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Definitons
Trivia
Practice Problems
100
Shows the relationship between the aggregate price level and the quantity of aggregate output supplied that exists in the short run
What is the SRAS curve
100
Does an increase in the cost of production increase or decrease the SRAS?
Decrease
100
In general, a change in the price level, all other things unchanged, causes A) a movement along the aggregate demand curve. B) a shift of the aggregate demand curve. C) both a movement along the aggregate demand curve and a shift in the curve. D) no change in the purchasing power of assets.
A - a movement along the aggregate demand curve
200
The dollar amount of the wage paid
What is Nominal Wage
200
use the graph to show the effect of an increase in the cost of production on the SRAS curve
the SRAS curve shifts upward to the left
200
Suppose that a presidential candidate who promised large personal income tax cuts is elected. Which of the following is most likely to occur? A) a decrease in short-run aggregate supply B) a decrease in aggregate demand C) an increase in short-run aggregate supply D) an increase in aggregate demand
D - an increase in aggregate demand
300
Shows the relationship between the aggregate price level and the quantity of aggregate output supplied that would exist if all prices were flexible
LRAS Curve
300
Would an increase in productivity cause a left or right shift in the SRAS curve? Show on the graph
an increase in productivity causes the SRAS curve to shift right
300
The only government policy that has a DIRECT effect on the aggregate demand curve is: A) changing the quantity of money. B) raising or lowering the tax rate. C) changing the level of government purchases of final goods and services. D) changing the level of government transfers.
C - changing the level of government purchases of final goods and services
400
The level of real GDP the economy would produce if all prices were flexible
What is potential output
400
Why is the LRAS curve vertical?
because it shows us the amount of output that can POTENTIALLY be produced in the economy
400
The short-run aggregate supply curve may shift to the right if: A) productivity increases. B) nominal wages increase. C) personal income taxes decrease. D) commodity prices rise.
A - productivity increases
500
Shows the relationship between the aggregate price level and the quantity of aggregate output demanded by the total economy
What is Aggregate Demand
500
Can output be above/below potential in the LRAS curve
No!
500
. In the long run, nominal wages are: A) sticky downward but flexible in an upward direction. B) sticky upward but flexible in a downward direction. C) sticky in both an upward and downward direction. D) flexible because contracts and informal agreements are renegotiated in the long run.
D - Flexible because contracts and informal agreements are renegotiated in the long run