macro midterm ch 15

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 events shifts the short run aggregate supply curve to the right

A drop in oil prices

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 macro economic quantities tend to fluctuate together

Which of the following will cause the long run aggregate supply to increase

An increase in the size of the labor force

Factors that cause short run aggregate supply to shift

Changes in labor capital natural resources technology and the expected price level

Most economists believe that classical macaroeconomics theory ___________

Is valid only in the long run

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

Stagflation is caused by a

Leftward shift in the aggregate supply curve

According to the wealth effect arrogant demand slopes downward because

Lower prices increase the value of money holdings and consumer spending increases

According to the interest rate affect aggregate demand slopes downward because

Lower prices reduce money holdings increases lending interest rates fall investment spending increases

House there is an unexpected price level increase in the economy affirm mistakenly assumes that their prices have risen relative to the prices of other goods and services so it increases the quantity of their good supplied the theory that best describes the firms reaction is the

Misperceptions theory

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 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 an output in the long run

Output in the price level are unchanged from their initial values

Which of the following illustrates the interest rate effect

Praises rise consumers save less interest rates rise spending decreases

Suppose 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 an output in short run

Prices fall and output is unchanged from its initial value

In the long run a decrease in aggregate demand will cause which of the following to occur

Prices for fallen output will return to the full employment level

Suppose the economy is initially 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 and aggregate supply what happens to prices an output in the short run

Prices rising output falls

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 ad for 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 the left

Suppose the price level falls. Because of fix 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

Which of the following is not a reason why the aggregate demand curve slopes downward

The classical effect

Suppose the Fed increases the money supply causing aggregate demand to increase using aggregate demand in the long run aggregate supply curve what impact does have on the price level and real GDP

The price level increase in the GDP will remain the same

The natural level of output is the amount of real GDP produced

When the economy is at the natural rate of unemployment

Which of the following will cause aggregate demand to increase

firms feel optimistic about future business conditions

In the model of aggregate demand and aggregate supply the quantity of_________ is on the horizontal axis and the__________ is on the vertical axis

output;price level

Stagflation occurs when the economy experiences

rising prices and falling output