5 Written questions
5 Matching questions
- aggregate supply
- efficiency wages
- AD-AS model
- aggregate demand
- a The macroeconomic model that uses aggregate demand and aggregate supply to determine and explain the price level and the real domestic output.
- b A schedule or curve that shows the total quantity of goods and services demanded (purchased) at different price levels.
- c A wage that minimizes wage costs per unit of output by encouraging greater effort or reducing turnover.
- d Leftward shifts of the aggregate supply curve reflect increases in per-unit production costs and cause BLANK-BLANK inflation, with accompanying negative GDP gaps.
- e A schedule or curve showing the total quantity of goods and services supplied (produced) at different price levels.
5 Multiple choice questions
- 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).
- The reluctance of firms to cut prices during recessions (that they think will be short-lived) because of the costs of altering and communicating their price reductions; named after the cost associated with printing new menus at restaurants.
- The BLANK-BLANK-BLANK aggregate supply curve assumes that both input prices and output prices are fixed. With output prices fixed, the aggregate supply curve is a horizontal line at the current price level. The BLANK-BLANK aggregate supply curve assumes nominal wages and other input prices remain fixed while output prices vary. The aggregate supply curve is generally upsloping because per-unit production costs, and hence the prices that firms must receive, rise as real output expands. The aggregate supply curve is relatively steep to the right of the full-employment output level and relatively flat to the left of it. The BLANK-BLANK aggregate supply curve assumes that nominal wages and other input prices fully match any change in the price level. The curve is vertical at the full-employment output level.
- Factors such as input prices, productivity, and the legal-institutional environment that, if they change, shift the aggregate supply curve.
- 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.
5 True/False questions
downsloping → The aggregate supply curve associated with a time period in which input prices (especially nominal wages) are fully responsive to changes in the price level.
equilibrium price level → The price level at which the aggregate demand curve intersects the aggregate supply curve.
demand, supply → 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.
short-run → The aggregate supply curve associated with a time period in which input prices (especially nominal wages) are fully responsive to changes in the price level.
simultaneous → 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.