ECON 104 Fall FINAL - ECON 104 Fall 2012 Dr Adrienne...

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ECON 104 Fall 2012 Dr. Adrienne Kearney REVIEW QUESTIONS FOR FINAL EXAM Chapter 13, Lectures 10/26 – 11/30 1. Define aggregate demand (AD). What is the equation for AD? Shows relationship between price level and qty of real GDP AD=C+I+G+NX 2. Define short-run aggregate supply (SRAS). Shows relationship in the short run between the price level and the qty of real GDP Supplied 3. Why does AD have a negative slope? In other words, when the price level rises or falls, how are C, I, NX affected? As the price level rises, real output demanded falls=NEG slope 4. What is monetary policy to stabilize the economy during recession? During inflationary boom? 5. What is fiscal policy to stabilize the economy during recession? During inflationary boom? Recession: Decrease (T) Increase (G) Boom: Increase (T) Decrease (G) 6. What are the factors other than fiscal and monetary stabilization policy that can cause a shift in AD? GDP Growth/Expectaions of HH’s C & I/Strength of U.S. Dollar (AD(dec)=C+I+G+NX(dec) AD LEFT) 7. How did the drop in stock prices during the Great Recession affect HH spending? Spending decreased 8. Define long-run aggregate supply (LRAS). What determines the level of LRAS? Why do we say LRAS is potential GDP or full employment output? Vertical at potential output y(bar) changes in the price level do not affect LRAS 9. How would an increase in the size of the US work force, an increase in the U.S. capital stock or an advance in technology affect the LRAS curve?
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Shift it right 10. Why does the SRAS have a positive slope?
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