Unit 3.2: Aggregate demand and supply review sheet

Review of terms for unit 3.2: Aggregate demand and supply

I have included this page, which contains a PDF handout as a simple revision exercise.  I find that many IB students get a degree of comfort from these short summary handouts.

1. Complete the following sentences by filling in the missing words:

     can be described as the quantity demanded for all goods and services, within an economy, at a given     and a given time,       , calculated by the formulae:  

 price  paribus  ceteris  C+G+I+(X-M)  C+G+I+X  demand  supply  Aggregate 

 

 

2. Complete the following sentences by filling in the missing words:

    - the total value of all   produced goods and services consumed in an economy.

  Total  Private  output / sales  consumption  domestically 

 

 

3. Complete the following sentences by filling in the missing words:

  ( ) can be described as   spending whether by national or local governments. 

 G  spending  sector  private  public  national  Government 

 

 

4. Complete the following sentences by filling in the missing words:

A       occurs when total government expenditure exceeds its revenue.  A   occurs when government revenues exceeds its expenditure.

 budget  deficit  surplus  Budget 

 

 

5. Complete the following sentences by filling in the missing words:

 ( ) - spending by businesses on capital stock.  This includes all goods used to produce other goods and services, e.g. computers for business use, factories, offices and production machinery.  Net investment spending is calculated by total minus

 I  investment  total  depreciation  net spending  Investment 

 

 

6. Complete the following sentences by filling in the missing words:

External balance is equal to (  -  ).  This is influenced by a nation's productivity, trade policy,   rate, resource endowment, technology, foreign currency reserves, and consumer preferences - both at home and abroad.

  imports  inflation  real  exports  PPP  exchange 

 

 

7. Complete the following sentences by filling in the missing words:

Aggregate supply - also known as total output, represents the total    of goods and services   within an economy at a given and at an overall   level.

 produced  demand  time  price  output  supply 

 

 

8. Complete the following sentences by filling in the missing words:

    is an unexpected event that impacts on the supply of a product or commodity, resulting in a sudden in price.

shift  shock  change  Supply  supply Aggregate  

 

 

9. Complete the following sentences by filling in the missing words:

Macroeconomic equilibrium is where aggregate   is   to aggregate demand.  When the level of national output is operating above the full employment level of output, the economy has an    .  Similarly, where the level of national output is operating below the full employment level of output, the economy is experiencing a contractionary / gap. 

 equal  inflationary  expansionary  gap  supply  gap  recessionary 

 

 

10. Complete the following sentences by filling in the missing words:

Recession can be described as a period of time when there is a  in GDP for two three   periods. 

 month  fall  GDP  consecutive 

 

 

11. Complete the following sentences by filling in the missing words:

/ neo-classical economists believe that changes to the     determine a country's economic performance.  Such a school of thought supports the view that macroeconomic markets are self   and that any attempt to stimulate aggregate     through government intervention will be   .

 correcting  supply  money  inflationary  contractionary  keynesian  demand  Monetarist 

 

 

12. Complete the following sentences by filling in the missing words:

economics consists of a set of theories focused on total spending in the economy and the effect that spending has on output and inflation.  They believe that increased  expenditure and lower taxes can be used to stimulate   and close a gap.

  demand  government  contraction  Neo-classical  deflationary  Keynesian 

 

 

13. Complete the following sentences by filling in the missing words:

     to     represents the proportion of any additional income earned that is consumed on domestically produced goods and services.

 consume  save  import  Marginal  propensity Average  

 

 

14. Complete the following sentences by filling in the missing words:

      to   represents the proportion of any additional income earned that is saved.

consume  save  import  Marginal  propensity

 

 

15. Complete the following sentences by filling in the missing words:

     to     represents the proportion of any additional income earned that is consumed on goods and services produced overseas.

 consume  save  import  Marginal  propensity

 

 

16. Complete the following sentences by filling in the missing words:

Multiplier - the factor by which any in total output is greater than the initial change in initial spending.  It is calculated by the formulae 1 / (   ).

 1 - MPC  MPC  decrease  increase  MPS 

 

 

17. Complete the following sentences by filling in the missing words:

    occurs when spending by governments in the public sector increases the price of scarce resources. The degree of         in an economy will be determined by the level of      in the economy.

out  Crowding  crowding  inefficiency  capacity  Space  spare  out 

 

 

18. Complete the following sentences by filling in the missing words:

Supply side policies - a government can improve the quantity and / or  of its       over time, by for instance, improvements to infrastucture such as the building of new dams or roads e.t.c., through   in training and better education, growing a nation’s     base through investment in new machinery and by encouraging , through incentives designed to encourage new businesses to start up.

of  investment  entrepreneurship  quantity  capital  factors  saving  consumption  production costs  production quality 

 

 

19. Complete the following sentences by filling in the missing words:

The keynesian LRAS curve has  distinct sections.  Unlike the classical LRAS curve the economy can be in   at many different points along the LRAS curve.

 two  AS curve  three  equilbrium 

 

 

20. Complete the following sentences by filling in the missing words:

The classical / free market LRAS is perfectly at the equilbrium level of       .  This is because classical economists believe that in the run price level and output are    of each other.

income  inelastic  national  elastic  independent  long  price level 

 

 

Total Score:

Available as a PDF file at:  Review sheet

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