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Exam 24: Aggregate Demand and Aggregate Supply Analysis

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Question 41

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Explain how each of the following events would affect the short-run aggregate supply curve. a.A decrease in the price level b.A decrease in what the price level is expected to be in the future c.A price level that is currently lower than expected d.An unexpected decrease in the price of an important raw material e.A decrease in the labor force

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a.A lower price level would cause a move...

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Question 42

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Hurricane Katrina resulted in a decline in oil production infrastructure along the gulf coast.As a result there was an unexpected decline in oil and natural gas supplies in 2005.Suppose that this caused an increase in the price level and a decline in real GDP in 2006.Also assume that potential real GDP continued to grow due to other factors.You can assume the aggregate demand curve did not change.Show the macroeconomic equilibrium for 2005 and 2006 using the dynamic aggregate supply and aggregate demand model.

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The economy began at the point (Y1,P1)o...

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Question 43

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An adverse supply shock causes the short-run aggregate supply curve to shift left,increasing the price level.

Explain how the aggregate demand and aggregate supply model can be made more dynamic.

If aggregate demand just decreased,which of the following may have caused the decrease?

Article Summary While sticking with a new strategy of letting market forces determine prices while producing more to keep customers,OPEC has stated that oil prices will not be increasing for the remainder of 2015 due to increased supplies and falling demand in China.OPEC members had initially thought that crude oil prices would rise to $70 - $80 a barrel by the end of 2015,but have revised their forecast down to a price of $40 - $50 a barrel.Despite the drop in price,OPEC has decided to stick with its new production strategy so new supplies from non-OPEC countries would not cut into OPEC's share of the market,even though the low prices are not bringing in enough revenue for the member countries to balance their budgets.In a September 2015 report,the U.S.Energy Information Administration reported that global oil output would exceed projected consumption by more than 2 million barrels a day in 2015. -Refer to the Article Summary.The unexpected increase in the supply of oil mentioned in the article summary resulted in a decrease in the price of oil.After an unexpected decrease in the price of oil,the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.

Suppose there has been an increase in investment.As a result,real GDP will ________ in the short run,and ________ in the long run.

During 2008,oil price increases

The new classical model has as its central idea that

Figure 24-2 -Refer to Figure 24-2.Ceteris paribus,a decrease in the expected future price level would be represented by a movement from

________ of unemployment during ________ make it easier for workers to ________ wages.

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

Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?

The basic aggregate demand and aggregate supply curve model helps explain

According to Marx,which of the following factors of production did not contribute anything of value to production?

What is potential GDP?

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?

Figure 24-3 -Refer to Figure 24-3.Which of the points in the above graph are possible long-run equilibria?

Monetarism is a school of thought put forth by Milton Friedman.He argued that the economy would most likely

The ________ shows the relationship between the price level and quantity of real GDP demanded.