Aggregate Supply And Demand

Question 1

Flexible prices

Answer 1

Virtually guarantee that all output can be sold

Question 2

Flexible wages

Answer 2

Would ensure that everyone who wants a job has a job

Question 3

Say’s Law

Answer 3

“Supply creates its own demand”

Unsold goods will ultimately be sold when buyers and sellers find an acceptable price

Question 4

Aggregate demand

Answer 4

The total quantity of output demanded at alternative price levels in a time period, ceteris paribus

Aggregate demand curve
High on left then drops in a curved line to the right, lower prices encourage more spending

Question 5

Aggregate demand curve is downward slopping because

Answer 5

Real balance effect
Foreign trade effect
Interest - rate effect

Question 6

Aggregate supply

Answer 6

The total quantity of output producers and willing and able to supply at alternative prices in a given time period, ceteris pairibus

Aggregate supply curve is upward sloping

We expect the rate of output to increase when price levels rise

Question 7

Aggregate supply and demand curves summarize the market activity of

Answer 7

The whole (macro) economy

Question 8

Macro equilibrium

Answer 8

The unique combination of price level and real output compatible with the aggregate demand and aggregate supply

Mutually compatible with both buyer and seller intentions

Question 9

Macroeconomics is the study of the

Answer 9

Aggregate economy