Figure 2: Keynes's AD-AS Model The Keynesian AS curve Price Level Up to real output level Yf AS increases in AD have no effect on the price level. Increases in AD beyond Yf cause an increase in the price level but no increase in real output. p1 AD2 AD AD1 National income (real GDP) Copyright: www.economicsonline.co.uk

Economists forecast future economic conditions by studying variables that tend to fluctuate in advance of the overall economy. The most significant of these variables are known as leading indicators, and they compose the index of leading economic indicators. Which of the following variables are measured as part of this index?  Check all that apply. Supplier deliveries   The ratio of elderly to nonelderly workers   New orders for consumer goods   Stock prices   The money supply     True or False: Businesses and government care only about long-run economic forecasts, because they cannot adapt policy or output to accommodate short-run fluctuations. False   True     Suppose the most recent data show that the average initial weekly claims for unemployment insurance have recently decreased. This change suggests  ____ period in the coming months.

Inflation has reached its highest point since the 1970s. Please identify at least three factors affecting AS and/or AD, and briefly explain the final combined effect of these factors on real GDP and inflation.Include at least one factor affecting AS and at least one factor affecting AD.

What relationship does the short-run aggregate supply curve represent?