Doblas HW 5 review

Aggregate demand increases if expected future income, inflation, or profits ________. Moreover, aggregate demand increases if fiscal policy ________ government expenditure.

increase; increases

Aggregate demand increases if fiscal policy ______ taxes or ________ transfer payments.

decreases; increases

Aggregate demand increases if monetary policy ______ the quantity of money and ______ interest rates.

increases; decreases

Aggregate demand increases if the US Dollar _______ or foreign income _______. 

depreciates; increases

When the price level, the money wage rate, and other factor prices rise by the same percentage, there is a movement along __________. Potential GDP _______. 

the LAS curve; does not change

When the price level rises but the money wage rate and other factor prices remain the same, there is a movement along _______. The quantity of real GDP supplied ________.

the SAS curve; increases

The table gives an economy's aggregate demand, short-run aggregate supply, and long run-aggregate supply schedules. 

Price Level	Real GDP demanded	Real GDP supplied in Short Run	Real GDP supplied in Long Run
100	700	200	700
110	600	350	700
120	500	500	700
130	400	650	700

A graph representing this table is shown.

What type of output gap does the graph show?

a recessionary gap

Choose the correct statement about the LAS curve

The LAS curve is vertical because potential GDP is independent of the price level

What is the effect of a rise in the money wage rate?

It does not change the LAS curve because along the LAS curve a rise in the money wage rate is accompanied by an equal percentage change in the price level

The table gives the aggregate demand schedule, the short-run aggregate supply schedule, and the long-run aggregate supply schedule for an economy.

Price Level	Real GDP Demanded	Real GDP supplied in Short Run	Real GDP supplied in Long Run
100	550	350	500
105	500	400	500
110	450	450	500
115	400	500	500

The economy has __________.

a recessionary gap of $50 billion

Choose the correct statement.

The quantity of real GDP supplied equals potential GDP at the price level at which the real wage rate is at its full-employment equilibrium level

In what circumstances does high inflation accompany economic growth? 

Inflation and growth happen at the same time when the LAS increases, but the money supply (and AD) increase at a higher rate than the increase in LAS.

A ______ macroeconomist believes that business cycle fluctuations are the efficient responses of a well-functioning market economy that is hit by shocks that arise from the uneven pace of technological change.

classical

A ______ macroeconomist believes that wages take a very long time to adjust, and that fiscal policy should boost aggregate demand to exit recessions in a reasonable amount of time.

Keynesian

Long run macroeconomic equilibrium ______. 

occurs when real GDP equals potential GDP, and the LAS , SAS , and AD curves intersect