The Aggregate Demand Aggregate Supply Model

Refers to Exhibit 4. Suppose the economy is operating in a recession such as point B in Exhibit 4. If policy makers allow the economy to adjust to the long run natural rate on its own, ?

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Refers to Exhibit 4. Suppose the economy is operating in a recession such as point B in Exhibit 4. If policy makers allow the economy to adjust to the long run natural rate on its own, ?

A. People will reduce their price expectations and the short run aggregate supply will shift right
B. People will raise their price expectations and aggregate demand will shift left
C. People will raise their price expectations and the short run aggregate supply will shift left
D. People will reduce their price expectations and aggregate demand will shift right

Suppose the economy is initially in long run equilibrium Then suppose there is a drought that destroys much of the wheat crop if policymakers allow the economy to adjust to long-run equilibrium on its own, according to the model to aggregate demand and aggregate supply what happens to prices and output in the long run ?

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Suppose the economy is initially in long run equilibrium Then suppose there is a drought that destroys much of the wheat crop if policymakers allow the economy to adjust to long-run equilibrium on its own, according to the model to aggregate demand and aggregate supply what happens to prices and output in the long run ?

A. Output rises; prices are unchanged from the initial value
B. Output and the price level are unchanged from their initial values
C. Output falls; prices are unchanged from the initial value
D. Prices fall; output is unchanged from its initial value

Suppose the economy is initially in long-run equilibrium Then suppose there is an increase in military spending due to rising international tensions According to the model of aggregate demand and aggregate supply what happens to prices and output in the long run ?

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Suppose the economy is initially in long-run equilibrium Then suppose there is an increase in military spending due to rising international tensions According to the model of aggregate demand and aggregate supply what happens to prices and output in the long run ?

A. Output falls; prices are unchanged from the initial value
B. Price fall; output is unchanged from its initial value
C. Output and the price level are unchanged from their initial values
D. Prices rise; output is unchanged from its initial value

Suppose the price level falls but suppliers only notice that the price of their particular product has fallen Thinking there has been a fall in the relative price of their product they cut back on production, This is a demonstration of the ?

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Suppose the price level falls but suppliers only notice that the price of their particular product has fallen Thinking there has been a fall in the relative price of their product they cut back on production, This is a demonstration of the ?

A. misperceptions theory of the short run aggregate supply curve
B. classical dichotomy theory of the short run aggregate supply curve
C. sticky price theory of the short run aggregate supply curve
D. sticky wage theory of the short run aggregate supply curve

Which of the following statements is true regarding the long-run aggregate supply curve? The long-run aggregate supply cruve ?

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Which of the following statements is true regarding the long-run aggregate supply curve? The long-run aggregate supply cruve ?

A. Is vertical because an equal change in all prices and wages leaves output unaffected
B. is positively sloped because price expectations and wages tend to be fixed is the long run
C. shifts right when the government raises the minimum wage
D. shifts left when the natural rate of unemployment falls

In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism is to ?

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In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism is to ?

A. shift the short-run aggregate supply curve to the left
B. shift the aggregate demand curve to the right
C. shift the short-run aggregate supply curve to the right
D. shift the aggregate demand curve to the left

Which of the following statements about economic fluctuations is true ?

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Which of the following statements about economic fluctuations is true ?

A. None of these answers
B. A depression is a mild recession
C. A variety of spending income, and output measures can be used to measure economic fluctuation because most macroeconomic quantitties tend to fluctuate together
D. A recession is when output rises above the natural rate of output