macro chapter 10

In the short run, a favorable supply shock causes: A) both prices and output to rise. B) prices to rise and output to fall. C) prices to fall and output to rise. D) both prices and output to fall.

c

The vertical long-run aggregate supply curve satisfies the classical dichotomy because the natural rate of output does not depend on: A) the labor supply. B) the supply of capital. C) the money supply. D) technology.

c

If the Fed accommodates an adverse supply shock, output falls ______ and prices rise ______. A) less; more B) less; less C) more; less D) more; more

a

If the short-run aggregate supply curve is horizontal, then changes in aggregate demand affect: A) level of output but not prices. B) prices but not level of output. C) both prices and level of output. D) neither prices nor level of output.

a

Starting from long-run equilibrium, if the velocity of money increases (due to, for example, the invention of automatic teller machines), the Fed might be able to stabilize output by: A) decreasing the money supply. B) increasing the money supply. C) decreasing the price level. D) increasing the price level.

a

Alan Blinder's survey of firms found that the most accepted theory of price stickiness was: A) menu costs. B) failure to coordinate price changes. C) nominal contracts. D) procyclical elasticity.

b

If the short-run aggregate supply curve is horizontal, then the: A) classical dichotomy is satisfied. B) money supply cannot affect prices in the short run. C) money supply cannot affect output in the short run. D) money supply is irrelevant in the short run.

b

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. A) above B) below C) equal to D) either above or below

b

The short run refers to a period: A) of several days. B) during which prices are sticky and unemployment may occur. C) during which capital and labor are fully employed. D) during which there are no fluctuations.

b

76. Stagflation occurs when prices ______ and output ______. A) fall; falls B) fall; increases C) rise; falls D) rise; increases

c

A decline in the Index of Supplier Deliveries is typically an indicator of a future _____ in economic production, and a narrowing of the interest rate spread between the 10-year Treasury note and 3-month Treasury bill is typically an indicator of a future _____ in economic production. A) increase; slowdown B) increase; increase C) slowdown; increase D) slowdown; slowdown

d

Along an aggregate demand curve, which of the following are held constant? A) real output and prices B) nominal output and velocity C) the money supply and real output D) the money supply and velocity

d

If a short-run equilibrium occurs at a level of output below the natural rate, then in the transition to the long run prices will ______ and output will ______. A) increase; increase B) decrease; decrease C) increase; decrease D) decrease; increase

d

Monetary neutrality is a characteristic of the aggregate demand-aggregate supply model in: A) both the short run and the long run. B) in neither the short run nor the long run. C) in the short run, but not in the long run. D) in the long run, but not in the short run.

d

The version of Okun's law studied in Chapter 10 assumes that with no change in unemployment, real GDP normally grows by 3 percent over a year. If the unemployment rate fell by 1 percentage point over a year, Okun's law predicts that real GDP would: A) decrease by 1 percent. B) decrease by 2 percent. C) increase by 4 percent. D) increase by 5 percent.

d