Econ 104 Final Exam |40 Questions and Answers
Dynamic Aggregate Supply and Demand Graph - -Recession: AD shifts left, then workers
and firms adjust to lower price level, and SRAS shifts right
Expansion: AD shifts right, then workers and firms adjust to higher price levels, and SRAS
shifts left
Supply Shock: SRAS shifts left, then a recession is caused, and SRAS shifts back to its
original position
-Causes of Shifts in LRAS - -Increase in potential GDP, increase in labor force and capital
stock, technological change
-Causes of Shifts in AD - -Rising income and population, increasing investment, increasing
government purchases
-Causes of Shifts in SRAS - -Increase in labor force and capital stock, technological change
-Effects of Shifts in AS - -AS↑ = Price level ↓ and Unemployment ↓
-Effects of Shifts in AD - -AD ↑ = Price level ↑ and Unemployment ↓
-Inflation - -AD increases faster than AS, SR equilibrium is to the right of LRAS, money
supply grows faster than GDP
-Stagflation - -Rising price level during a recession, occurs after a supply shock
-Recession - -SR equilibrium is to the left of SRAS
-Characteristics and Functions of Money - --usable by most people
-standardized quality
-durable
-valuable relative to weight
-divisible
-assets people are willing to accept in exchange for goods or services or for payment of
debt
-Measuring Money Today - -Narrow Definition of Money Supply: liquid, currency, checking
accounts, traveler's checks, "transactions money"
Broad Definition of Money Supply: less liquid, narrow definitions + savings deposits +
small-denomination time deposits + money market mutual funds
*Credit bards are not considered money
-Reserves (R) - -Deposits a bank keeps as cash in its vault with the Federal Reserve
Dynamic Aggregate Supply and Demand Graph - -Recession: AD shifts left, then workers
and firms adjust to lower price level, and SRAS shifts right
Expansion: AD shifts right, then workers and firms adjust to higher price levels, and SRAS
shifts left
Supply Shock: SRAS shifts left, then a recession is caused, and SRAS shifts back to its
original position
-Causes of Shifts in LRAS - -Increase in potential GDP, increase in labor force and capital
stock, technological change
-Causes of Shifts in AD - -Rising income and population, increasing investment, increasing
government purchases
-Causes of Shifts in SRAS - -Increase in labor force and capital stock, technological change
-Effects of Shifts in AS - -AS↑ = Price level ↓ and Unemployment ↓
-Effects of Shifts in AD - -AD ↑ = Price level ↑ and Unemployment ↓
-Inflation - -AD increases faster than AS, SR equilibrium is to the right of LRAS, money
supply grows faster than GDP
-Stagflation - -Rising price level during a recession, occurs after a supply shock
-Recession - -SR equilibrium is to the left of SRAS
-Characteristics and Functions of Money - --usable by most people
-standardized quality
-durable
-valuable relative to weight
-divisible
-assets people are willing to accept in exchange for goods or services or for payment of
debt
-Measuring Money Today - -Narrow Definition of Money Supply: liquid, currency, checking
accounts, traveler's checks, "transactions money"
Broad Definition of Money Supply: less liquid, narrow definitions + savings deposits +
small-denomination time deposits + money market mutual funds
*Credit bards are not considered money
-Reserves (R) - -Deposits a bank keeps as cash in its vault with the Federal Reserve
