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ECON 202 > Aggregate Demand and Aggregate Supply > Flashcards

Aggregate Demand and Aggregate Supply Flashcards

1
Q

What is Recession

A

It is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

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2
Q

What is Depression

A

It is a severe recession

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3
Q

Money is a veil behind the actions of real economic forces are concealed.
A. True
B. False

A

True

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4
Q

Money does not matter in a classical model.
A. True
B. False

A

True

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5
Q

In the long run, prices change and real variables are fixed.
A. True
B. False

A

True

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6
Q

Money neutrality holds nominal variables and doesn’t affect real variables.
A. True
B. False

A

True

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7
Q

In the short run, prices are fixed, and real variables change. Money neutrality does not hold.
A. True
B. False

A

True

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8
Q

When studying year to year fluctuations in the economy, the assumption of monetary neutrality is not appropriate.
A. True
B. False

A

True

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9
Q

In the short run, most real and nominal variables are intertwined.
A. True
B. False

A

True

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10
Q

What is the model of aggregate demand and aggregate supply.

A

It is the model that economists use to explain short run fluctuations in economic activity around its long-run trend.

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11
Q

What is aggregate-demand curve

A

It is a curve that shows the quantity of goods and services that households, firms, and the government want to buy at each price level.

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12
Q

What is aggregate-supply curve

A

It is a curve that shows the quantity of goods and services that firms choose to produce and sell at each price level.

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13
Q

What is the Wealth effect

A

It is an economic theory that suggests that individuals tend to spend more when they perceive themselves to be wealthier when there’s a decrease in price level.

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14
Q

What is the Interest rate effect

A

It is a concept in monetary economics that describes how changes in interest rate decrease can influence overall economic activity.

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15
Q

What is the real exchange rate effect

A

It is the tendency for a fall in the price level to decrease the real exchange rate and increase net exports.

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16
Q

What are the 4 changes why the aggregate-demand curve might shift.

A
  1. Change in consumption
  2. Change in investment
  3. Change in government purchases
  4. Change in net exports
17
Q

If Canadians become more concerned with saving for retirement and reduce current consumption,aggregate-demand will decline and shift to the left.
A. True
B. False

A

True

18
Q

If the government cuts taxes, it encourages people to pend more, resulting in an increase in aggregate-demand and will shift right.
A. True
B. False

A

True

19
Q

If firms become pessimistic about future business conditions, they may cut back on investment spending, shifting aggregate-demand to the left.
A. True
B. False

A

True

20
Q

Suppose the computer industry introduces a faster line of computers and many firms decide to invest in new computer systems. This will lead the aggregate-demand curve to the right.
A. True
B. False

A

True

21
Q

An increase in the supply of money lowers the interest rate on the short run.
A. True
B. False

A

True

22
Q

If the value of the Canadian dollar increases, Canadian goods become more expensive to foreigners. Net exports fall, and aggregate demand shifts to the left.
A. True
B. False

A

True

23
Q

The vertical LRAS curve is a graphical representation of the classical dichotomy and money neutrality.
A. True
B. False

A

True

24
Q

What is the Natural rate of output

A

It is the production of goods and services that an economy achieves in the long run when unemployment is at its normal rate.

25
Q

What are the 4 changes why aggregate-supply curve might shift.

A
  1. Changes in capital
  2. Changes in labour
  3. Changes in natural resources
  4. Changes in technological knowledge
26
Q

In the short run, the price level does affect the economy’s output.
A. True
B. False

A

True

27
Q

An increase in the overall level of prices tends to raise the quantity of goods and services supplied.
A. True
B. False

A

True

28
Q

What is the sticky wage theory

A

It is an economic concept that suggests that wages do not adjust immediately to price changes in the overall price level or economic conditions.

29
Q

What is the sticky price theory

A

It is an economic concept that suggests that prices of goods and services do not adjust immediately to changes in the overall price level or economic conditions.

30
Q

What is the misperceptions theory

A

It is an economic concept that is part of the New Keynesian school of thought. It offers an explanation for why changes in the overall price level or the inflation rate can affect real economic activity in the short run.

31
Q

In the short run, shifts in aggregate demand cause fluctuations in the economy’s output of goods and services.
A. True
B. False

A

True

32
Q

In the long run, shifts in aggregate demand affect the overall price level but do not affect the level of output.
A. True
B. False

A

True

33
Q

Policymakers who influence aggregate demand can potentially mitigate that severity of economic fluctuations.
A. True
B. False

A

True

34
Q

What is Stagflation

A

Stagflation is a situation in which the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high.

35
Q

Shifts in aggregate supply can cause stagflation.
A. True
B. False

A

True

36
Q

Policymakers who can influence aggregate demand can potentially mitigate the adverse impact on output but only at the cost of exacerbating the problem of inflation.
A. True
B. False

A

True

ECON 202 (14 decks)

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