Chapter 12: Macroeconomics (page 428)
What are the 4 components of aggregate demand?
Consumption, Investments, Government spending, Net Exports
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How do you calculate aggregate demand?
A rise in productivity increases potential output, but some worry that demand for the additional output will be insufficient even in the long run. How would you respond?
Why do you think gas prices rose in the recessions of the 1970s but fell after the Great Recession?
Suppose the economy is initially at the potential output and the quantity of aggregate output supplied increases. What information would you need to determine whether this was due to a movement along the SRAS curve or a shift of the LRAS curve?
Describe the short-run effects of each of the following shocks on the aggregate price level and on aggregate output.
a. The government sharply increases the minimum wage, raising the wages of many workers.
b. Solar energy firms launch a major program of investment spending.
c. Congress raises taxes and cuts spending.
d. Severe weather destroys crops around the world.
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