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The aggregate demand curve shows the relationship between
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The aggregate demand curve shows the relationship between
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The short run aggregate supply curve shows the relationship in the short run between
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the price level and the quantity of real GDP supplied by firms.
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Which of the following would cause a decrease in aggregate demand?
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a decrease in government spending
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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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The interest rate effect refers to the fact that a higher price level results in
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higher interest rates and lower investment.
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The international-trade effect refers to the fact that an increase in the price level will result in
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a decrease in exports and an increase in imports.
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The short-run aggregate supply curve slopes upward because of all of the following reasons except
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in the short run, an unexpected change in the price of an important resource can change the cost to firms.
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How does a decreasea decrease in the price level affect the quantity of real GDP supplied in the long run?
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Changes in the price level do not affect the level of GDP in the long run.
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A supply shock is
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a sudden increase in the price of an important natural resource, resulting in a leftward shift of the SRAS curve.
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If government policymakersdash-Congress, the president, and members of the Federal Reservedash-do not take any policy actions in response to the recession, what is the likely result?
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The unemployment rate will rise in the short run but return to the natural rate of unemployment in the long run, and real GDP will drop below potential GDP in the short run but return to potential GDP in the long run.
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Which of the following best explains how the economy will adjust back to long-run equilibrium?
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Short-run aggregate supply will decrease (shift leftward) as firms and workers adjust to the new price level
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At the new long-run equilibrium,
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real GDP and the unemployment rate will remain the same, but price level will be higher compared to the initial equilibrium, prior to the increase in exports.
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Which of the following factors brought on the recession of 2007minus−2009?
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The financial crisis.
The end of the housing bubble.
A rapid increase in the price of oil.
The end of the housing bubble.
A rapid increase in the price of oil.
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By "housing bubble" President Obama referred to an increase in the price of housing caused by
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an increase in the demand for housing based on the expectation that prices will continue to increase.
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The end of the housing bubble can bring on a recession because
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reduced demand for housing lowers investment, which in turn lowers aggregate demand and income.
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The 2007-2009 recession was a clear example of
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the effect that a decrease in aggregate demand can have on the economy.
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