chapter 21

Question 1

what two macroeconomic outcomes do AD-AS framework focus on

Answer 1

1. The quantity of output produced across the
   whole economy.
2. The price of that output.

Question 2

what is the Aggregate demand curve

Answer 2

represents the total quantity of goods and services that an economy/buyers is willing to purchase at different price levels.

Question 3

is the aggregate demand curve upward or downward sloping

Answer 3

downward sloping

Question 4

what is the Aggregate supply curve

Answer 4

represents the total quantity of goods and services that all producers in an economy are willing and able to supply at different price levels.

Question 5

is the aggregate supply curve upward or downward sloping

Answer 5

upward sloping

Question 6

what is the equilibrium

Answer 6

The only point where the
quantity of output demanded is
equal to the quantity supplied.

Question 7

what is aggregate expenditure

Answer 7

the total amount of goods and services that people want to buy across the whole economy.

Question 8

why is the aggregate demand curve downward sloping

Answer 8

The aggregate demand curve shows that a
higher price level ultimately leads buyers to
demand a lower quantity of output.

Question 9

what causes a movement along the aggregate demand curve.

Answer 9

Changes in the price level

Question 10

what causes the aggregate demand curve to shift.

Answer 10

Any other factor (other than a change in price level) that causes consumers, investors, the government, or foreigners to change their spending plans.

Question 11

how do higher prices affect the aggregate demand curve

Answer 11

➢ lead the Fed to raise the real interest rate,
➢ reducing the quantity of output
demanded.
having there be a upward movement along the demand curve

Question 12

how do lower prices affect the aggregate demand curve

Answer 12

➢ lead the Fed to cut the real interest rate,
➢ raising the quantity of output
demanded.
having there be a downward movement along the demand curve

Question 13

An increase in aggregate expenditure
at any price level causes the aggregate
demand curve to BLANK.

Answer 13

1. shift to the right

Question 14

A decrease in aggregate expenditure
at any price level causes the aggregate
demand curve to BLANK.

Answer 14

1. shift to the left

Question 15

Why is the aggregate supply upward-sloping

Answer 15

higher output leads to a higher price level
Lower output leads to lower prices.

Question 16

BLANK causes a movement along the aggregate supply curve

Answer 16

Changes in the price level

Question 17

BLANK cause the aggregate supply curve to shift

Answer 17

Changes in production costs

Question 18

Changes in production costs can be caused by shifts in

Answer 18

1. Input prices
2. Import prices
3. Productivity
4. The exchange rate

Question 19

A fall in production costs causes
the aggregate supply curve to
BLANK

Answer 19

shift down to the right.

Question 20

A rise in production costs causes
the aggregate supply curve to
BLANK.

Answer 20

shift up to the left

Question 21

what is Stagflation

Answer 21

the combination of declining GDP (economic stagnation) and rising prices (inflation)

Question 22

If the prices of your inputs rise what happens to the aggregate supply

Answer 22

aggregate supply shifts up to the left

Question 23

When U.S. consumers pay higher prices for imported cars, clothes, etc what happens to the aggregate supply

Answer 23

Aggregate supply shifts up to the left

Question 24

If the prices of your inputs drop what happens to the aggregate supply

Answer 24

aggregate supply shifts down to the right

Question 25

When U.S. producers pay higher prices for imported raw materials and intermediate inputs…

Answer 25

Aggregate supply shifts up to the left

Question 26

Lower productivity means having to buy
more inputs to produce the same output. how does this affect the aggregate supply

Answer 26

Aggregate supply shifts up to the left

Question 27

higher productivity means having to do less. how does this affect the aggregate supply

Answer 27

Aggregate supply shifts down to the right

Question 28

Depreciation of the U.S. dollar leads suppliers to set higher prices, shifting aggregate supply to the BLANK.

Answer 28

left

Question 29

Appreciation of the U.S. dollar leads suppliers to set higher prices, shifting aggregate supply to the BLANK

Answer 29

right