Ch. 9-10

In the short run, the aggregate supply curve is ____ because input prices are _____.

positively sloped; not completely flexible

The crowding out effect recognizes that if the government sells bonds to finance spending, it can cause interest rates to ___________ investment.

rise, reducing

Which of the following events will shift the aggregate demand curve to the right?

a new government program to eliminate poverty

Which of the following factors will cause the aggregate demand curve to shift to the left?

appreciation of the dollar

Using discretionary fiscal policy to smooth the short-term business cycle is challenging because

deciding on fiscal policy often takes a long and contentious legislative process

As GDP decreases, tax revenues _____, causing a _______ to aggregate demand

decline; stimulus

The advantage of automatic stabilizers over discretionary fiscal policy is that automatic stabilizers:

do not require overt action by policymakers

During cost-push inflation, aggregate output _______ and the aggregate price level _________.

falls; rises

Policies that __________ will expand the economy but also generate price pressures.

increase transfer payments

In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts in these two curves, what is a likely outcome?

inflation

Using demand-side fiscal policy to stimulate aggregate demand when the economy is at full employment will primarily result in:

inflation

The cyclically balanced budget:

is not easy to implement, because it is difficult to plan to balance the surpluses and deficits over a span of years.

A stronger dollar will shift the U.S. aggregate demand curve to the _____ and _____ output demanded.

left; decrease

Expansionary fiscal policies could:

move the economy to full employment.