Chapter 10 graded homework

When the Federal Reserve increases the money supply, at a given price level the amount of output demanded is ______ and the aggregate demand curve shifts ______.

greater; outward

According to the quantity theory of money, if output is higher, ______ real balances are required, and for fixed M this means ______ P.

higher; lower

If the short-run aggregate supply curve is horizontal, an increase in union aggressiveness that pushes wages and prices up will result in ______ prices and ______ output in the short run.

higher; lower

A difference between the economic long run and the short run is that

demand can affect output and employment in the short run, whereas supply is the ruling force in the long run

Assume that the economy starts from long-run equilibrium. If the Federal Reserve increases the money supply, then ______ increase(s) in the short run and ______ increase(s) in the long run.

output; prices

In the short run an adverse supply shock causes? (to prices & output)

prices to rise and output to fall

The vertical long-run aggregate supply curve satisfies the classical dichotomy because the natural rate of output depends on

-the supply of capital. -technology. -the labor supply.

In the long run prices?

are flexible

The price level decreases and output increases in the transition from the short run to the long run when the short-run equilibrium is _____ the natural rate of output in the short run.

below

The aggregate demand curve tells us possible

combinations of P and Y for a given value of M.

If a change in government regulations allows banks to start paying interest on checking accounts, this will

increase the demand for money.