macro econ review questions chapter 13

The Fed acted aggressively in lowering the interest rate during the recession(s) of

1990-1991 and 2001

When the _____ the Fed is willing to accept large changes in output to keep the price level stable.

AD curve is relatively flat

If the Fed has a strong preference for stable output relative to prices, the ____ curve is relatively _____

AD; steep

With a cost shock, a small decrease in output relative to the increase in the price level would occur if the ____ curve is relatively _____.

AD; steep

if the government increases taxes, the

aggregate demand decreases

A decrease in inflationary expectations that causes firms to decrease their prices shift the

aggregate supply curve to the right

a decrease in the Z factors represents

an easing of monetary policy

demand-pull inflation can be the result of

an increase in government spending

What shifts the aggregate demand curve to the left?

an increase in taxes

When the AD curve is relatively flat,

both fiscal policy and monetary policy can be used to increase output

The federal government decreasing the amount of money spent on public health programs is an example of ____________

contractionary fiscal policy

_____ corresponds to lower output and ____ corresponds to higher output.

cost-push inflation; demand-pull inflation

a leftward shift in the aggregate supply curve generate a ____ inflation and ____ output

cost-push; lower

In a binding situation, a decrease in the Z factors

does not shift the AD curve

The US experienced a zero bound interest rate

since the end of 2008

The Fed will raise the interest rate by the greatest amount when the economy is on the ____ part of the AS curve and there is ______

steep; an increase in government spending

For an economy to experience both economic growth and inflation at the same time

the aggregate demand curve must shift to the right

Fiscal policy affects the _____ market through changes in taxes and government spending

goods

If the economy is on the steep portion of the AS curve and the government spending increases, ______ crowds out _____.

government spending; planned investment

Stagflation is an economic condition characterized by ____ unemployment and ____ inflation

high; high

the fed generally had ______ interest rates in the 1970s and early 1980s to fight _____

high; inflation

other things equal, demand-pull inflation results in output _____ and the price level ____

increasing; increasing

in a binding situation

neither planned investment nor output change when the price level decreases

The aggregate demand curve would shift to the right if ____

net taxes were decreased

When analyzing the effects of ______, what primarily matters is the shape of the AS curve

net taxes, the Z factors, government spending

In a binding situation, there is _____ crowding out of planned investment when net taxes decrease

no

If an increase in net taxes in the US resulted in a very large decrease in aggregate output and a very small decrease in the price level, then the US economy must have been

on the very flat part of the short-run aggregate supple curve

Since 1970, the Fed generally ____ the interest rate when ____ was high.

raised; inflation

since 1970, the US has experienced 5 ___ periods and 2 ___ periods

recessionary; inflationary

If wages adjust fully to price increases in th long run, the full effect of fiscal policy is on

the price level

if the economy is on the steep portion of the AS curve

there is almost complete crowding out of planned investment