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Exam 14: Aggregate Demand and Aggregate Supply

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Question 21

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Stickiness of wages

A) is unrelated to stickiness of prices.
B) lessens the stickiness of prices.
C) reinforces stickiness of prices.
D) may or may not reinforce stickiness of prices.

E) B) and D)
F) B) and C)

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Question 22

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Figure 14.2 -Refer to Figure 14.2. A movement from point a to point b could be caused by an)

A) increase in government spending.
B) decrease in the price of oil.
C) decrease in taxes.
D) decrease in short-run aggregate supply.

E) A) and B)
F) All of the above

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Question 23

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During an economic boom

The relationship between the level of prices and total quantity of goods and services producers are willing to supply is represented by the

Figure 14.2 -Refer to Figure 14.2. A movement from point c to point a could be caused by an)

Explain why the short-run aggregate supply curve is a relatively flat, horizontal line.

When the price level is low, resulting in domestic goods being cheaper than imported foreign goods,

Recall the Application about the behavior of prices in retail catalogs to answer the following question(s) . Economist Anil Kashyap of the University of Chicago examined the prices of 12 selected goods from L.L. Bean, REI, and The Orvis Company, Inc. Kashyap tracked the prices from the companiesʹ catalogs which were reissued every six months. -According to this Application, the prices which were tracked in the retail catalogs exemplified the macroeconomic concept of the short run, a period of time in which

Recall the Application about oil price fluctuations in the U.S. economy to answer the following question(s) . During the 1970s, the world economy was hit with a series of supply shocks which impacted the prices of oil and many agricultural commodities. Since the United States is a net importer of oil, the changes in oil prices also had an impact on aggregate demand. During the 1990s, the world economy experienced favorable supply shocks in the oil market, but in 2008, world oil prices skyrocketed to $145 a barrel before falling again in 2009 and 2010. -According to this Application, because the United States is a net importer of foreign oil, an increase in oil prices is like an)

The economyʹs ability to coordinate economic activity is hindered by

The relationship between the level of prices and the quantity of real GDP supplied is known as

Summary of the article: U.S. Economy: New-Home Sales Decline to Record Low (Update 1) By Bob Willis Bloomberg Businessweek February 24, 2010 In January 2010, new home sales in the United States dropped to their lowest level on record, as homebuilders faced significant competition from foreclosures of existing homes. The decline in sales occurred despite projections made just one month earlier that new home sales would rise in January. The sales decline reemphasized Fed Chairman Ben Bernankeʹs comments regarding the slow recovery of the economy and the need for continued low interest rates. New home sales declined in the Northeast, South, and West, with only the Midwest showing a small gain. For the entire nation, the median price of a new home fell to its lowest level since December 2003. Based on the sales rate in January 2010, the country had a 9.1-month inventory of homes, its highest rate since May 2009. -If home prices are falling, consumers purchasing a home will find their purchasing power of money has increased. This benefit to consumers is called the

Figure 14.1 -Figure 14.1 shows three aggregate demand curves. A movement from curve AD1 to curve AD0 could be caused by an)

When considering the aggregate demand curve, the wealth effect, interest rate effect and effects from international trade reinforce each other.

What are the two types of prices in an economy?

Recall the Application about oil price fluctuations in the U.S. economy to answer the following question(s) . During the 1970s, the world economy was hit with a series of supply shocks which impacted the prices of oil and many agricultural commodities. Since the United States is a net importer of oil, the changes in oil prices also had an impact on aggregate demand. During the 1990s, the world economy experienced favorable supply shocks in the oil market, but in 2008, world oil prices skyrocketed to $145 a barrel before falling again in 2009 and 2010. -According to this Application, between 1997 and 1998, supply shocks had what simultaneous effect in the oil market?

If prices are sticky

Output in the long run is determined by which of the two following factors when an economy operates at full employment?

Which of the following types of workers might have wages that change quickly?

Figure 14.1 -Figure 14.1 shows three aggregate demand curves. A movement from curve AD1 to curve AD2 could be caused by an)