Macroeconomics Final Exam: Chapter 12 AD-AS Model
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
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| Aggregate Demand (AD) Curve: | show 🗑
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| if P rises in AD curve, according to the wealth effect... | show 🗑
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| show | more money is required to buy a given quantity of g/s, increase demand for money causing increase in interest rates, higher interest rates makes borrowing less attractive and reduces I
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| show | inverse relationship between price (P) and consumer spending (C)
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| show | inverse relationship between price (P) and Investment Spending (I)
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| show | price level changes, all else constant
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| What factors would cause you to "shift" entire AD curve? | show 🗑
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| show | to combat a recession, to expand/ increase demand
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| show | reins in a boom, to reduce demand
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| show | Increase AD, shift AD curve to right (outward)
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| What is the effect of contractionary macro policy on AD curve? | show 🗑
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| show | gov. purchases, taxes, transfer programs
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| show | money supply, interest rates
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| show | relationship between fixed price (P) and amount of output supplied
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| What factors would cause you to "move along" the SRAS curve? | show 🗑
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| What factors would cause you to "shift" entire SRAS curve? | show 🗑
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| Long-Run Aggregate Supply (LRAS) Curve | show 🗑
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| show | K, H, T
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| show | what the economy is able to produce when resources are fully utilized, unemployment at its natural rate ("full employment")
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| show | AD
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| show | Increase AD, shift curve to right
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| show | Decrease AD, shift curve to left
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| What curve do supply shocks shift? | show 🗑
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| A negative supply shock will... | show 🗑
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| show | shift SRAS to the right
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| When do output gaps occur? | show 🗑
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| show | recessionary gap
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| show | inflationary gap
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| How will the economy self-correct in a recessionary gap? | show 🗑
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| show | negative supply or negative demand
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| How will the economy self-correct in a inflationary gap? | show 🗑
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| show | positive demand
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