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Exam 9: Aggregate Demand and Aggregate Supply Analysis

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Question 81

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The level of real GDP in the long run is

A) potential GDP.
B) affected by changes in the price level.
C) determined solely by aggregate demand.
D) the same as the level of nominal GDP in the long run.
E) the maximum possible GDP in any given period.

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Question 82

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When the price level in Canada rises relative to the price level of other countries,________ will rise,________ will fall,and ________ will fall.

A) imports; exports; net exports
B) exports; imports; net exports
C) net exports; exports; imports
D) net exports; imports; exports
E) exports; net exports; imports

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Question 83

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Explain how the economy moves back to full employment from recession.Be sure to detail what happens to short-run aggregate supply,unemployment,equilibrium GDP and the price level.

Figure 9.6 Alt text for Figure 9.6: In figure 9.6,a graph depicting short-run equilibrium and long-run equilibrium. Long description for Figure 9.6: The x-axis is labelled,real GDP (trillions of 2007 dollars) ,and the y-axis is labelled,price level (CPI) .5 lines are shown; SRAS1,SRAS2,AD1,AD2,and LRAS.Line SRAS1 begins near the bottom left and slopes up to the top right corner.Line SRAS2 follows the same slope as line SRAS1,but is plotted to the right.Line AD1 begins at the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as AD1,but is plotted to the right.Line SRAS1 intersects line AD1 at point C,more than half way along both lines.Line SRAS1 intersects line AD2 at point B,approximately 3 quarters of the way along both lines.Line SRAS2 intersects line AD1 at point D,approximately 3 quarters of the way along both lines.Line SRAS2 intersects the line AD2 at point A,more than half way along both lines.Line LRAS is perpendicular to the x-axis,passing through points A and C and intersecting all 4 lines. -Refer to Figure 9.6.Suppose the economy is at point A.If government spending increases in the economy,where will the eventual long-run equilibrium be?

All of the following are reasons why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services except

Why does the short-run aggregate supply curve shift to the right in the long run,following a decrease in aggregate demand?

Figure 9.1 Alt text for Figure 9.1: In figure 9.1,a graph comparing real GDP and price level. Long description for Figure 9.1: The x-axis is labelled,real GDP,and the y-axis is labelled,price level,with 0 at the vertex.Line AD1 begins in the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as line AD1 but is plotted to the right.Points A and B are plotted along line AD1.Point A is a little less than half way along the left side of the line,and point B is little more than half way on the right side of the line. -Refer to Figure 9.1.Ceteris paribus,a decrease in government spending would be represented by a movement from

What variables cause the short-run aggregate supply curve to shift? For each variable,identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left.

If you noticed that fashion models were wearing longer skirts,the local store was sold out of lipstick,and skinny ties were all you saw for sale,it might be reasonable to assume

Potential GDP refers to the level of

Which of the following is one explanation as to why the aggregate demand curve slopes downward?

Figure 9.7 Alt text for Figure 9.7: In figure 9.7,a graph comparing real GDP and price level. Long description for Figure 9.7: The x-axis is labelled,real GDP (trillions of dollars) ,with values 11.0,11.8,12.1 marked.The y-axis is labelled,price level,with values 110 and 112 marked.6 lines are shown; SRAS1,SRAS2,AD1,AD2,LRAS1,LRAS2.Line SRAS1 begins near the bottom left and slopes up to the top right corner.Line SRAS2 follows the same slope as line SRAS1,but is plotted to the right.The area between lines SRAS1 and SRAS2 is indicated by a right pointing arrow.Line AD1 begins at the top left corner and slopes down toward the bottom center.Line AD2 follows the same slope as AD1,but is plotted to the right.The area between lines AD1 and AD2 is indicated by a right pointing arrow.Line LRAS1 is perpendicular to the x-axis,and begins from value 11.0.Line LRAS2 perpendicular to the x-axis,and begins from point 12.1.The area between lines LRAS1 and LRAS2 is indicated by a right pointing arrow.Line LRAS1 intersects lines AD1 and SRAS1 at point A (11.0,110) .Lines AD2 and SRAS2 intersect at point B (11.8,112) .Points A and B are connected to their respective coordinates on the x-axis and y-axis with dotted lines.Line LRAS2 intersects lines SRAS1 and SRAS2 on the right end of these lines.Similarly,line LRAS2 intersects lines AD1 and AD2 on the right end of these lines. -Refer to Figure 9.7.Given the economy is at point A in year 1,what will happen to the unemployment rate in year 2?

Canada followed the U.S.into recession in 2008,but not in 2001.One important reason why Canada did not follow the U.S.into recession in 2001 is

If potential GDP is equal to $600 billion,what does the long-run aggregate supply curve look like?

Workers expect inflation to rise from 3% to 5% next year.As a result,this should

A decrease in the price level will

Suppose the economy is at full employment and firms become more pessimistic about the future profitability of new investment.Which of the following will happen in the short run?

Using an aggregate demand graph,illustrate the impact of an increase in the price level on aggregate demand.

An increase in the price level causes a movement down the aggregate demand curve.

What are sticky prices and how can contracts make them "sticky"?