UB MGM 301 - chapter 6-2 (2 pages)

Previewing page 1 of 2 page document View the full content.
View Full Document

chapter 6-2



Previewing page 1 of actual document.

View the full content.
View Full Document
View Full Document

chapter 6-2

39 views


Pages:
2
School:
University at Buffalo-SUNY
Course:
Mgm 301 - Principles Of Marketing
Unformatted text preview:

Chapter 6 Real GDP and Price Level in the Long Run 1 The sum of all planned expenditures in an economy is called aggregate demand aggregate demand curve The sum of planned production in the economy is called aggregate supply aggregate supply curve 2 The long run aggregate supply curve is horizontal vertical because in the long run there is full incomplete information and full adjustment to changes in the price level can occur 3 The aggregate demand curve relates planned expenditures of all goods and services to various The aggregate supply curve relates planned rates of total production for the entire economy to various 4 The aggregate demand curve is sloped due to three effects and 5 When the price level rises other things being constant the real wealth of people who hold cash balances falls rises Therefore planned purchases of goods and services will fall rise 6 When a nation s price level falls other things being constant its exports rise fall and its imports rise fall Therefore total planned purchases will rise fall 7 When the price level falls people will want to hold more less money in order to carry out the same transactions This decrease in the demand for money causes interest rates to rise fall Such a change in the interest rate causes households to plan to purchase more fewer consumer durables and businesses to plan to purchase more fewer capital goods 8 If government spending rises and taxes fall the AD curve will shift to the left right If the economic forecast is rosy the AD curve will shift to the left right If the money supply falls the AD curve shifts to the 9 If the position of the aggregate demand curve remains unchanged then economic growth causes the longrun equilibrium price level to decline increase This is called 10 Which one of the following does not cause the AD curve to shift a an increase in taxes b a decrease in the real interest rate c a decrease in the price level d a change in the money supply 11 Which of the following must be true of a long run deflationary situation in which real GDP is increasing I The AD curve must be shifting rightward ceteris paribus II The LRAS curve must be shifting leftward ceteris paribus III The LRAS curve must be shifting rightward ceteris paribus a I only b III only c both I and II only d both II and III only 12 Consider the graph below and then answer the following questions a What is the current long run equilibrium level of real GDP What is the current long run equilibrium price level b If the economy grows sufficiently that 2 trillion in additional real GDP is forthcoming in the long run and if aggregate demand remains unchanged what will be the new long run equilibrium price level 13 Consider the diagram below and suppose that long run equilibrium real GDP rises by 2 trillion but the equilibrium price level remains unchanged Assuming parallel shift s of any schedule draw new schedules showing how this could take place 14 T F Demand side inflation occurs when LRAS remains unchanged but aggregate demand increases 15 T F If people s preferences income and purchase habits remain unchanged but LRAS increases this is an example of supply side inflation


View Full Document

Access the best Study Guides, Lecture Notes and Practice Exams

Loading Unlocking...
Login

Join to view chapter 6-2 and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view chapter 6-2 and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?