ace that **** MF

Look at the figure Aggregate Supply. If the economy is at point E:

actual output is more than potential output

Look at the figure Macroeconomic Equilibrium Curve 1 refers to _______, curve 2 refers to ________, and curve 3 refers to ___________.

aggregate demand; long-run aggregate supply, short run aggregate supply

The long-run aggregate supply curve is vertical because in the long run:

all prices are flexible

Suppose that a presidential candidate who promised large personal income tax cuts is elected. which of the following is most likely?

an increase in aggregate demand

Look at the figure shift of the aggregate demand curve. a movement from AD1 to AD2 may have been the result of

an increase in government spending

The short-run aggregate supply curve would shift to the left for all the following reasons EXCEPT

an increase in interest rates

Stagflation may results from:

an increase in the price of oil.

Look at the fiscal policy choices. in panel (b), if real GDP is equal to Y1 there is

an inflationary gap

A government might want to increase aggregate demand to

close a recessionary gap

Look at the figure AD-AS model I. If the economy is at point X, the appropriate fiscal policy is to:

decrease taxes and increase government spending

If the price level rises by 10%, the purchasing power of 10,000 will:

decrease to $9,000

A contradictionary fiscal policy either____ government spending or ____ taxes.

decreases; increases

A recessionary gap can be closed by ______ wages that shift the ____.

falling; SRAS curve rightward

Look at the figure Inflationary and Recessionary Gaps. at E3 the economy:

has an inflationary gap

Look at the figure inflationary and recessionary gaps. A movement from AD3 to AD1 could be caused by:

higher tax rates

The short-run aggregate supply curve slopes upward because a _____ aggregate price level leads to ________.

higher; higher output, since most production costs are fixed in the short run

Look at the figure Inflationary and Recessionary Gaps. The intersection of SRAS with AD in panel (a) indicates an economy

in a recessionary gap.

Look at the figure policy alternatives. Assume that the economy depicted in panel (a) is in short-run equilibrium at a real GDP level of Y1. The economy will correct itself:

in the long run as wages fall

Look at the figure Shift of the Aggregate Demand Curve. A movement from point A on AD1 to point C on AD2 could have resulted from a(n)

increase in the total quantity of consumer goods and services demanded

Look at the figure short-run equilibrium. if the economy is at equilibrium at Y1 and P1, and appropriate policy to return the economy to potential output would be a(n)

increase taxes

Look at the figure Fiscal Policy Choices. if the government uses discretionary fiscal policy for the economy in panel (a) when real GDP is Y1 government spending is likely to be ____ and taxes are likely to be ____.

increased; cut

Stagflation is a combination of ________ unemployment and ______ inflation.

increasing; increase

Look at the figure Short-Run Equilibrium. If the economy is at equilibrium at Y1 and P1, it is in a(n):

inflationary gap

if the economy is at the equilibrium above potential output, there is a ___ gap and ___ fiscal policy is appropriate

inflationary; contractionary

The interest rate effect is the tendency for changes in the price level to affect

interest rates an thus the quantity of investment spending and consumption

Aggregate demand will increase in all of the following cases except when

interest rates increase

Look at the figure inflationary and Recessionary gaps. At E2 the economy;

is in equilibrium

If the marginal propensity to consume is 0.75, the multiplier for taxes and transfer payments is

less than 4

An expansionary fiscal policy

may include decreases in taxes

Look at the fiscal policy choices. It would be appropriate to use contractionary fiscal policy to shift aggregate demand in ____ from ___

panel (b) AD1 to AD2

Look at the figure shifts of the AD-AS curves. an increase in wages in the short run is illustrated by

panel D

Look at the figure shifts of the AD-AS curves. A short run increase in net exports is illustrated by

panel a

Look at the figure shifts of the AD-AS curves. A short run decrease in investment spending is illustrated by

panel b

Look at the figure shifts of the AD-AS curves. a decrease in wages in the short run is illustrated by

panel c

Look at the figure AD-AS model I. If the economy is at point X, there is a(n) ____ gap with ____ unemployment.

recessionary; high

To close an inflationary gap with fiscal policy the government could

reduce budget allocations to interstate highway maintenance

Look at the figure Fiscal Policy choices. if the government uses discretionary fiscal policy for the economy in panel (b) when real GDP is Y1 government spending is likely to be ____ and taxes are likely to be ___.

reduced; increased

All of the following are examples of fiscal policy EXCEPT

reducing the interest rate by increasing the money supply

Look at the figure An Increase in Aggregate Demand. The short-run equilibrium at Y2 and P2

results in an inflationary gap

If the stock of physical capital increases, all other things unchanged, the aggregate demand curve will

shift to the left

Suppose that consumer expectations improve. The aggregate demand curve will undergo a

shift to the right

Look at the figure Short-Run equilibrium. The economy is in short-run equilibrium. To move the economy to potential GDP, the government should reduce its spending by an amount equal to

(Y1-Yp)(1-MPC).

If checking account has an interest rate of 1% and a Treasury bill has an interest rate of 2%, the opportunity cost of holding the checking account as money is

1%

If the marginal propensity to save is 0.1, then the government spending multiplier has a value of

10

If the marginal propensity to save is .025, investment spending is $700 million, and the government increases its purchases of goods and service by $100 million, then real GDP increases by:

400 Million

Look at the figure AD-AS Model II. when firms decrease their investment spending, in the short run the ____ curve will shift to the _____.

AD ; left

Look at the figure Fiscal Policy I. Suppose that this economy is in equilibrium at E1. If there is a decrease in taxes, ________ will shift to the ______, causing a(n) _______ in the price level and a(n) in real GDP.

AD1: right : increase : increase

Look at the figure Fiscal Policy I. Suppose that this economy is in equilibrium at E2. If there is a decrease in government purchases, ____ will shift to the ______, causing a(n) _____ in the price level and a(n)______ in real GDP.

AD2: left; decrease; decrease

Look at the figure an increase in aggregate Demand. Because of the pressures at the short-run equilibrium at Y2 and P2

the SRAS curve will shift to the left

An increase in government transfers is an example of _____ fiscal policy because it shifts the aggregate demand curve to the _____ aggregate output.

Expansionary; right, increasing

Potential output is the level of real GDP that

the economy would produce if all prices, including nominal wages, were fully flexible.

which of the following is Not a government transfer payment

the federal payroll

A cut in taxes ______, shifting the aggregate demand curve to the _____.

Increases disposable income and consumption; right

when short-run aggregate supply decreases it means that the short-run aggregate supply curve shifts to the _____ and the quantity of aggregate output that producers are willing to supply _______.

Left; decreases

The U.S. national debt as a percentage of GDP is ______ that of Greece.

Lower Than

The aggregate demand curve is downward sloping because of

the wealth effect of a change in aggregate price level

An inflationary gap will be eliminated because there is ____ pressure on wages, shifting the ____.

upward; short-run aggregate supply curve to left

Look at the figure Fiscal Policy Choices. it would be appropriate to use confectionary fiscal policy to shift aggregate demand in ______ from ______.

Panel (a) AD1 to AD2

All of the following are examples of fiscal policy EXCEPT:

Reducing the money supply to raise the interest rate

According to the aggregate demand curve, when the aggregate price level ______, the quantity of aggregate output _______.

Rises; demanded falls

Look at the figure AD-AS Model II. If nominal wages fall, in the short run the _____ curve will shift to the ____.

SRAS; right

Look at the figure Aggregate Supply movements. Which statement is Correct?

Short-run aggregate supply has decreased.

Which of the following represents the government budget balance most accurately?

T-G-TR

Look at the figure Inflationary and Recessionary Gaps. Which of the following measures a recessionary gap?

Y2-Y1

Look at the figure Short-Run Equilibrium. Appropriate fiscal policy action is:

a decrease in transfer payments.

Look at the figure Policy Alternatives. The economy in panel (b) is initially in short-run equilibrium at real GDP level Y1 and price level P2. At real GDP level Y1 there is

a recessionary gap

Look at the figure Policy alternative. Suppose that the initial equilibrium is at real GDP level Y1 and price level P2 in panel (a). at real GDP level Y1 there is

a recessionary gap

Look at the figure inflationary and recessionary gaps. If the economy is in short-run equilibrium at Y1 in panel(a) the economy is in

a recessionary gap

Look at the figure Fiscal Policy Choices. In panel (a), the economy is initially at output level Y1 and there is:

a recessionary gap.

Look at the figure Inflationary and Recessionary gaps. The intersection of AD with SRAS in panel (b) indicates:

a short-run equilibrium

which of the following will shift the short-run aggregate supply curve to the RIGHT?

a widespread decrease in commodity prices