ECN 222 Quiz 11

The sticky-price theory implies that

All of the above are correct.(-the short-run aggregate-supply curve is upward-sloping. -an unexpected fall in the price level induces firms to reduce the quantity of goods and services they produce. -menu costs influence the speed of adjustment of prices.)

Refer to Figure 33-10. If the economy starts at point A, a short-run fall in output would be consistent with a movement to point

D

Refer to Figure 33-10. If the economy starts at point C, stagflation would be consistent with point

D

Refer to Figure 33-6. Which of the long-run aggregate-supply curves is consistent with a short-run economic expansion?

LRAS1

Refer to Figure 33-6. Which of the long-run aggregate-supply curves is consistent with a recession?

LRAS3

If aggregate demand shifts right then in the short run

firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the left.

The recession of 2008-2009 was preceded by

all of the above (-a sharp decline in housing prices. -large losses among financial institutions that owned mortgage-backed securities. -rises in mortgage defaults and home foreclosures. )

The equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level), where a is a positive number, represents

an upward-sloping short-run aggregate supply curve

An increase in the price level and a reduction in output would result from

bad weather in farm states.

The mathematical equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level), expresses

how output deviates in the short run from its long run natural rate.

Which of the following did the Fed do during the recession of 2008-2009?

lowered the federal funds rate and purchased securities and loans

In the long run, an increase in the stock of human capital

makes the price level fall, while increases in the money supply make prices rise.

Which of the following both shift aggregate demand right?

net exports rise for some reason other than a price change and government purchases rise.

A decrease in the expected price level shifts

only the short-run aggregate supply curve right.

The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected,

production is less profitable and employment falls.

If the government repeals an investment tax credit and increases income taxes,

real GDP and the price level fall.

If there are sticky wages, and the price level is greater than what was expected, then

the quantity of aggregate goods and services supplied rises, as shown by a movement to the right along the short-run aggregate supply curve

Menu costs help explain

sticky-price theory.

When the price level falls

None of the above are correct. ( households want to lend less. the interest rate rises. firms want to spend less on investment goods. )

An economic expansion caused by a shift in aggregate demand causes prices to

rise in the short run, and rise even more in the long run.

The aggregate supply curve is

vertical in the long run and slopes upward in the short run.