question
Added all together
answer
Aggregate
question
Formula for Aggregate Demand
answer
AD = C + I + G + NX
question
Combination of all prices and all quantities that could possibly prevail in all of the markets
answer
Aggregate Demand
question
All the goods and services (real GDP) that buyers are willing and able to purchase at different price levels
answer
Aggregate Demand
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Aggregate demand has an __________________ relationship between ___________ and _______
answer
inverse;
real GDP;
price level
real GDP;
price level
question
Aggregate Demand is the demand ____________, _____________, ____________, and ___________
answer
consumers;
businesses;
government;
foreign countries
businesses;
government;
foreign countries
question
Three Reasons Aggregate Demand is Downward Slopign
answer
Wealth Effect;
Interest-Rate Effect;
Exchange-Rate Effect
Interest-Rate Effect;
Exchange-Rate Effect
question
THE WEALTH EFFECT
- Higher price levels reduce the ______________ of money
- Leads to a decrease in the ________________
- Lower price level increases ________
- Leads to an increase in the ________________
- Higher price levels reduce the ______________ of money
- Leads to a decrease in the ________________
- Lower price level increases ________
- Leads to an increase in the ________________
answer
purchasing power;
quantity of expenditures;
purchasing power;
quantity of expenditures
quantity of expenditures;
purchasing power;
quantity of expenditures
question
THE INTEREST-RATE EFFECT
- When the price level increases, lenders need to ____________ to get a _______ return on her loans
- Higher interest rates discourage _______________ and _____________
- When the price level increases, lenders need to ____________ to get a _______ return on her loans
- Higher interest rates discourage _______________ and _____________
answer
charge a higher rate;
real;
consumer spending;
business investment
real;
consumer spending;
business investment
question
THE EXCHANGE-RATE EFFECT
- When the US price levels increase, ______________ purchase fewer US goods and Americans purchase ________________
- The other countries don't want to buy from us when our price level is ________
- Our exports are going to to go ________, and so is ______________
- Exports fall and imports ________, causing real GDP demanded to __________
- When the US price levels increase, ______________ purchase fewer US goods and Americans purchase ________________
- The other countries don't want to buy from us when our price level is ________
- Our exports are going to to go ________, and so is ______________
- Exports fall and imports ________, causing real GDP demanded to __________
answer
foreign countries;
more foreign goods;
high;
down;
consumer spending;
rise;
fall
more foreign goods;
high;
down;
consumer spending;
rise;
fall
question
give the four shifters of Aggregate Demand
answer
Consumer spending;
investment;
government spending;
net export
investment;
government spending;
net export
question
The amount of goods and services (real GDP) that firms will produce in an economy at different price level
answer
aggregate supply
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Wages and resource prices will NOT increase as price level increases
- In the SR, price level DOES effect an economy's output
- In the SR, price level DOES effect an economy's output
answer
Short Run Aggregate Supply
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Wages and resources prices will increase as price levels increase
- In the LR, price level DOES NOT EFFECT an economy's output
- In the LR, price level DOES NOT EFFECT an economy's output
answer
Long Run Aggregate Supply
question
LONG RUN AGGREGATE SUPPLY
- In the LR, an economy's labor, capital, natural resource, and technology are what determine the total Q of goods and services supplied
- Positioned at the point of ________________
- In the LR, an economy's labor, capital, natural resource, and technology are what determine the total Q of goods and services supplied
- Positioned at the point of ________________
answer
full employment
question
Long run aggregate supply vertical line is positioned at the _____________________
answer
point of full employment
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SHIFTS IN LR AGGREGATE SUPPLY
- Change in .........
___________________, ______________, ______________, ______________
- Change in .........
___________________, ______________, ______________, ______________
answer
Labor;
capital;
natural resources;
technology
capital;
natural resources;
technology
question
In the SR, Aggregate Supply will shift _________. Why?
answer
Upward;
Sticky Wage Theory;
Sticky Price Theory;
Misperceptions Theory
Sticky Wage Theory;
Sticky Price Theory;
Misperceptions Theory
question
Nominal wages don't adjust very quickly to changes in economic conditions
(Think about the impact of long term contracts)
(Think about the impact of long term contracts)
answer
Sticky Wage Theory
question
The price of some goods and services are slow to adjust due to menu costs
(restaurants: Their menu cost will depend on a contract with a produce provider or meat provider for x amount every month, printing up new menus costs money, that will add to cost, some businesses will wait to adjust prices until it is a more convenient time for them)
(restaurants: Their menu cost will depend on a contract with a produce provider or meat provider for x amount every month, printing up new menus costs money, that will add to cost, some businesses will wait to adjust prices until it is a more convenient time for them)
answer
Sticky Price Theory
question
Suppliers may be slow to realize that the change in price is occuring across the economy and is not limited to their individual market
answer
Misperceptions Theory
question
SHIFTS IN SHORT RUN AGGREGATE SUPPLY
Changes in........
1- ________________
2- _______________
3- ________________
Changes in........
1- ________________
2- _______________
3- ________________
answer
resource prices;
actions of the government;
productivity
actions of the government;
productivity
question
A period of declining real incomes and rising unemployment
answer
recession
question
A severe recession
answer
depression
question
The model that most economists use to explain short-run fluctuations in economic activity around its long-run trend
answer
model of aggregate demand and aggregate supply
question
A curve that shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level
answer
Aggregate demand curve
question
A curve that shows the quantity of goods and services that firms choose to produce and sell at each price level
answer
aggregate supply curve
question
The production of goods and services that an economy achieves in the long run when unemployment is at its normal rate
answer
natural rate of output
question
A period of falling output and rising prices
answer
Stagflation
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