Questions from Ch 21 Flashcards
Assume the economy is operating at the full employment level of real GDP when aggregate demand increases from 2AD to AD . To return to the full employment level of real GDP, the aggregate supply curve shifts ____ and the new equilibrium price level _____
Left / Rises
If the AD curve shifts left on a fixed short-run AS curve, the result
Decrease in the price level & real GDP.
If the AS curve shifts right on a fixed AD curve, the result is
decrease in PL & increase in real GDP.
The AD and AS model is related to the business cycle via
Real GDP
If economy at full employment, cost-push inflation results from…
AS curve shifting right.
If economy is at full employment, demand-pull inflation results from…
AD curve shifting right
Stagflation is characterized by…
rising inflation & rising unemployment
In short run there is a ________ relationship between unemployment rate & rate of inflation.
a negative
A policy maker who is concerned w/ rate of inflation may not choose to reduce it because __________.
reducing rate of inflation means that unemployment rate will increase
What is the GDP price index if Nominal GDP - 5,600 & Real GDP - 5,000? (In the billions)
112
If real GDP in a yr was $3,600 billion and price index was 104, then nominal GDP in that yr was approx.?
$3,744 billion
What is the GDP Price Index if Nominal - 5,200 & Real - 4,800?
108.3
Base year is 2005, and the GDP price index in 2004 is 92.0. This implies that the…
prices in 2005 were higher than in 2004
For a nation’s real GDP per capita to rise during a year…
Real GDP must increase more rapidly than population.
The selection of which point on the production possibilities frontier is most likely to result in the largest increase in economic growth over time?
The highest point basically
An increase in the economy’s human capital would…
Shift the production possibilities frontier outward (expand)
A nation’s avg annual real GDP growth rate is 7.6%. What is the approximate. # of yrs it’d take for the GDP to double? (rule of 72)
9.5 yrs
Economic growth can be portrayed as a…
outward shift of the production possibilities frontier.
Scenario A has real GDP growing at a avg annual rate of 2% / Scenario B has a avg annual growth of 4%. Nation A & B’s real GDP would double in about..?
A - 36 years / B - 18 years
The aggregate demand curve shows the…
inverse relationship between PL and quantity of real GDP purchased.
The interest rate effect on aggregate demand indicates that a…
decrease in the price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending.
The foreign purchases, interest rate, and real-balances effects explain why the
Aggregate demand curve is downward-sloping.
An increase in personal income taxes would shift AD to the
Left because C will decrease.
What factors will shift AD1 to AD3? (to the right) (Y - PL / X - R GDP)
Decrease in Consumer Wealth
