Adas

If the economy is at A and there is a fall in aggregate demand, in the short run the economy

moves to D

If the economy starts at C, an increase in the money supply moves the economy

to A in the long run

If the economy starts at A and there is a fall in the aggregate demand, the economy moves

to C in the long run

The economy would be moving to long run equilibrium if it started at

D and moved to C

In the short run, a favorable shift in aggregate supply will move the economy from

A to B

REFER TO STOCK MARKET BOOM 2010. Which curve shifts and in which direction?

Aggregate demand shifts right

An increase in the money supply would move the economy from C to

B in the short run and A in the long run

REFER TO STOCK MARKET 2010. In the short run what happens to the price level and real GDP?

Both the price level and real GDP rise

An economic contraction caused by a shift in aggregate demand remedies itself over time as the expected price level

Bowls, shifting aggregate supply left

If the economy is in the long run equilibrium, then an adverse shift in aggregate supply will move the economy from

C to D

REFER TO STOCK MARKET BOOM 2010. What happens to the expected price level and what impact does this have on wage bargaining?

The expected price level rises. Bargains are struck for higher wages.

if something caused resources to become more readily available, then

The price level would fall and real GDP would rise

Suppose the economy is initially in long run equilibrium and aggregate demand rises. In the long run prices

are higher and output is the same as the original long run equilibrium

An economic contraction caused by a shift in aggregate demand causes prices to

fall in the short run, and fall even more in the long run

If the economy starts at A and moves to D in the short run, the economy

moves to C in the long run