Macro Final (CH 22 review)

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[Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.] Figure 35-9. The shift of the aggregate-supply curve from AS1 to AS2:

represents an adverse shock to aggregate supply.

A favorable supply shock causes output to

rise. To counter this a central bank would decrease the money supply.

When they are confronted with an adverse shock to aggregate supply, policymakers face a difficult choice in that:

All of the above are correct.

Which of the following results in higher inflation and higher unemployment in the short-run?

an adverse supply shock such as an increase in the price of oil

[Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.] Figure 35-9. Which of the following events could explain the shift of the aggregate-supply curve from AS1 to AS2?

an increase in the world price of oil

[Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.] Refer to Figure 35-9. A significant increase in the world price of oil could explain:

both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2.

A favorable supply shock causes the price level to

fall. To counter this a central bank would increase the money supply.

A favorable supply shock shifts the short-run Phillips curve

left and inflation falls

The sacrifice ratio is the

number of percentage points annual output falls for each percentage point reduction in inflation

[Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.] Refer to Figure 35-9. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as:

stagflation

Which of the following is not associated with an adverse supply shock?

the short-run Phillips curve shifts left

[Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.] Figure 35-9. What is measured along the horizontal axis of the right-hand graph?

the unemployment rate


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