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Exam 33: Aggregate Demand and Aggregate Supply

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Question 41

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Figure 33-9 ​ ​ -Refer to Figure 33-9. Identify the price and output levels consistent with long-run equilibrium.

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Question 42

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Scenario 33-2 Imagine that in the current year the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. -Refer to Scenario 33-2. How is the new long-run equilibrium different from the original one?

A) The price level and real GDP are higher.
B) The price level and real GDP are lower.
C) The price level is higher and real GDP is the same.
D) The price level is the same and real GDP is higher.

E) A) and D)
F) A) and B)

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Question 43

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The logic of the exchange-rate effect begins with a change in the price level changing the interest rate.

Which of the following would not be directly included in aggregate demand?

Increased optimism about the future leads to rising prices and falling unemployment in the short run.

Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange.

Who said about classical economic theory: "the long run is a misleading guide to current affairs. In the long run we are all dead"?

The sticky-price theory helps explain what feature of the aggregate demand and aggregate supply model?

Because economists understand what things change GDP, they can predict recessions with a fair amount of accuracy.

What curve shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level?

The effect of a change in the value of the dollar in the foreign exchange market due to a change in the price level helps explain the slope of aggregate demand, but does not shift it. The effects of a change in the value of the dollar in the foreign exchange market due to speculation is shown by shifting the aggregate demand curve.

Other things the same, what happens to the price level and the quantity of output when the short run aggregate supply curve shifts to the right?

The model of aggregate demand and aggregate supply is nothing more than a large version of the model of market demand and market supply.​

Figure 33-10 ​ ​ -Refer to Figure 33-10. Identify which long run aggregate-supply curve(s) would be consistent with long-run equilibrium.

The effect of an increase in the price level on the aggregate-demand curve is represented by a

Suppose the government raises taxes. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift?

Explain how a recession differs from a depression.

Identify the variables that could cause shifts in both the short-run and long-run aggregate-supply curves.

Explain how a change in the expected price level would shift the short-run and long-run aggregate-supply curves.

A change in the money supply changes only nominal variables in the long run.