Question 1

Define potential GDP. Under what circumstances does actual real GDP fall short of potential GDP, equal potential GDP, and exceed potential GDP?

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Question 2

How does a cut in interest rates that increases investment affect the quantity of real GDP demanded, the aggregate demand curve, real GDP, and the price level?

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Question 3

State how shifts in the aggregate demand curve can explain the movement of real GDP around potential GDP.

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Question 4

Can actual real GDP exceed potential GDP?

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Question 5

-What is the current equilibrium price level and real GDP for the economy illustrated in the figure above?
 Does this economy have an inflationary gap, a recessionary gap, or neither?
 As it adjusts toward full employment, which curve shifts?
 What is the equilibrium real GDP and price level that the economy will ultimately reach?

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-What is the current equilibrium price level...

Question 6

What is a cost-push inflation?

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Question 7

What are sources that can start a demand-pull inflation?

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Question 8

-Based on the table above,
a. What is the equilibrium price level and real GDP?
b. If potential GDP is $11.0 trillion, what does that imply about the economy's level of employment?
c. If potential GDP is $9.0 trillion, what does that imply about the economy's level of employment?

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-Based on the table above,
a. What is...

Question 9

"The aggregate demand multiplier results in the aggregate demand curve shifting by more than any given initial change in expenditure." Is the previous statement correct or incorrect?

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Question 10

The economy is at full employment and then aggregate demand increases. Describe what happens as an immediate result of the increase in aggregate demand. Describe how the economy adjusts back to full employment.

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Question 11

When the aggregate supply curve intersects the aggregate demand curve at a level of real GDP that exceeds potential GDP, is there an inflationary gap or a deflationary gap?
 What adjustments will take place?

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Question 12

Suppose that during 2005, the actual real GDP of Chile was 3.5 billion pesos at the same time the potential GDP was 3.4 billion pesos. What sort of equilibrium existed in Chile?

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Question 13

"An increase in Mexican income decreases aggregate demand in the United States." Is the preceding statement correct or incorrect?
 Briefly explain your answer.

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Question 14

What is the aggregate demand multiplier and why does it occur?

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Question 15

Describe how a demand-pull inflation can occur.

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Question 16

What is demand-pull inflation?

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Question 17

What two variables are determined in an aggregate supply-aggregate demand figure?
 Is the slope of the aggregate supply curve positive or negative?
 Is the slope of the aggregate demand curve positive or negative?

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Question 18

What are the two channels through which the world economy can affect U.S. aggregate demand?
 State what changes in the world economy can increase U.S. aggregate demand.

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Question 19

Explain how changes in foreign income can impact real GDP in a country.

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Question 20

What factors can start a cost-push inflation?
 What must the Fed's response be for the inflation to continue?

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...

Quiz 19: Aggregate Supply and Aggregate Demand

Define potential GDP. Under what circumstances does actual real GDP fall short of potential GDP, equal potential GDP, and exceed potential GDP?

How does a cut in interest rates that increases investment affect the quantity of real GDP demanded, the aggregate demand curve, real GDP, and the price level?

State how shifts in the aggregate demand curve can explain the movement of real GDP around potential GDP.

Can actual real GDP exceed potential GDP?

What is a cost-push inflation?

What are sources that can start a demand-pull inflation?

-Based on the table above, a. What is the equilibrium price level and real GDP? b. If potential GDP is $11.0 trillion, what does that imply about the economy's level of employment? c. If potential GDP is $9.0 trillion, what does that imply about the economy's level of employment?

"The aggregate demand multiplier results in the aggregate demand curve shifting by more than any given initial change in expenditure." Is the previous statement correct or incorrect?

The economy is at full employment and then aggregate demand increases. Describe what happens as an immediate result of the increase in aggregate demand. Describe how the economy adjusts back to full employment.

When the aggregate supply curve intersects the aggregate demand curve at a level of real GDP that exceeds potential GDP, is there an inflationary gap or a deflationary gap? What adjustments will take place?

Suppose that during 2005, the actual real GDP of Chile was 3.5 billion pesos at the same time the potential GDP was 3.4 billion pesos. What sort of equilibrium existed in Chile?

"An increase in Mexican income decreases aggregate demand in the United States." Is the preceding statement correct or incorrect? Briefly explain your answer.

What is the aggregate demand multiplier and why does it occur?

Describe how a demand-pull inflation can occur.

What is demand-pull inflation?

What two variables are determined in an aggregate supply-aggregate demand figure? Is the slope of the aggregate supply curve positive or negative? Is the slope of the aggregate demand curve positive or negative?

What are the two channels through which the world economy can affect U.S. aggregate demand? State what changes in the world economy can increase U.S. aggregate demand.

Explain how changes in foreign income can impact real GDP in a country.

What factors can start a cost-push inflation? What must the Fed's response be for the inflation to continue?