5 Written questions
5 Matching questions
- interest-rate effect
- determinants of aggregate demand
- aggregate demand
- aggregate supply, flexibility
- a The BLANK BLANK curve shows the level of real output that the economy demands at each price level.
- b 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).
- 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 Factors such as consumption spending, investment, government spending, and net exports that, if they change, shift the aggregate demand curve.
- e 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.
5 Multiple choice questions
- A schedule or curve that shows the total quantity of goods and services demanded (purchased) at different price levels.
- 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.
- Factors such as input prices, productivity, and the legal-institutional environment that, if they change, shift the aggregate supply curve.
- Rightward shifts of the BLANK BLANK curve, caused by large improvements in productivity, help explain the simultaneous achievement of full employment, economic growth, and price stability that occurred in the United States between 1996 and 2000. The recession of 2001, however, ended the expansionary phase of the business cycle. Expansion resumed in the 2002-2007 period, before giving way to the severe recession of 2007-2009.
- A wage that minimizes wage costs per unit of output by encouraging greater effort or reducing turnover.
5 True/False questions
aggregate supply → A schedule or curve showing the total quantity of goods and services supplied (produced) at different price levels.
downsloping → Leftward shifts of the aggregate supply curve reflect increases in per-unit production costs and cause BLANK-BLANK inflation, with accompanying negative GDP gaps.
menu costs → The macroeconomic model that uses aggregate demand and aggregate supply to determine and explain the price level and the real domestic output.
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 → 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.