Chapter 9

Question 0

Key component of aggregate demand/supply model

Answer 0

LRAS

Question 1

An increase in economy’s potential output

Answer 1

Economic growth

Question 2

What does economy need to produce?

Answer 2

Human resource or labor, physical resources or capital

Question 3

If business spends more on plants and equipment what happens?

Answer 3

Economies growth rate expands

Question 4

Model is used to

Answer 4

Simplify complicated reality and visualize it in order to understand it and make prediction

Question 5

Unemployment is —— related to output

Answer 5

Inversely

Question 6

What is aggregate demand or expenditures?

Answer 6

government
Consumption
Investment or business spending
Net exports

Question 7

Increase in price level decreases the real value of money balances which makes us want to spend less on goods and services

Answer 7

Real balance wealth effect

Question 8

Inverse relationship with total expenditures

Answer 8

Interest rate -when prices increase interest rates tend to increase
Open economy- domestic price rise relative to rat of world reduce exports

Question 9

Cause increase in aggregate demand

Answer 9

Increase money circulation
Increase security about jobs and future income
Improvements in economic conditions
A reduction in real interest rates
A drop in foreign exchange dollar

Question 10

Price where AD intersects LRAS

Answer 10

Long run equilibrium

Question 11

Two situations that result in inflation

Answer 11

Decrease LRAS

Increase in AD

Question 12

The price level is set by

Answer 12

AD