Topic 8 Questions

A movement down an aggregate demand curve results from

a decrease in the level of prices.

According to the Keynesian view of aggregate demand

a. an increase in the money supply lowers interest rates and stimulates planned investment b. spending. c. changes in government spending and taxes, and net exports are important sources of shifts in the d. aggregate demand curve. e. changes in consumer or business optimism can also shift the aggregate demand curve. all of the above are true.

Of the following factors, the ones causing the aggregate supply curve to shift include

a. changes in labor market tightness. b. changes in inflationary expectations. c. supply shocks including commodity price changes. d. attempts by workers to increase their real wages. all of the above.

A decrease in the availability of raw materials that increases the price level is called a(n)

c. adverse supply shock.

An adverse or negative supply shock causes the aggregate _____ curve to shift to the _____.

c. supply; left

Stagflation is the result of a

negative supply shock.

The expenditure multiplier decreases toward zero over time because

nominal wages and prices adjust to shocks so the effect on output eventually decreases to zero.

A supply shock is:

. a sudden change in input costs or productivity that shifts aggregate supply sharply.

Alternating periods of expansion and recession in the aggregate economy are called:

. economic fluctuations. **check answer

In the standard AD-AS model, if the central bank decreases the money supply then:

. the price level and output will decrease in the short run.

In the standard AD-AS model from Principles of Macroeconomics, if oil prices double then:

. the short-run aggregate supply curve shifts to the left causing prices to increase and output to decrease.

Keynesians analyse aggregate demand in terms of its four component parts:

a. consumer expenditures, planned investment spending, government spending, and net exports.

Which of the following events would not involve a supply shock that would shift the aggregate supply curve?

b. Financial crisis results in freezing of inter-bank lending

According to monetarists, a decline in the money supply, holding other factors constant, shifts the aggregate _____ curve to the _____.

b. demand; left

A _____ supply shock, such as unusually good weather or the development of a new technology,_____ production costs and shifts the aggregate supply curve _____.

c. positive; lowers; rightward

If the central bank wants to increase output then it should:

conduct open market purchases of government securities to increase the quantity of banking reserves.

The _____ supply shock from declining oil prices in 1986 did not produce the business cycle boom that had been predicted, in part, because a _____ in net exports that year weakened aggregate _____.

e. positive; decline; demand

The impact lag is:

the time between a policy change and the effect of that policy change.