Module 8 Assignment: Problem Set — The Aggregate Demand-Aggregate Supply Model

You can click on the following link to download the problem set for this module: The Aggregate Demand-Aggregate Supply Model Problem Set.

The Aggregate Demand – Aggregate Supply Problem Set

  1. Suppose that there is a positive aggregate supply shock. Which graph most accurately shows how this would affect the aggregate demand – aggregate supply model? Note that the new curve is shown in gray.
    1. AS curve shifts right:
      Aggregate supply curve shifts to the right.
    2. AD curve shifts right:
      Aggregate demand curve shifts to the right.
    3. AS curve shifts left:
      Aggregate supply curve shifts to the left.
    4. AD curve shifts left:
      Aggregate demand curve shifts to the left.
  1. Suppose that there is a positive aggregate demand shock. Which graph most accurately shows how this would affect the aggregate demand – aggregate supply model? Note that the new curve is shown in gray.
    1. AS curve shifts right:
      Aggregate supply curve shifts to the right.
    2. AD curve shifts right:
      Aggregate demand curve shifts to the right.
    3. AS curve shifts left:
      Aggregate supply curve shifts to the left.
    4. AD curve shifts left:
      Aggregate demand curve shifts to the left.
  1. Suppose that we observe a decrease in wages. Which graph most accurately shows how this would affect the aggregate demand – aggregate supply model? Note that the new curve is shown in gray.
    1. AS curve shifts right:
      Aggregate supply curve shifts to the right.
    2. AD curve shifts right:
      Aggregate demand curve shifts to the right.
    3. AS curve shifts left:
      Aggregate supply curve shifts to the left.
    4. AD curve shifts left:
      Aggregate demand curve shifts to the left.
  1. Suppose that we observe relative price increase of US goods. Which graph most accurately shows how this would affect the aggregate demand – aggregate supply model? Note that the new curve is shown in gray.
    1. AS curve shifts right:
      Aggregate supply curve shifts to the right.
    2. AD curve shifts right:
      Aggregate demand curve shifts to the right.
    3. AS curve shifts left:
      Aggregate supply curve shifts to the left.
    4. AD curve shifts left:
      Aggregate demand curve shifts to the left.

Use the following information to answer questions 5 through 7:

The graph below shows the AD-AS diagram for Spain. All numbers are in billions.

Aggregate Demand and Aggregate Supply diagram for Spain. The AD y intercept is at (0, 1000) and the x intercept is at (1000, 0). The SRAS y intercept is at (0, 200). The LRAS line runs parallel to the y axis through the point 500 on the x axis. The AD and SRAS curves intersect at (400, 600). The AD line intersects the LRAS line at (500, 500) and the SRAS line intersects the LRAS line at (500, 700).
  1. What is the level of Potential GDP in Spain?

 

  1. What is the size of real GDP in the short-run equilibrium?

 

  1. What is the price level in the short-run equilibrium?

 

Use the following information to answer questions 8 through 11:

The graph below shows the AD-AS diagram for Spain. Suppose that the economy experiences a negative aggregate demand shock denoted by the move from AD1 to AD2. Note that the new curve is shown in gray.

Aggregate Demand and Aggregate Supply diagram for Spain. The AD1 y intercept is at (0, 1100) and the x intercept is at (1100, 0). The SRAS y intercept is at (0, 200). The LRAS line runs parallel to the y axis through the point 700 on the x axis. The AD1 and SRAS curves intersect at (450, 650). The AD1 line intersects the LRAS line at (700, 400) and the SRAS line intersects the LRAS line at (700, 900). The y intercept of the AD2 line is (0, 900) and the x intercept is (900, 0). AD2 intersects the LRAS line at (700, 200) ind intersects the SRAS line t (350, 550).
  1. What has happened to the cyclical unemployment in Spain (select one)?
    1. Cyclical unemployment remains the same.
    2. Cyclical unemployment decreased.
    3. Cyclical unemployment increased.

 

  1. What happened to the frictional unemployment in Spain (select one)?
    1. Frictional unemployment remained the same.
    2. Frictional unemployment decreased.
    3. Frictional unemployment increased.

 

  1. What happened to the structural unemployment in Spain(select one)?
    1. Structural unemployment remained the same.
    2. Structural unemployment decreased.
    3. Structural unemployment increased.

 

  1. What happened to the price levels in Spain(select one)?
    1. Price levels remained the same.
    2. Price levels decreased.
    3. Price levels increased.

 

Use the following information to answer questions 12 through 15:

The graph below shows the AD-AS diagram for Spain. Suppose that the economy experiences a positive aggregate supply shock denoted by the move from SRAS1 to SRAS2.

Note that the new curve is shown in gray.

Aggregate Demand and Aggregate Supply diagram for Spain. The AD y intercept is at (0, 1100) and the x intercept is at (1100, 0). The SRAS1 y intercept is at (0, 500). The LRAS line runs parallel to the y axis through the point 700 on the x axis. The AD and SRAS1 curves intersect at (300, 800). The AD line intersects the LRAS line at (700, 400) and the SRAS1 line intersects the LRAS line at (700, 1200). The y intercept of the SRAS2 line is (0, 400). SRAS2 intersects the LRAS line at (700, 1100) and intersects AD at (350, 750).
  1. What happened to the cyclical unemployment in Spain (select one)?
    1. Cyclical unemployment remains the same.
    2. Cyclical unemployment decreased.
    3. Cyclical unemployment increased.

 

  1. What happened to the frictional unemployment in Spain (select one)?
    1. Frictional unemployment remains the same.
    2. Frictional unemployment decreased.
    3. Frictional unemployment increased.

 

  1. What happened to the structural unemployment in Spain (select one)?
    1. Structural unemployment remains the same.
    2. Structural unemployment decreased.
    3. Structural unemployment increased.

 

  1. What happened to the price levels in Spain (select one)?
    1. Price levels remain the same.
    2. Price levels decreased.
    3. Price levels increased.

 

* This assignment by Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License. You can access an alternative means to plotting points at https://www.desmos.com/calculator.