Chapter 8: Aggregate Demand and Aggregate Supply

Suppose that U.S. producers purchase resource ABC from a foreign country. If the price of resource ABC rises, the result in the U.S. would be a

leftward shift of the SRAS curve

The real wage will rise if either the ____________ rises or the ___________ declines.

nominal wage, price level

Suppose the following: (1) productivity rises, (2) wealth increases, (3) any change in SRAS is less than any change in AD. Based on this information, in the short-run Real GDP will __________ and the price level will _____________.

rise, rise

After an adverse supply shock strikes Country XYZ, the country's ___________________ curve will shift _______________, which will lead to a(n) __________________ in the country's price level and a(n) ____________ in its short-run Real GDP.

short-run aggregate supply, leftward, increase, decrease

The international trade effect helps to explain why the ____________________ curve is _________________.

aggregate demand, downward sloping

A higher income tax rate ______________ consumption, causing a __________ shift in the AD curve.

decreases, leftward

The interest rate effect begins with a change in the_________________ and helps to explain why ____________________

price level, aggregate demand curve is downward sloping

A decrease in business taxes ____________________ the expected profitability of investment decisions, shifting the aggregate demand curve ___________________.

raises, rightward

There is a decline in income and business taxes and the price of nonlabor inputs decreases. Suppose that any change in AD will be less than any change in SRAS. It follows that the _____________ will decline and Real GDP will ______.

price level, rise