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Chapter 12: Macroeconomics Aggregate Demand (page 239)
What are examples of aggregate demand?
Examples include consumer goods, capital goods, and government spending programs.
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True or False. Decreases in AD normally lead to decreases in both output and the price level.
Which of the following will shift the aggregate demand curve to the left?
The government reduces personal income taxes.
Interest rates rise.
The government raises corporate profit taxes.
There is an economic boom overseas that raises the incomes of foreign households.
Which of the following will shift the aggregate supply curve to the right?
A new networking technology increases productivity all over the economy.
The price of oil rises substantially.
Business taxes fall.
The government passes a law doubling all manufacturing wages.
Answer the following questions on the basis of the following three sets of data for the country of North Vaudeville:
| (A) | (B) | (C) | |||
| Price Level | Real GDP | Price Level | Real GDP | Price Level | Real GDP |
| 110 | 275 | 100 | 200 | 110 | 225 |
| 100 | 250 | 100 | 225 | 100 | 225 |
| 95 | 225 | 100 | 250 | 95 | 225 |
| 90 | 200 | 100 | 275 | 90 | 225 |
Which set of data illustrates aggregate supply in the immediate short-run in North Vaudeville? The short-run? The long run?
Assuming no change in hours of work, if real output per hour of work increases by 10 percent, what will be the new levels of real GDP in the right column of A? Do the new data reflect an increase in aggregate supply or do they indicate a decrease in aggregate supply?
What is the wealth effect?
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