5 Written questions
5 Matching questions
- consumers, government, multiplier
- aggregate demand
- real-balances effect
- demand, supply
- a The determinants of aggregate demand consist of spending by domestic BLANKS, by businesses, by BLANK, and by foreign buyers. The extent of the shift is determined by the size of the initial change in spending and the strength of the economy's BLANK.
- b The aggregate BLANK-aggregate BLANK model (AD-AS model) is a flexible-price model that enables analysis of simultaneous changes of real GDP and the price level.
- c Because the short-run aggregate supply curve is the only version of aggregate supply that can handle BLANK changes in the price level and real output, it serves well as the core aggregate supply curve for analyzing the business cycle and economic policy.
- d The tendency for increases in the price level to lower the real value (or purchasing power) of financial assets with fixed money value and, as a result, to reduce total spending and real output, and conversely for decreases in the price level.
- e A schedule or curve that shows the total quantity of goods and services demanded (purchased) at different price levels.
5 Multiple choice questions
- A measure of average output or real output per unit of input. For example, the productivity of labor is determined by dividing real output by hours of work.
- An aggregate supply curve relevant to a time period in which input prices (particularly nominal wages) do not change in response to changes in the price level.
- The BLANK BLANK curve shows the levels of real output that businesses will produce at various possible price levels. The slope of the aggregate supply curve depends upon the BLANKITY of input and output prices. Since these vary over time, aggregate supply curves are categorized into three time horizons, each having different underlying assumptions about the flexibility of input and output prices.
- The determinants of aggregate supply are BLANK BLANKS, BLANK, and the BLANK-BLANK environment. A change in any one of these factors will change per-unit production costs at each level of output and therefore will shift the aggregate supply curve.
- An aggregate supply curve for which real output, but not the price level, changes when the aggregate demand curves shifts; a horizontal aggregate supply curve that implies an inflexible price level.
5 True/False questions
equilibrium → The intersection of the aggregate demand and aggregate supply curves determines an economy's BLANK price level and real GDP. At the intersection, the quantity of real GDP demanded equals the quantity of real GDP supplied.
immediate-short-run, short-run, long-run → An aggregate supply curve for which real output, but not the price level, changes when the aggregate demand curves shifts; a horizontal aggregate supply curve that implies an inflexible price level.
equilibrium price level → The gross domestic product at which the total quantity of final goods and services purchased (aggregate expenditures) is equal to the total quantity of final goods and services produced (the real domestic output); the real domestic output at which the aggregate demand curve intersects the aggregate supply curve.
interest-rate effect → The tendency for increases in the price level to increase the demand for money, raise interest rates, and, as a result, reduce total spending and real output in the economy (and the reverse for price-level decreases).
aggregate supply → A schedule or curve that shows the total quantity of goods and services demanded (purchased) at different price levels.