Download AP Macro Economics - Spring Branch ISD

AP Macro Economics
Chapter 11
Aggregate Demand and Aggregate Supply
Directions; use the information in the text to answer the following questions.
Other things equal, an outward shift of the production possibilities curve can be expected
to shift the aggregate supply curve ______________________________.
2.
Monopoly or market power is the ability of a firm to set ____________________.
3.
Other things equal, _______________________________ of the dollar decreases
aggregate demand in the United States and may increase aggregate supply by reducing
the prices of imported resources.
4.
Graphically, demand-pull inflation is shown as a rightward shift of the AD curve in the
___________________________ or _______________________ ranges of aggregate
supply.
5.
Graphically, cost-push inflation is shown as a leftward shift of __________ curve.
6.
Graphically, the full-employment, low-inflation, rapid-growth economy of the last half of
the 1990s is depicted by a _____________________ shift of the aggregate demand curve
and a _____________________ shift of the aggregate supply curve.
0
Q2 Q1
Real domestic output GDP
(A)
P2
P1
a
AD
0
AS1 AS2
AD2
P3
b
Price level
P1
AD2 AD1
AD1
AS2 AS1
AS
Price level
Price level
1.
Q2 Q1
Real domestic output GDP
(B)
P2
P1
0
b
a
c
Q1 Q2 Q3
Real domestic output GDP
(C)
7.
Refer to the above diagrams. Assume that all curves have shifted as shown by the arrows.
A recession is depicted by panels _______________________________.
8.
Refer to the above diagrams. Assume that all curves have shifted as shown by the arrows.
Cost-push inflation is depicted by panel ___________________________.
9.
Refer to the above diagrams. Assume that all curves have shifted as shown by the arrows.
Growth, full-employment and relative price stability is depicted by panel
______________________.
10. Refer to the above diagrams. Assume that all curves have shifted as shown by the arrows.
Other things equal, an increase in investment spending is depicted by panel
_____________________.
11. Refer to the previous diagrams. Assume that all curves have shifted as shown by the
arrows. Other things equal, a decline in productivity is depicted by panel
___________________.
12. Refer to the previous diagrams. Assume that all curves have shifted as shown by the
arrows. Other things equal, a decline in net exports caused by a change in incomes abroad
is depicted by panel _____________________.
13. Refer to the previous diagrams. Assume that all curves have shifted as shown by the
arrows. Other things equal, a decline in net exports caused by the foreign purchases effect
of a price-level increase is depicted by the move from point a to point b in panel
__________________.
14. Refer to the previous diagrams. Assume that all curves have shifted as shown by the
arrows. Other things equal, a decrease in resource prices is depicted by panel
_______________________.
Amount of real
Price level
output demanded (index value)
$200
300
300
250
400
200
500
150
500
150
Amount of real
output supplied
$500
500
400
300
200
15. Refer to the above data. The vertical range of the aggregate supply curve is associated
with price levels __________________________________________.
16. Refer to the above data. The equilibrium price level will be ________________.
17. Refer to the above data. If the price level is 150 and producers supply $300 of real output
a shortage of real output of __________________ will occur.
18. Refer to the above data. Full-capacity output in this economy will occur at a real output
level of _____________________.
19. The equilibrium price level and level of real output occur where ______________
__________________________________________________________________.
20. If aggregate demand increases and, as a result, real output and employment increase but
the price level remains unchanged, we can assume that aggregate demand intersects
aggregate supply in the __________________________ range of the aggregate supply
curve.
21. If aggregate demand intersects the aggregate supply curve in the intermediate range of
aggregate supply, a leftward shift in the aggregate supply curve will cause
_____________________________________________________________.
Price level
AS1 AS
2
P1
AD1
0
AD2
Q1 Q2 Q3
Real domestic output
22. In the above figure AD1 and AS1 represent the original aggregate supply and demand
curves and AD2 and AS2 show the new aggregate demand and supply curves. At the
original equilibrium price and quantity, this economy is in the
______________________________ range of the AS curve.
23. Suppose the price level increases, but real output is unchanged. We can infer that
aggregate demand has increased in the ________________________ range of the
aggregate supply curve.
24. If the dollar price of foreign currencies falls (that is, the dollar appreciates), we would
expect aggregate demand to _________________________ and aggregate supply to
__________________________.
25. Prices and wages tend to be flexible _________________________________, but
inflexible _____________________________________.
26. _____________________________________ are above-market-wages that elicit so
much added work effort that per-unit production costs are lower than at market wages.
27. ______________________________________ are the costs to firms of changing prices
and communicating them to customers.
28. The fear of unwanted price wars may explain why many firms are reluctant to
______________________________ when a decline in aggregate demand occurs.
29. In recent years unemployment rates in ____________________________ have been
higher than in the United States.
30. It is unclear whether high ____________________________________ rates have
resulted from high natural rates of unemployment or insufficient aggregate demand.