econ 20
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
The natural level of output is the amount of real GDP produced _______
when the economy is at the natural rate of unemployment
Suppose the economy is initially in long-run equilibrium. Then suppose there is a sudden rise in the price of crude oil due to a military conflict in the Middle East. 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
Which of the following events shifts the short-run aggregate-supply curve to the right?
. A drop in oil prices
uppose the economy is initially in long-run equilibrium. Then suppose there is a sudden rise in the price of crude oil due to a military conflict in the Middle East. If policymakers allow the economy to adjust to long-run equilibrium on its own, according to the model of aggregate demand and aggregate supply, what happens to prices and output in the long run?
. Output and the price level are unchanged from their initial values
According to the wealth effect, aggregate demand slopes downward because _____
. lower prices increase the value of money holdings and consumer spending increases
Stagflation occurs when the economy experiences _______.
. rising prices and falling output
Which of the following would not cause a shift in the long-run aggregate-supply curve?
A change in price expectations
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.
Suppose the economy is initially in long-run equilibrium. Then suppose there is a reduction in investment spending. 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 long-run equilibrium. Then suppose there is a reduction in investment spending. 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.
Which of the following is not a reason why the aggregate-demand curve slopes downward?
The classical effect
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 but 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
Which of the following statements is true regarding the long-run aggregate-supply curve? The long-run aggregate-supply curve ____
is vertical because an equal change in all prices and wages leaves output unaffected
graph: Suppose the economy is operating in a recession such as point B in the graph. If policymakers allow the economy to adjust to the long-run natural level on its own, ____
people will reduce their price expectations and the short-run aggregate supply will shift right
According to the model of aggregate supply and aggregate demand, in the long run, an increase in the money supply should cause _______
prices to rise and output to remain unchanged
Policymakers are said to "accommodate" an adverse supply shock if they _____
respond to the adverse supply shock by increasing aggregate demand, which further raises prices
In the model of aggregate demand and aggregate supply, the initial impact of a decrease in consumer optimism is to ______
shift aggregate demand to the left
graph: Suppose the economy is operating in a recession such as point B in the graph. If policymakers wished to move output to its long-run natural level, they should attempt to _____
shift aggregate demand to the right