difference between aggregate expenditure and aggregate demand is that
aggregate demand shows the relationship between the price level and the jlevel of aggregat expediture when all other factors that affect aggregate expenditure are held constant; aggregate expediture is a point on the aggregate demand curve at a specific price.
The aggregate demand curve does not slope down for
a lower price level makes imports from other countries less expenses, and US citizens buy more imports.
an increase in the price level will cause a what in the aggregate demand curve.
movement up along
an increase in government purchases will cause a what in the aggregate demand curve.
rightward shift
an increase instate income taxes will cause a what in the aggregate demand curve.
leftward shift
an increase in interest rates will cause a what in the aggregate demand curve.
leftward shift
A faster income growth in other countries will cause what in the US aggregate demand curve.
rightward shift
aggragate demand curve does not shift because of the
price level change
the long run aggregate supply curve is vertical because in the long run,
changes in the price level do not affect potential GDP, as potential GDP depends on the size of the labor force, capital stock and technology
Suppose that workers and firms could always predict next years price level with perfect accuracy. Under these circumstances, the SRAS curve
would be the same as the LRAS
A supply shock is
a sudden increase in the price of an important natural resource, resulting in a leftward shift of the SRAS curve
What would cause a decrease in real GDP and if large enough a recession?
an increase in interest rates that causes aggregate demand to fall
What scenario would lead to a reduction in real GDP and may even cause a recession
an increase in oil price that causes short-run aggregate supply to fall
what would cause an increase in the price level (short run inflation)
a reduction in taxes that increases aggregate demand
In the dynamic aggregate demand and aggregate supply model, if aggregate demand increases faster than potential real GDP there will be
inflation
In the dynamic aggregate demand and aggregate supply model, if aggregate demand increases slower than potential real GDP there will be
recession
During the expansion of the business cycle, production, employment and income...
increase
During the recession phase of the business cycle, production, employment and income...
decrease
in the first quarter of 2011, business inventories increased by $49.1 billion. Can we tell from this information whether aggregate expenditure was higher or lower than GDP during the first quarter of 2011?
Aggregate expenditure was less than GDP in the first quarter of 2011
What is the effect on inventories, GDP, and employment when aggregate expenditure exceeds GDP?
Inventories decrease, GDP increases and employment increases
in the 45 degree line diagram the 45 degree line shows
all the points where aggregate expediture equals real GDP
Suppose we drop the assumption that net exports do not depend on real GDP
negative slope because as domestic GDP or income increases, imports increase while exports remain the same leading to a reduction in net exports
correct statement about planned inventory increases
planned inventory increases are likely to indicate business optimism and correspond with upturns in the businesss cycle
correct statement about unplanned inventory increases
unplanned inventory increase are likely to indicate that aggregate expenditures are low and correspond with downturns in the business cycle
the multiplier effect is the process by which
an increase in autonomous expenditure leads to a larger increase in real GDP
If the marginal propensity to consume is .90 by how much will an increase in planned investment spending of $200 billion shift up the aggregate expediture line?
if planned investment spending increases by $200 billion, it will shift the aggregate expenditure line up by $200 billion
by how much will it increase equilibrium real GDP?
increase by $2000 billion
would a larger multiplier lead to more severe recessions or less severe recessions?
a larger multiplier means that small changes in spending lead to large changes in GDP, and thus recessions would be more severe.
True of False: Increases in real GDP per capita do not increase the amount of goods and services available to a country's citizens
false
True of False: increases in real GDP per capita increase life expectancy at birth
True
True of False: Increases in real GDP per capita mean people will have a lower portion of leisure time over the course of their lives
False
What factores would cause a US labor productivity to be nearly six times higher than russian labor productivity?
the US has more capital available per worker and higher levels of technology
What is not a loanable fund?
Real Estate
households supply loanable funds because of the
interest income recieved from the borrowers
businesses demand loanable funds because
firms need to borrow funds for new projects such as building new factories or carrying out new research projects.
A weak financial system might make economic growth difficult since
capital investment, essential for rapid economic growth, is often financed by borrowed funds and an unstable financial system leads to difficulty attracting loanable funds
With the decrease shift in supply, the equilibrium quantity of loanable funds
decreases
with the change in equilibrium quantity of loanable funds, the quantity of saving decreases and the quantity of investment
decreases.
suppose the economy is currently in a recession and that economic forecasts indicate that the economy will soon enter an expansion. As a result
expected profitability of new investment in plant and equipment increases and the demand for loanable funds rises.
What is the general relationship between the business cycle and unemployment and inflation?
during an expansion, unemployment falls and inflation increases.
When examining economic growth rates throughout history
the world experienced little to no growth until the industrial revolution, after which some economies began to experience growth.
When comparing US economic growth with the economic growth that occurred in the soviet union during the 1900s, a possible explanation for the US growing at significantly higher rates is
the US experienced a greater level of technological progress than the soviet union.
Why are the limits on political freedom likely to become an obstacle to china's continued economic growth?
failure to establish the rule of law, entrepreneurs will feel secure enough to bring together the factors of production, lack of consistent enforcement of property rights.
