Aggregate Model Flashcards
In the long run, changes in the money supply affect…
Nominal variables, but not real variables.
The model of aggregate demand and aggregate supply explains the relationship between…
The real GDP and the price level.
What happens when the overall price levels in an economy rises?
It lowers the quantity demanded of goods and services, but the quantity supplied rises.
What is not included in aggregate demand?
Purchases of stocks and bonds.
What causes a movement to the left along a given aggregate demand curve?
An increase in the price level.
People will spend more if price level…
Falls, making the dollar they hold worth more.
Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire…
Increased consumption, shifting the aggregate demand curve to the right.
When taxes increase, consumption decreases as shown by…
Shifting aggregate demand to the left.
If countries that imported from Canada went into a recession, we would expect that the Canadian net exports would…
Fall, making aggregate demand shift left.
The sticky wage theory of the short-run aggregate supply curve says that when the price level rises more than expected, the real wage…
Falls, so unemployment rises.
What shifts SRAS to the right?
Increase in the quantity of resources, decrease in the price of resources, and improvements in technology.
If foreigners started purchasing more Canadian products, then in Canada…
Aggregate demand shifts to the right (Canadian exports increased).
If unions negotiate widespread increases in workers’ wages, then…
SRAS shifts to the left (cost of production increases).
If the price of gold, an important resource in the electronics industry decreases, then…
SRAS shifts to the right (cost of production declined).
If Canada opens its doors to immigrants, thus increasing the labour force…
Both SRAS and LRAS shift to the right.
