Econ 202 - ch 20

Which of the following events shifts the short run aggregate supply curve to the right?

A drop in oil prices

Which of the following statements about economic fluctuations is true?

A variety of spending, income, and output measures can be used to measure economic fluctuations because most macroeconomic quantities tend to fluctuate together

The misperceptions theory explains why the long run aggregate supply curve is downward sloping

False

Over the last 50 years, us real GDP has grown at about 5% per year

False

If the economy is in a recession, the economy will adjust to long-run equilibrium on its own as wages and price expectations rise

False

In the long run, an increase in government spending tends to increase output and prices

False

If the Federal Reserve increases the money supply, the aggregate demand curve shifts to the left

False

Which of the following would not cause a shift in the long run aggregate supply curve?

An increase in price expectations

An increase in price expectations shifts the long run aggregate supply curve to the left

False

Economist refer to fluctuations and output as the business cycle because movements and output a regular and predictable

False

If policymakers choose to try to move the economy out of recession, they should use their policy tools to decrease aggregate demand

False

Which of the following statements is true regarding long run aggregate supply curve? The long run aggregate supply curve

Is vertical because an equal change in all prices and wages leave output unaffected

According to the wealth effect, aggregate demand slopes downward because

Lower prices increase the value of money Holdings and consumer spending increases

According to the interest rate effect, aggregate demand slopes downward because

Lower prices reduce money Holdings, increase lending, interest rates fall, and investment spending increases

Suppose the price level Falls the suppliers only notice that the price of their particular product has fallen. Thinking there has been a fall in the relative price of their product, they cut back on production. This is a demonstration of the

Misperceptions theory of the short run aggregate supply curve

Suppose the economy is initially in a long run equilibrium. Then Suppose there is a reduction in military spending due to the end of the Cold War. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run?

Prices fall and output Falls

Suppose the economy is initially in a long run equilibrium. Then Suppose there is a reduction in military spending due to the end of the Cold War. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the long run?

Prices fall and output is unchanged from its initial value

Suppose the economy is initially in the long-run equilibrium. Then Suppose there is a drought that destroy as much of the wheat crop. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run?

Prices rise and output Falls

According to the model of aggregate supply and aggregate demand, in the long run, and increase to the money supply should cause

Prices to rise and output to remain unchanged

Policy makers are said to accommodate an adverse Supply shock if they

Respond to the adverse Supply Shock by increasing aggregate demand, which further raises prices

Stagflation occurs when the economy experiences

Rising prices and falling output

In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism is to

Shift aggregate demand to the right

Suppose the price level Falls. Because of fixed nominal wage contracts, firms become less profitable, and they cut back on production. This is a demonstration of the

Sticky wage theory of the short run aggregate supply curve

Which of the following is not a reason why the aggregate demand curve slopes downward?

The classical dichotomy and monetary neutrality effects

A rise in price expectations that causes wages to rise causes the short run aggregate supply curve to shift left

True

A rise in the price of oil tends to cause stagflation

True

If the classical dichotomy and monetary neutrality hold in the long run, then the long run aggregate supply curve should be vertical

True

In the short run, if the government Cuts back spending to balance its budget, it will likely cause recession

True

Investment is a particularly volatile component of spending across the business cycle

True

One reason aggregate demand slopes downward is the wealth effect a decrease in the price level increases the value of money Holdings in consumer spending Rises

True

The short-run effect of an increase in aggregate demand is an increase in output and an increase in the price level

True

The natural level of output is the amount of real GDP produced

When the economy is at the natural rate of unemployment