Fix the aggregate demand slip

Exercise and reference answers

Questions

1. Statement parts

   1. Aggregate demand
   2. adds up C, I, G
   3. and exports
   4. plus imports

   Correction

   minus imports

   Incorrect part

   plus imports

2. Statement parts

   1. The AD curve
   2. slopes
   3. upward
   4. as the price level rises

   Correction

   downward

   Incorrect part

   upward

3. Statement parts

   1. Potential GDP
   2. is drawn as
   3. a flat line
   4. on the diagram

   Correction

   a vertical line

   Incorrect part

   a flat line

4. Statement parts

   1. Higher input prices
   2. shift short run
   3. aggregate supply
   4. to the right

   Correction

   to the left

   Incorrect part

   to the right

5. Statement parts

   1. Stagflation pairs
   2. stagnant growth
   3. with
   4. falling prices

   Correction

   high inflation

   Incorrect part

   falling prices

Instructions

Tap the one wrong piece in each line about aggregate demand and supply.

Explanation