Chapter 14 Aggregate Demand and Aggregate Supply

2) During an economic boom

A) the level of unemployment tends to be high.

B) it is difficult for firms to recruit and retain workers.

C) firms have an easier time purchasing raw materials.

D) prices tend to decrease over time.

3) Adjustments in ________ take the economy from the short-run equilibrium to the long-run equilibrium.

A) imports and exports

B) interest rates

C) wages and prices

D) the multiplier

4) If actual output exceeds potential output, ________ shifts upward over time.

A) the short-run AS curve

B) the short-run AD curve

C) the long-run AS curve

D) the long-run AD curve

5) If potential output exceeds actual output, ________ shifts downward over time.

A) the short-run AS curve

B) the short-run AD curve

C) the long-run AS curve

D) the long-run AD curve

6) During an economic boom, output exceeds potential output.

7) If potential output exceeds actual output, the aggregate demand curve shifts downward over time.

8) If actual output exceeds potential output, the short-run aggregate supply curve shifts downward over time.

9) Describe how adjustments in wages and prices take the economy from the short-run equilibrium to the long-run equilibrium.

10) Draw an aggregate supply and aggregate demand graph which shows the economy producing an output which exceeds potential output in the short run, and the adjustment that will occur as the economy adjusts to long-run equilibrium.