Aggregate Demand – Principles of Macroeconomics Final

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Aggregate Demand, Long-Run Aggregate Supply, Principles of Macroeconomics

The key words in this Macroeconomics course include Aggregate Demand, Long-Run Aggregate Supply (LRAS), Short-Run Aggregate Supply (SRAS), Gross Domestic Product (GDP), Great Recession, Price Level, Stock Market Crash, Great Depression, Social Security, Principles of Macroeconomics.


Use the following graph to answer the following questions. The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS) have decreased, with no change in short-run aggregate supply (SRAS).


During the Great Recession, real gross domestic product (GDP) decreased, yet the aggregate price level remained largely unchanged, as depicted in the graph. Unemployment increased to above-normal levels. Which of following best explains why this happened?

A stock market crash, large numbers of bank failures, an increase in tax rates, and a tight money supply caused a recession.

A significant decline in military spending following the end of a war led to a recession.

A sudden increase in oil prices caused inflation and a deep recession.

A sharp recession followed the United States abandoning the gold standard.

A decline in housing prices and stock prices, plus a financial crisis, caused a recession.


During the Great Recession, the unemployment rate climbed as high as ________ and remained around 8 percent ________ year(s) after the recession began.

35 percent; eight

15 percent; seven

20 percent; one

10 percent; five

25 percent; eight


The Great Depression ended in

June 2009.

May 1937.

August 1929.

August 2004.

June 1938.


Use the following graph to answer the following questions. The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS) have decreased, with no change in short-run aggregate supply (SRAS).


As a result of aggregate demand and long-run aggregate supply decreasing, we can see that the price level ________ and real gross domestic product (GDP) ________.

decreased; remained unchanged

remained unchanged; decreased

increased; decreased

remained unchanged; increased

increased; increased


During the Great Depression, a major financial crisis followed the collapse of the stock market, which led to

a decrease in tax rates and increase in the money supply.

the failure of many banks.

a decrease in barriers to international trade.

an increase in consumer sentiment and spending.

an increase in oil and gas prices.


Over the next 20 years, the number of workers per Social Security beneficiary is predicted to be

less than 1.

less than 2 but more than 1.

less than 5 but more than 3.

more than 5.

less than 3 but more than 2.