ECON 2301 DSMCh14 – Flashcards
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How can government policies shift the aggregate demand curve to the right?
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By increasing government purchases
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In the short run, a supply shock as a result of an unexpected decrease in oil prices will:
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decrease the price level but increase real GDP
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In the long-run, the level of output is:
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the full-employment level of output
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The paradox of thrift states that increased household savings will ultimately lead to:
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lower income
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Which of these factors will cause the long-run aggregate supply curve to shift to the right?
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The accumulation of more machinery and equipment
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According to the graph, an increase in government spending, all else equal, will shift the AD curve from the initial AD curve to the curve labeled:
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Increased AD
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The 2007-2009 recession was a clear example of the impact:
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that a decrease in aggregate demand can have on the economy
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According to the graph, the situation of this economy after the supply shock can be called:
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stagflation
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If firms reduce investment spending and the economy enters a recession, which of these contributes to the adjustment that causes the economy to return to its long-run equilibrium?
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the eventual agreement by workers to accept lower wages
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According to the graph, in this economy there will be a tendency for:
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both wages and prices to rise over time
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Which of these factors will shift the short-run aggregate supply to the left?
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A decrease in the size of the labor force
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Stagflation is a:
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combination of inflation and recession
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Which of these factors will cause the aggregate demand curve to shift?
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A change in the expectations of households and firms
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An unexpected change in the price of oil would be called __________ by economists.
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a supply shock
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Which of these policies affects the economy through intended changes in the money supply?
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Monetary policy
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The aggregate demand and aggregate supply model explains:
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short-run fluctuations in real GDP and the price level
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The 1974-1975 recession was a result of a:
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supply shock that caused a leftward shift of the short-run aggregate supply curve
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The long-run aggregate supply curve:
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shifts to the right as technological change occurs
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The wealth effect refers to the fact that:
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when the price level falls, the real value of household wealth rises, and so will consumption
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A higher domestic price level will result in:
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higher imports
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Which of these shifts the aggregate demand curve to the right?
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Lower interest rates
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The economy is in long-run equilibrium when the short-run aggregate supply and the aggregate demand curve intersect at a point:
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on the long-run aggregate supply curve
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The aggregate demand curve shows the relationship between:
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the price level and the quantity of real GDP demanded
