AP Macroeconomics The Aggregate Demand/Aggregate Supply Model — practice questions
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Practice AP Macroeconomics The Aggregate Demand/Aggregate Supply Model in the app →The economist Jean-Baptiste Say is associated with a law summarized in shorthand as which statement?John Maynard Keynes is associated with a law summarized in shorthand as which statement?Over which time horizon does Say's law, that supply creates its own demand, work best as an approximation?Over which time horizon does Keynes' law, that demand creates its own supply, apply fairly well?Economists who generally emphasize the importance of aggregate supply, following the Say's law tradition, for During the Great Depression, U.S. unemployment soared above 20 percent from 1933 to 1935, even though the numbWhat does aggregate supply refer to in the AD/AS model?Why does the aggregate supply curve slope upward?Potential GDP is a specific economic term. What does it mean?At the far left of the aggregate supply curve, where output is far below potential GDP and many factories sit At the far right of the aggregate supply curve, where the economy is near potential GDP and labor and machinerWhat does aggregate demand refer to in the AD/AS model?Aggregate demand is written as C + I + G + X minus M. What do these four letters stand for?According to the wealth effect explanation for why the aggregate demand curve slopes downward, what happens toAccording to the interest rate effect explanation for why the aggregate demand curve slopes downward, what hapAccording to the foreign price effect explanation for why the aggregate demand curve slopes downward, what hapFor the imaginary economy of Xurbia, a table lists aggregate demand and aggregate supply at several price leveWhen the aggregate supply curve shifts to the right, what happens to the quantity of real GDP produced at everOver the long run, productivity growth lets the same quantity of labor produce more output. What effect does hWages and energy prices are widely used inputs across the whole economy. If these input prices rise, holding oFrom 1985 to 1986, the average price of crude oil fell by almost half, from $24 a barrel to $12 a barrel. WhatU.S. recessions in 1974 to 1975, 1980 to 1982, 1990 to 1991, 2001, and 2007 to 2009 were each preceded or accoAn unexpected early freeze destroys a large share of a region's agricultural crops. What does this supply shocAn overseas war requires a large number of workers to leave their ordinary production jobs to fight. What doesThe AD curve shifts to the right when at least one of its four components rises. What must happen for the AD cIn the AD formula C + I + G + X minus M, why is the value of imports subtracted rather than counted as a positConsumer confidence and business confidence both rise. What does this do to the AD curve, and to the new equilConsumer confidence and business confidence both drop sharply. What does this do to the AD curve, and to the nDuring the 1990s, U.S. government spending declined from 21 percent of GDP in 1991 to 17.8 percent of GDP in 1During the recession of 2001, the U.S. Congress enacted a tax cut intended to increase consumption spending. SWhat is the general lesson about the effect of a rightward shift of the aggregate demand curve on real GDP andIn the AD/AS diagram, how is long-run economic growth due to rising productivity illustrated over time?In the AD/AS diagram, how is a recession illustrated?The U.S. unemployment rate typically hovers around 5 percent, give or take a point, when the economy is healthHow does cyclical unemployment behave in the AD/AS diagram as the equilibrium moves closer to, or farther fromDuring the 2007 to 2009 recession, the U.S. inflation rate fell from 3.8 percent in 2008 to what value in 2009Two possible triggers for inflationary pressure appear in the AD/AS model. What are they?The Keynesian zone sits at the far left of the SRAS curve, where it is relatively flat and output is far belowThe neoclassical zone sits at the far right of the SRAS curve, where it is nearly vertical and output is at orIn the intermediate zone of the SRAS curve, which is upward-sloping between the flat Keynesian zone and the stStill in the intermediate zone of the SRAS curve, what happens to output and the price level when AD instead sDuring the housing bubble, rising home values made homeowners feel wealthier and encouraged more borrowing agaWhen the housing bubble burst, overall household wealth dropped dramatically and credit markets seized up, a cIn response to the financial crisis following the housing bust, the Federal Reserve lowered short-term interesAlongside monetary policy, two federal laws were passed as a fiscal policy response to the housing crisis, one