1. If the price level and the level of real GDP both increase, would it be more likely that the aggregate supply curve or the aggregate demand curve shifted? Would this shift represent an increase or a decrease (Note the increase in PRICE LEVEL, not an outside force)?
2. If the price of Pepsi increases, U.S. consumers can easily substitute to another brand of cola in the same stores. If the price level of all U.S. goods increases, to what type of goods would U.S. consumers have to substitute in order to avoid the higher prices? What would this do to the quantity demanded of all U.S. goods?
3. What would happen to the aggregate supply curve if worker productivity increased as a result of increased training and education?
4. Which of the following could lead to inflation?
a. An increase in aggregate supply
b. An increase in aggregate demand
c. A decrease in aggregate supply
d. A decrease in aggregate demand
5. If the price level rises and the money wage rate stays the same, what effect will this have upon labor demanded and production?
6. Explain the effect a rise in price levels would have upon the demand for money and nominal interest rates.
7. Given the same scenario as #6, what will the effect be on real GDP (Explain)?
8. Refer to Figure 19.7, pg. 522. Explain why equilibrium cannot be achieved at point 'A'.
9. What are the 2 chief causes of Cost-Push inflation?
10. Explain in detail why the Great Depression was so bad as compared to the Great Recession of 2008-2009 .