

cost-push inflation is characterized by...

decrease in aggregate supply and no change in aggregate demand

With cost-push inflation in the short run, there will be a(n)

decrease real GDP

in short run a decrease in expenditures will

decrease the price level and output

Long run aggregate supply is ALWAYS equal to ...

full employment GDP

A decrease in expected returns on investment will most likely shift the AD curve to the

left because Ig will decrease.

LRAS=

long run aggregate supply

If the price level decreases, then the aggregate expenditures schedule will shift and this translates into a

movement down along the aggregate demand curve.

The economy experiences an increase in the price level and an increase in real domestic output. Which is a likely explanation?

net exports have increased

The labels for the axes of the aggregate demand graph should be

real domestic output on the horizontal axis and the price level on the vertical axis.