Econ Test 3 - Aggregate Demand and Supply Analysis

Question 0

Aggregate demand is made up of how many components?

Answer 0

four

Question 1

The total quantity of an economy’s output of final goods and services demanded

Answer 1

Aggregate Demand

Question 2

What are the four components that make up aggregate demand?

Answer 2

consumption spending
investment spending
Government spending
Net exports

Question 3

Yad =

Answer 3

C + I + G + NX

Question 4

What is consumer spending on goods and services?

Answer 4

consumption

Question 5

What is business spending on machines, factories, other capital goods, plus spending on new home construction?

Answer 5

Investment spending

Question 6

What is federal, state, and local government spending on labor and all other goods and services and consumables?

Answer 6

Government spending

Question 7

What is foreign spending on domestically produced goods and services?

Answer 7

Net exports

Question 8

What is the net of domestic spending on foreign produced goods and services?

Answer 8

Net Exports

Question 9

What is the relationship between the quantity of aggregate output demanded and the inflation rate when all other variables are held constant?

Answer 9

Aggregate Demand Curve

Question 10

What makes up the aggregate demand curve?

Answer 10

output demanded

inflation rate

Question 11

What is a positive function of disposable income?

Answer 11

Consumption spending

Question 12

Consumption spending is a positive function of what?

Answer 12

disposable income

Question 13

What is a negative function of the real interest rate?

Answer 13

Investment spending

Question 14

Investment spending is a negative function of what?

Answer 14

real interest rate

Question 15

The relationship between aggregate demand and inflation is based on the recognition that?

Answer 15

rising inflation will elicit a real interest rate response from the monetary authorities

Question 16

Higher real interest rate increases costs of financing household consumption purchases which works to reduce what?

Answer 16

consumption spending

Question 17

Higher real interest rates does what to the costs of financing household consumption purchases?

Answer 17

increases costs

Question 18

Higher real interest rates increase the cost of financing capital purchases which works to reduce what?

Answer 18

business investment spending

Question 19

Higher increases of costs does what to financing capital purchases?

Answer 19

rises

Question 20

Higher real interest rates increases the attractiveness of domestic assets and currency increases what?

Answer 20

the foreign exchange value of the dollar

Question 21

When the foreign exchange value of the dollar goes up this works to encourage what?

Answer 21

imports and discourage exports

Question 22

Economists always have to show what?

Answer 22

downward sloping demand curves, micro or macro

Question 23

An increase in real interest rate does what to aggregate demand and shifts the AD curve where?

Answer 23

decreases AD

shifts left

Question 24

A decrease in government spending does what to aggregate demand and shifts the AD curve where?

Answer 24

decreases aggregate demand | shifts left

Question 25

An increase in net exports does what to the aggregate demand and shifts the AD curve where?

Answer 25

increases AD | shifts right

Question 26

An increase in consumption spending does what to aggregate spending and shifts the AD curve where?

Answer 26

increases AD | shifts the AD curve right

Question 27

A decrease in Investment/Business spending does what to aggregate demand and shifts the AD curve which way?

Answer 27

decreases AD | shifts the AD curve left

Question 28

An increase in financial frictions does what to aggregate demand and shifts the AD curve where?

Answer 28

decreases aggregate demand | shifts the AD curve left

Question 29

An increase in inflation rate does what to buying power?

Answer 29

decreases

Question 30

A decrease in buying power does what to household and business spending?

Answer 30

decreases

Question 31

What is real money balances?

Answer 31

buying power

Question 32

More uncertainty encourages who to spend less as inflation rises?

Answer 32

households and business

Question 33

Higher inflation makes domestic prices rise how in foreign markets?

Answer 33

rise faster

Question 34

Rising goods prices in foreign markets does what to export sales?

Answer 34

Reduces

Question 35

A reduction in export sales does what to Net exports spending?

Answer 35

less of it

Question 36

A decrease in the quantity of aggregate output demanded moves the AD curve how?

Answer 36

moves up the AD curve

Question 37

AD curve is sloped how?

Answer 37

negatively

Question 38

A rise in general uncertainty shifts the Aggregate demand curve where?

Answer 38

left

Question 39

General uncertainty does what to households and business spending?

Answer 39

constrains it

Question 40

A rise in monetary policy shifts the AD curve where?

Answer 40

left

Question 41

A fall in monetary policy shifts the AD where?

Answer 41

right

Question 42

A rise in government purchases shifts the AD where?

Answer 42

right

Question 43

A fall in government purchases shifts the AD where?

Answer 43

left

Question 44

A rise in taxes shifts the AD curve where?

Answer 44

left

Question 45

A fall in taxes shifts the AD curve where?

Answer 45

right

Question 46

A rise in net exports shifts the AD where?

Answer 46

right

Question 47

A fall in net exports shifts the AD curve where?

Answer 47

left

Question 48

A rise in investment shifts the demand curve where?

Answer 48

right

Question 49

A rise in autonomous investment shifts the AD curve where?

Answer 49

right

Question 50

A rise in financial frictions shifts the AD curve where?

Answer 50

left

Question 51

The total quantity of an economy's output of final goods and services supplies

Answer 51

Aggregate supply

Question 52

The relationship between the quantity of aggregate output supplied and the inflation rate when all other variables are held constant

Answer 52

Aggregate supply curve

Question 53

Price level is another term for?

Answer 53

inflation rates

Question 54

What takes a long time to adjust to new different conditions?

Answer 54

wages and prices

Question 55

Why is there a difference in long and short run aggregate supply curves?

Answer 55

prices need time to fully adjust

Question 56

Long run aggregate supply curve is not determined or affected by what adjustments?

Answer 56

wage and price

Question 57

A time frame where all short run deviations from the economy's full employment productive capacity are resolved

Answer 57

long run

Question 58

How many factors determine aggregate supply?

Answer 58

three

Question 59

What three factors affect aggregate supply?

Answer 59

available capital fully employed labor available technology

Question 60

Reflects the economy's maximum productive capacity when all resources are fully employed at sustainable levels

Answer 60

long run aggregate suppply

Question 61

The long run AS curve runs how on a graph?

Answer 61

vertical

Question 62

Why is the long run aggregate supply curve vertical?

Answer 62

since inflation rate is not a productive resource

Question 63

The non-accelerating inflation rate of unemployment is the unemployment rate below which the inflation rate accelerates due to?

Answer 63

excess demand in the economy

Question 64

The non-accelerating inflation rate of unemployment is the unemployment rate above which the inflation rate decelerates due to?

Answer 64

excess supply

Question 65

An increase in capital shifts the long run aggregate supply curve where?

Answer 65

right

Question 66

An increase in labor shifts the long run aggregate supply curve where?

Answer 66

right

Question 67

An increase in technology shifts the long run aggregate supply curve where?

Answer 67

right

Question 68

A fall in the natural rate of unemployment shifts the long run aggregate supply curve where?

Answer 68

right

Question 69

A decrease in capital shifts the long run aggregate supply curve where?

Answer 69

left

Question 70

A decrease in labor shifts the aggregate supply curve where?

Answer 70

left

Question 71

A decrease in technology shifts the long run aggregate supply curve where?

Answer 71

left

Question 72

An increase in the natural rate of unemployment shifts the long run aggregate supply curve where?

Answer 72

Left

Question 73

More heavily utilized labor reduces what?

Answer 73

the natural rate of unemployment

Question 74

What is the total quantity of an economy's output of final goods and services supplied?

Answer 74

aggregate supply

Question 75

In the short run wages and prices tend to be?

Answer 75

sticky or rigid

Question 76

As output rises above its long-run potential, demand for resources does what?

Answer 76

bids up wages and prices

Question 77

The speed of wage and price adjustments is what in economics?

Answer 77

its much debated

Question 78

What is much debated in economics?

Answer 78

speed of wage and price adjustments

Question 79

Perfectly flexible wages and prices/perfect sensitive inflation rate response to the output gap imply a perfectly vertical what?

Answer 79

Aggregate supply curve

Question 80

A rise in expected inflation does what to the aggregate supply curve?

Answer 80

shifts it up

Question 81

A rise in price shock does what to aggregate supply curve?

Answer 81

shifts up

Question 82

A rise in output gap does what to the aggregate supply curve?

Answer 82

shifts up

Question 83

A fall in expected inflation does what to the aggregate supply curve?

Answer 83

shifts down

Question 84

A fall in price shock does what to the aggregate supply curve?

Answer 84

shifts down

Question 85

A fall in output gap does what to the aggregate supply curve?

Answer 85

shifts down

Question 86

A rise in expected inflation or price shock does what to the short run aggregate supply curve?s

Answer 86

shifts up

Question 87

What are the differences between actual GDP and potential GDP?

Answer 87

output gaps

Question 88

The output that would be produced if the economy's resources were fully employed at their long-run sustainable intensities?

Answer 88

potential GDP

Question 89

What kind of unemployment is there when potential GDP is involved?

Answer 89

frictional

Question 90

A higher output gap does what to inflation?

Answer 90

increases

Question 91

A persistent output gap increases expected inflation and shifts the aggregate suply curve?

Answer 91

Up

Question 92

In the long-run, the economy exhibits what kind of tendencies?

Answer 92

self correcting

Question 93

What does much of the debate about short run out revolve around?

Answer 93

The speed of the adjustment and to what extent the actions of the government should be

Question 94

What is generally agreed upon about short run output?

Answer 94

it will eventually return to a natural rate

Question 95

What adjustment process has inflexible or rigid wages that are particularly downward?

Answer 95

slow adjustment process

Question 96

What adjustment process has a need for active government policy?

Answer 96

slow adjustment process

Question 97

What are the two types of adjustment processes?

Answer 97

slow and rapid

Question 98

What adjustment process has flexible wages and prices?

Answer 98

rapid

Question 99

What adjustment process has less need for government intervention?

Answer 99

rapid

Question 100

In this adjustment process, episodes of unemployment are short and even necessary

Answer 100

rapid adjustment

Question 101

In this adjustment process long periods of unemployment destroy job skills and make future employment more difficult

Answer 101

slow adjustment

Question 102

A shift in aggregate demand to the right due to a positive demand shock does what to output and inflation?

Answer 102

increases

Question 103

A negative demand shock shifts the Aggregate demand curve where?

Answer 103

left

Question 104

A positive demand shock shifts the AD curve where?

Answer 104

right

Question 105

A negative supply shock shifts the AS curve where?

Answer 105

up

Question 106

A shift in the AS curve up does what to inflation and output?

Answer 106

increases inflation | decreases output

Question 107

A permanent negative supply shock shifts the LRAS curve where?

Answer 107

left

Question 108

A permanent negative supply shock shifts the AS curve where?

Answer 108

up

Question 109

What can occur during health care cost slow down, computerization of business processes, and rapid spread of online use?

Answer 109

positive permanent supply shock

Question 110

A permanent positive supply shock shifts LRAS where?

Answer 110

right

Question 111

A permanent positive supply shock shifts AS where?

Answer 111

down

Question 112

A permanent positive supply shock leads to what?

Answer 112

permanent rise in output | permanent decrease inflation

Question 113

Permanent supply shocks affect output and inflation where?

Answer 113

short and long run

Question 114

Temporary supply shocks affect output and inflation when?

Answer 114

Only in the short run

Question 115

A permanent supply shock that will result in higher prices means there will be an immediate rise in what?

Answer 115

inflation

Question 116

One group of economists believes tat business cycle fluctuations result from?

Answer 116

permanent supply shocks alone

Question 117

The theory that says business cycle fluctuations result from permanent supply shocks alone is called?

Answer 117

real business cycle theory

Question 118

Monetary policy tightening does what to aggregate demand?

Answer 118

decreases

Question 119

A decrease in aggregate demand does what to ouput?

Answer 119

lowers

Question 120

A decrease in output does what to inflation?

Answer 120

decreases

Question 121

These can occur as a result of changes in labor costs or other product costs

Answer 121

supply shocks