5 Written questions
5 Matching questions
- aggregate demand
- equilibrium price level
- input prices, productivity, legal-institutional
- a 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.
- b 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.
- c The price level at which the aggregate demand curve intersects the aggregate supply curve.
- d A schedule or curve that shows the total quantity of goods and services demanded (purchased) at different price levels.
- e Leftward shifts of the aggregate supply curve reflect increases in per-unit production costs and cause BLANK-BLANK inflation, with accompanying negative GDP gaps.
5 Multiple choice questions
- 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.
- A schedule or curve showing the total quantity of goods and services supplied (produced) at different price levels.
- A wage that minimizes wage costs per unit of output by encouraging greater effort or reducing turnover.
- 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.
- The BLANK BLANK curve shows the level of real output that the economy demands at each price level.
5 True/False questions
immediate-short-run → 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.
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.
inflation, multiplier effect → Increases in aggregate demand to the right of the full-employment output cause BLANK and positive GDP gaps (actual GDP exceeds potential GDP). An upsloping aggregate supply curve weakens the BLANK BLANK of an increase in aggregate demand because a portion of the increase in aggregate demand is dissipated in inflation.
long-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.
productivity → 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.