Chapter 12: Aggregate Demand Curve (page 239)
What shifts the aggregate demand curve?
changes in consumption, investments, government spending, and net export changes.
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Explain how an upsloping aggregate supply curve weakens the realized multiplier effect from an initial change in investment spending.
At the current price level, producers supply \(375 billion of final goods and services while consumers purchase \)355 billion of final goods and services. The price level is:
Explain: “Unemployment can be caused by a decrease of aggregate demand or a decrease of aggregate supply.” In each case, specify the price-level outcomes.
What were the monetary and fiscal policy responses to the Great Recession? What were some of the reasons suggested for why those policy responses didn’t seem to have as large an effect as anticipated on unemployment and GDP growth?
Suppose that the table presented below shows an economy’s relationship between real output and the inputs needed to produce that output:
| Input Quantity | Real GDP |
| 150.0 | \(400 |
| 112.5 | 300 |
| 75.0 | 200 |
What is productivity in this economy?
What is the per-unit cost of production if the price of each input unit is \)2?
Assume that the input price increases from \(2 to \)3 with no accompanying change in productivity. What is the new per-unit cost of production? In what direction would the $1 increase in input price push the economy’s aggregate supply curve? What effect would this shift of aggregate supply have on the price level and the level of real output?
Suppose that the increase in input price does not occur but, instead, that productivity increases by 100 percent. What would be the new per-unit cost of production? What effect would this change in per-unit production cost have on the economy’s aggregate supply curve? What effect would this shift of aggregate supply have on the price level and the level of real output?
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