Slivinskie CH 8

An economy consists of _____ and _____ as the two major activities

• creating ; expanding

• buying ; producing

• selling ; making

_______ is the Buying Side of the economy, and _______ is the Producing Side of the economy (fill in the blanks)

• Purchasing group ; creation group

• Aggregate Demand ; Aggregate Supply

• Demand ; Supply

Understand the difference between AD, SRAS, LRAS

Aggregate Demand is...

• the quantity demanded of all goods and services (Real GDP) at different price levels, ceteris paribus

• the quantity produced of all goods and services (Real GDP) at different price levels, ceteris paribus

• the quantity demanded of only services at different price levels

Aggregate Demand Curve is a curve that shows the quantity demanded of all goods and services (Real GDP) at different price levels, ceteris paribus

• True

• False

The Aggregate Demand Curve is _____ sloping, and has an _____ relationship between price level and quantity demanded of Real GDP

• upward ; direct

• downward ; direct

• downward ; inverse

Understand the AD graph... as Q increases, P decreases and vice-versa

AD Curve slopes downward because (multiple right answers)

• Real Balance Effect

• Interest Rate Effect

• International Trade Effect

• Economies of Scale

___________ is the quantity of goods and services that can be purchased with a unit of money (inverse relationship between purchasing power and price level)

• purchasing power

• interest rate effect

• international trade effect

The ______ states that the inverse relationship between the price level and the quantity demanded of Real GDP is established through changes in the part of household and business spending that is sensitive to changes in interest rates

• real balance effect

• interest rate effect

• international trade effect