QUESTIONS FOR REVIEW

1. Name two macroeconomic variables that decline when the economy goes into a recession. Name one
macroeconomic variable that rises during a recession.

2. Draw a diagram with aggregate demand, short-run aggregate supply, and long-run aggregate supply. Be careful to label the axes correctly.

3. List and explain the three .reasons the aggregate-demand curve is downward sloping.

4. Explain why the long-run aggregate-supply curve is vertical.

5. List and explain the three theories for why the short-run aggregate-supply curve is upward sloping.

6. What might shift the aggregate-demand curve to the left? Use the model of aggregate demand and aggregate supply to trace through the short-run and long-run effects of such a shift on output and the price level.

7. What might shift the aggregate-supply curve to the left? Use the model of aggregate demand and aggregate supply to trace through the short-run and long-run effects of such a shift on output and the price level.

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