Topic 1

31問 • 1年前

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We have learned in microeconomics that when quantity demanded is ________ to quantity supplied, the market is in equilibrium. Similarly, in macroeconomics, when aggregate demand equals aggregate supply, __________ exists.

equal, equilibrium

Aggregate supply and demand refer to the concept of supply and demand but applied at a macroeconomic scale.Aggregate supply and aggregate demand are both plotted against the aggregate ______ level in a nation and the aggregate quantity of goods and services exchanged at a specified price.

price

____________ economist believed that the economy was either at or tending toward full employment. Therefore, classical equilibrium was when aggregate demand and aggregate supply are ________, we have _____________. As long as aggregate demand and aggregate supply ________ change, the economy would continue to operate at ___________.

Classical, equal, full employment, do not, full employment

Aggregate _________ is the demand of all products in an economy - OR the relationship between the Price Level and the level of aggregate output (real GDP) demanded.

demand

Illustration shows an __________ relationship between aggregate demand and price level. If there is an increase in the price level aggregate demand ____________; and if the price level __________, aggregate demand increases. Is represented by a ____________ sloping curve.

inverse, decrease, decrease, downward

It is the value of real GDP.

Aggregate Demand

_________ Curve shows all sectors of the economy are willing to purchase at various price levels. You will notice that as price level __________, people are willing to buy more output and people purchase less out as price ____________.

Demand, decrease, increase

We want to understand why if the Price Level ____________ why does the amount of aggregate output (real GDP) demanded decrease? Why is the AD curve ____________ sloping from _____to _______?

increase, downward, left, right

There are 3 reasons why the AD curve is a downward sloping curve:

The Real Balance Effect, The Interest Rate Effect, The Foreign Purchases Effect

The Real Balance Effect. When the price level goes up, the purchasing power of the peso goes _______. Your money and your other forms of wealth (such as stocks and bonds) _________ in terms of what they can purchase. It is also known as___________

down, shrink, wealth effect

It is also known as wealth effect.

The Real Balance Effect

The Interest Rate Effect. A _________ price level pushes interest rate which in turn affects consumption of some goods and services and _________ also the amount of investment.

rising, reduces

The Foreign Purchases Effect. When the price level in the Philippines _______ relative to other countries, the _________ goods and services become ______ expensive relative to other countries and the demand for these goods ________.

rises, domestic, more, declines

Just like with demand in the individual product market, there are determinants of AD that, if they change, will shift the AD curve. They are:

Change in Consumer Spending Change in Investment Spending Change in Net export Change in Money supply Change in Taxes Change in Savings

This Is the amount of real GDP that will be made available by sellers at different price levels.

Aggregate Supply

Aggregate _________ is the supply of all products in an economy - OR the relationship between the Price Level and the level of aggregate output (real GDP) supplied.

supply

Graphically, we would expect the AS curve to be _______ sloping. If business expect that they can get a higher price for their products (higher price level) they will want to produce _______.

upward, more

But, remember that the price level is the average level of ALL prices in the economy, therefore, if the price level ___________, the price of resources will also increase.

increase

Higher resource prices will encourage businesses to produce _______ So maybe the As curve should be downward sloping?

less

In the __________ or ____________, the level of output in the economy is low. Very little is being produced so there are a lot of resources not being used.

keynesian, horizontal range

In the Keynesian or horizontal range, the level of output in the economy is _____. Very little is being produced so there are a lot of resources ______ being used.

low, not

In the Keynesian or horizontal range, the level of output in the economy is low. Very little is being produced so there are a lot of resources not being used. Businesses are then able to produce _______ output ________ having to pay more for the additional resources. Since many resources are ___________ businesses will not have to pay a higher price to employ them. Therefore, they can produce more ________ having to raise the price (note how the price level is __________ in the Keynesian range of the AS curve).

more, without, unemployed, without, constant

In the ____________ range the supply curve begins to rise slowly as a few resources begin to run out and at higher levels of output the AS curve becomes steeper as the economy runs out of even more resources, until it is vertical when all resources are being used and it is not possible to produce any more output.

Intermediate

In the intermediate range, the ________ curve begins to _______ slowly as a few resources begin to run out and at higher levels of output the AS curve becomes steeper as the economy runs out of even more resources, until it is _________ when all resources are being used and it is _____ possible to produce any more output.

supply, rise, vertical, not

In the _________ or __________range, of the AS curve there are no more resources available. ALL are being used. So, all business together cannot produce any more since there are no more resources to use. But if some business try to produce more by enticing resources away from other business with higher resource prices (higher wages for example) whey will have to raise their prices to cover the higher costs - BUT the amount produced will stay the same since no additional resources are being used. So, the AS curve is vertical indicating no additional output even at higher price levels.

classical, vertical

In the Classical or vertical range, of the AS curve there are ____ more resources available. _____ are being used. So, all business together _______ produce any more since there are no more resources to use. But if some business try to produce more by enticing resources away from other business with higher resource prices (higher wages for example) whey will have to ______ their prices to cover the higher costs - BUT the amount produced will stay the same since no additional resources are being used. So, the AS curve is ___________ indicating ___ additional output even at ________ price levels.

no, all, cannot, raise, vertical, no , higher

If we want to use the AS-AD model to better understand the _______________ issues, then we need to be able to locate the "full employment level of output" - the amount of GDP that can be produced if all resources are being used.

macroeconomic

Note that at ________ levels of output the price level increase dramatically resulting in _____ inflation, therefore some people define the full employment level of output as the amount of output that can be produced and still maintain _____ inflation.

higher, high, low

Just like with supply in the individual product market, there are determinants of AS that, if they change, will shift the AS curve. They are:

Change in input prices Change in productivity of resources Legal-institutional environment

_______________ equilibrium occurs when the quantity of real GDP demanded _______ the quantity of real GDP supplied at the point of intersection of the AD curve and the AS curve.

macroeconomic, equals

If the quantity of real GDP _________ exceeds the quantity __________, inventories pile up so that firms will cut production and prices. If the quantity of real ________ exceeds the quantity ___________ inventories are depleted so that firms will increase production and prices.

suppy, demand, demand, supply

Topic 1

Mikyii · 67問 · 1年前

Topic 1