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Exam 10: Aggregate Demand and Aggregate Supply Analysis

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Question 51

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Refer to Figure 10.2 for the following questions. Figure 10.2 -In Figure 10.2, given the economy is at point A in year 1 and point B in year 2, what is the growth rate in real GDP between those two years?

A) 2.5%
B) 7.3%
C) 8.0%
D) 10.0%

E) All of the above
F) B) and D)

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Question 52

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An adverse supply shock causes the short-run aggregate supply curve to shift left, increasing the price level.

A) True
B) False

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Question 53

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Which of the following is an assumption of the basis (static) aggregate demand and aggregate supply model?

New Keynesian macroeconomic theory emphasises the role of 'sticky' prices in the economy.

Why does the short-run aggregate supply (SRAS)curve slope upward? _____________________________________________________________________________________________ _____________________________________________________________________________________________

After an unexpected increase in the price of oil, the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.

Which of the following is not an economic model that is an alternative to the aggregate demand and aggregate supply model?

Refer to Figure 10.1 for the following questions. Figure 10.1 -Suppose the economy is at point C in Figure 10.1. If government spending decreases in the economy, where will the eventual long-run equilibrium be?

If workers expect the rate of inflation to rise from 4% to 6% next year, this should:

Which of the following models has as its central idea that workers and firms have rational expectations?

The long-run aggregate supply curve shows the relationship between the ________ and ________.

Briefly explain the schools of thought that dispute Keynesian or New Keynesian aggregate demand and aggregate supply modelling. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Explain how each of the following events would affect the aggregate demand curve. a.Lower interest rates b.A decrease in net exports c.A decrease in the price level d.Slower income growth in other countries e.A decrease in imports _____________________________________________________________________________________________ _____________________________________________________________________________________________

Explain how each of the following events would affect the short-run aggregate supply curve. a.A decrease in the price level. b.A decrease in what the price level is expected to be in the future. c.A price level that is currently lower than expected. d.An unexpected decrease in the price of an important raw material. e.A decrease in the labour force. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Refer to Figure 10.1 for the following questions. Figure 10.1 -Which of the points in Figure 10.1 are possible short-run equilibriums but not long-run equilibriums?

When the price of oil rises unexpectedly, the price level ________ and the unemployment rate ________ in the short run.

Which of the following will shift the aggregate demand curve to the left, ceteris paribus?

What are sticky prices or wages, and how can contracts make them 'sticky'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The short-run aggregate supply curve has a ________ slope because as prices of ________ rise, prices of ________ rise more slowly.